What will happen if AIG is allowed to go under?
It won’t be sudden…it may take a few days but yes, everything will go to hell pretty quick. These people who say nothing will happen do not understand the problem at all. The gov’t isn’t worried for nothing…it’s dire, very dire. When Lehman and Bear went under last year it almost collapsed everything but miraculously we averted a disaster. Well, AIG is MUCH worse. If they go under then the banks fall like dominoes because they hold the majority of insurance on the bad debt. Right now there is no real panic because the gov’t is throwing tons of cash at the banks and keeping AIG afloat. If they didn’t do this and if AIG went under there would be a mad rush on the banks to liquidate. The banks physically do not have the cash for this and they would be forced to shut down. With the banking system shut down the economy shuts down. Money is the grease that keeps the machine running. No grease and it all seizes up. Got it?
