Worrying extremes of the free market

The US Federal Reserve announced that it will lend AIG (American Insurance Group) up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company - an extraordinary step in the bastion of the free market capitalism, meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system.

Of AIG's 116,000 staff in 130 countries, almost half are reportedly in Asia, where wholly-owned subsidiary American International Assurance Company Limited (AIA) manages most of the operations in Southeast Asia, China and Australia.

Even after the US Federal Reserve rescued AIG, hundreds of worried and nervous customers converged on the company's Singapore subsidiary on Wednesday, many looking to end their contracts -- some having flown in from abroad.

Singapore's de facto central bank, the Monetary Authority of Singapore, said AIA has enough assets to meet liabilities to policyholders, who should "not act hastily to terminate their insurance policies".


The AIG crisis unleashed another day of turmoil on global markets on Tuesday sparked by the weekend failure of Lehman Brothers, a leading US investment bank and the rushed takeover of Merrill Lynch by Bank of America.

In March, the Fed helped JPMorgan Chase buy Bear Stearns, one of the world's largest investment banks by providing a $29bn credit line. Earlier This month, the Treasury seized control of troubled US mortgage giants Fannie Mae and Freddie Mac.

These are unprecedented steps but we are also living in unprecedented times.

In a global world, what happens in the USA quickly affects other markets all round the world as we have witnessed in the stock markets losses this week. We have also seen that no country is practising unrestrained capitalism- i.e, the economic system governed by free market than by state regulation. The US Regulatory Authority, the Fed decided to bail out AIG, Bear Stearns, and Mortgage Houses Fannie Mae an Fredie Mac because they involved huge public investments and their collapse would result in untold global financial losses and loss of public confidence.

Like most other countries, Maldives follows the capitalistic model of economy with oversight by the state regulatory authority, the Maldives Monetary Authority(MMA). The important question for Maldives in the ever changing global capitalistic system is; " Is Maldives ready and prepared to react timely to give the warning signals to its investors about the financial health of publicly traded companies like the Bank of Maldives Plc (BML), State Trading Organization Plc (STO) or the Maldives Tourism Development Corporation (MTDC) to avoid financial hardship and chaos in a small community?"