AIG Rescue Had to Happen

AIG (AIG - commentary - Cramer's Take) was too big to fail. There was just no way this outfit was going to be left to go belly-up. It would have frozen the whole Western and Eastern banking worlds and now, through what looks to be a pretty good plan, the company will be able to liquidate assets orderly and set aside the billions it will no doubt need to pay out all of the sour paper it insured.

I am sure we will have to hear a lot of grousing about moral hazards and how this is an outrageous use of capital and how the Fed shouldn't be involved.

It's all hogwash. This is a company brought to its knees by short-sellers courtesy of the SEC's lax standards that would not be able to pay off financial bets worldwide, which would have set off a chain reaction that could have led to a worldwide depression. I mean it. That's how intertwined this companies' guarantees are into the international financial system.

Will the taxpayers be on the hook for all of the money? Actually, I think the assets of AIG are actually going to be able to cover most of the bets made, as they are darned good and can be sold over time, not fire-sold.

It's a horrible thing, but it is less horrible than every other option I have heard.

Now, how about some good news. A month ago, I talked about seven black holes: AIG, Lehman (LEH - commentary - Cramer's Take), Freddie (FRE - commentary - Cramer's Take), Fannie (FNM - commentary - Cramer's Take), Washington Mutual (WM - commentary - Cramer's Take), Citigroup (C - commentary - Cramer's Take), Ford (F - commentary - Cramer's Take) and GM (GM - commentary - Cramer's Take).

AIG, FNM/FRE and Leh are now off the table. Washington Mutual can muddle through or be seized by the FDIC in what I now think could be an orderly fashion. The automakers will get their guarantees because it is an election year.

Citigroup? It has a lot of assets it could sell and a big deposit base, so it simply has to make those sales and it will be fine. But it must make them.

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