'Fast Money' Recap: AIG Misbehaving

Dylan Ratigan hosted CNBC's "Fast Money" Tuesday night. He began the show with a discussion of late-breaking news out of Bloomberg that a conservatorship is under consideration for American International Group(AIG Quote - Cramer on AIG - Stock Picks). Ratigan explained that the model of a conservatorship would mean very limited equity value and government responsibility for the orderly management of liabilities and exposures at AIG.

"I would be surprised if this happens, but if it does, the equity will be wiped out," said Karen Finerman. Jeff Macke blamed the credit agencies for the mess in financials. "It's lousy if you work their or own the stock, but it's a better solution for the people out there watching the "Fast Money" show, added Guy Adami.

Pete Najarian said he took a shot in AIG, but he says the stock could very easily go to zero, considering the breaking news. Macke said buying AIG today was a wild "putting all your money on red or black" bet, so you get what you deserve. Adami pointed out that former AIG CEO Hank Greenberg had the opportunity for many years to figure out what the firm was trading.

Ratigan asked the traders if there are any other major banks that have such a big exposure to AIG that could cause them to fail. Najarian said the AIG shareholders shouldn't be shocked if they were following the preferred yields. Macke highlighted Ameritrade(AMTD Quote - Cramer on AMTD - Stock Picks), which has avoided any major problems, and is at a 52-week high.

Ratigan brought up Morgan Stanley(MS Quote - Cramer on MS - Stock Picks), which reported earnings after hours that beat Wall Street estimates. Finerman said it's possible that the market is blowing the AIG situation out of proportion when you consider the numbers out of Morgan. Macke said look at Goldman Sachs(GS Quote - Cramer on GS - Stock Picks), which rallied from $116 to $130. "The volatility on the equity side is a reflection of you have no idea what is going on under the sheets," he added.

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