The Times has a piece today that features some observers hand-wringing over the possibility that the government-owned insurance company AIG will suffer as competitors poach its best people and businesses.
But whats going on now is exactly what is supposed to happen when a company fails and liquidates. Other private-sector companies can buy the failed firms best people and assets, so that good businesses previously stuck in a bad company can continue to benefit the economy.
With AIG, the missing step was bankruptcy. Last year, the U.S. government had no system in place for an orderly failure of a big financial firm, and thus propped up AIG with $180 billion of taxpayer money.
Any focus on whether taxpayers will get a good “return” for that money is misguided. Government entities arent supposed to make a profit. The governments attempt to earn a financial return for the taxpayer at AIG doesnt help the economy; it just crowds out private-sector competitors.
It would be better for taxpayers to take a huge bath on their AIG investment so that they pressure Washington to make sure that too-big-to-fail rescues never happen again.
Original Source: http://corner.nationalreview.com/post/?q=YmZhNGM5ZTkzODE5NGRiMTNlZDU5OTcyNTFiODljYjc=