AIG sentences to ponder

First came the bailout. Now comes talk of a bailout from the bailout.

Here is the article.  Felix Salmon offers related commentary.  This reminds me of problems in public utility theory.  To get optimal cooperation, the regulator allows the regulated firm to set price above marginal cost so that the regulated firm has some incentive to obey.  But what do you do when the regulated firm is essentially wiped out?


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