When the U.S. bailed out AIG, it fully met AIG's obligations to European institutions. Many in the U.S. were upset about the large tax-payer funded flows overseas. Can and should U.S. financial institutions expect the same treatment?
For more read:
NYT (10-23-2011) Bank's Collapse in Europe Points to Global Risks by Gretchen Morgenson and Louise Story
For a good short (<5 min) video news story about Dexia and the Euro Crises
Some thoughts for discussion:
1. Should trading partners be paid in full? Should trading partners take a haircut as a penalty for not being more careful with whom they traded?
2. Would increasing the risk of loss shrink international financial markets so much that real economies would grow slower in the long run?
3. Since the U.S. honored payments to AIG's European trading partners, should Europe honor payments to U.S. trading partners?