A massive taxpayer-funded bailout for AIG that privatizes profit and socializes risk, sponsored by Sen. Christopher Dodd. It’s terrible that it’s happening . . . again. Back in 2002:
The Terrorism Risk Insurance Act privatizes profit and socializes risk. Though he voted for the Homeland Security Act, even conservative Sen. Phil Gramm (R-Texas) voted against the insurance measure, dubbing it “a windfall.”
One of the big winners will be American International Group (AIG), the world’s second-largest financial conglomerate and largest U.S. underwriter of commercial and industrial insurance. CEO Maurice “Hank” Greenberg was instrumental in persuading leaders of both parties to give insurance companies a handout in the event of losses ascribed to terrorism.
With $40 billion in revenue and $5.8 billion in annual profits, AIG is not a likely candidate for corporate welfare. It ranks fourth on Forbes’ list of America’s biggest companies, after Citigroup, General Electric and ExxonMobil.
The federal program, which will pay out insurance company claims for losses up to $100 billion, will be triggered once the insurance industry sustains only $5 million in terror losses. That’s a far cry from the original House formula, in which the government bailout would have begun after industry-wide losses of cumulative claims exceeding $1 billion, or a loss to one company exceeding $100 million. The Senate bill had a cumulative $10 billion industry-wide trigger. But the insurance industry got it eliminated . . .
The original House version of the bill passed in November 2001 with overwhelming Republican support. The lead sponsor of the original Senate version was Democrat Chris Dodd, who represents the insurance capital, Connecticut. Co-sponsors included Senate Banking Committee Chairman Paul Sarbanes (D-Md.) and Sen. Charles Schumer (D-N.Y.), known as a friend of the financial services industry.
What we are witnessing from Dodd is not a scandal; it is a habit.