In late 2012, the U.S. Treasury sold the last of the stock it had purchased in the insurance company AIG. The Treasury earned a profit on the $22.7 billion it had invested in AIG in 2008. An article in Wall Street Journal noted, "This step in AIG's turnaround, which essentially closes the book on one of the most controversial bailouts of the financial crisis, seemed nearly unattainable in 2008, when the insurer's imminent collapse sent shockwaves through the global economy."
a. Why did the federal government bail out AIG?
b. Why was the government bailout controversial?
c. Does the fact the federal government earned a profit on its investment in AIG mean that economists and policymakers who opposed the bailout were necessarily wrong? Briefly explain.