RED GREEN TO THE RESCUE

When the Berlin Wall came down it was heralded as the end to an experiment in socialism gone wrong. The forces of capitalism had prevailed. The unprecedented bail-outs of American corporations by the American government is starting to make me wonder about the triumph of capitalism. Why can't American business survive without government intervention and is this Red Green approach to duct taping up the problems in the economy prolonging the inevitable?

Yesterday morning we were all watching American International Group. This morning we woke to news that, in an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue the trillion dollar insurance company with roots in just about every corner of the American economy from bankruptcy!

The government stepped in when it was obvious that no one in private industry would. The bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by AIG and other institutions it does business with. Last week
the feds took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac but over the weekend they let Lehman Brothers falter. Earlier this year, the government bailed out another investment bank, Bear Stearns, by engineering a sale to JPMorgan Chase that left taxpayers on the hook for up to $29 billion of bad investments by Bear Stearns

A few months ago P&P was writing a lot about the economy and the storm clouds that lay ahead.
It looks like we maybe in the eye of the hurricane as investors wonder who is next and people start worrying about their nest eggs and insurance plans. What a mess!