Last Friday shaped up to be a pretty bad day for my friend Ryan Avent, who blogs about sensible urban planning and transit issues at The Bellows. Not only did news break that a recently demolished property was going to be made into the city's most unneeded parking lot - a sort of direct-from-hell version of terraforming in the downtown core of Washington, DC - but he learned that AIG's failure was going to have impact on mass transit systems in cities all over the country:
Metro and 30 other transit agencies across the country may have to pay billions of dollars to large banks as years-old financing deals unravel, potentially hurting service for millions of bus and train riders, transit officials said yesterday.
The problems are an unexpected consequence of the credit crisis, triggered indirectly by the collapse of American International Group, the insurance giant that U.S. taxpayers recently rescued from bankruptcy, officials said.
AIG had guaranteed deals between transit agencies and banks under which the banks made upfront payments that the agencies agreed to repay over time. But AIG's financial problems have invalidated the company's guarantees, putting the deals in technical default and allowing the banks to ask for all their money at once.
You didn't think this could cost you now, did you? As it turns out, there's already some Congressional movement afoot to quickly slap a band-aid on this problem. Nevertheless, the question Ryan asks is still worth asking, repeatedly: "One might ask just what the hell was the point of giving AIG government credit worth $122 billion (and counting) if it wasn't going to prevent the deals the firm guaranteed from falling apart."