I'll leave it to others to explain why the Federal Reserve had to provide AIG with an $85 Billion loan and why the Treasury Department reversed course from it's supposedly firm decision the day before not to support a federally orchestrated bailout. Everyone I talked to last night said there was no choice because of what the failure to act would do to the rest of the credit market. Honestly, I don't know enough to be able to do anything but listen to others who I trust on this one.
But the number -- $85 billion -- is staggering to me, and I'm someone who uses multiple billion dollar numbers every hour of every day. How big is $85 billion?
It's larger than the projected 2008 budgets of all but five federal agencies.
It's more than the 2008 budgets of the Departments of Energy and Education COMBINED.
It's twice what the Department of Homeland Security will spend this year.
As I said...staggering.
AIG
I think this is a case where the higher the potential total amount of the loan, the less that will be required to be drawn down. The key here was to send a very strong signal that AIG's obligations would be honored....
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