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Wednesday, September 17, 2008

Beijing S.O.S.

There appears to be only one reason the American International Group was nationalized by the American government, and that is because its failure would have been so costly in Asia, particularly in China, that it would have seemed like the moral equivalent of war. AIG goes way back in Far East; CV Starr made his millions there, and Hank Greenberg performed similar wonders. Yet nostalgia is not at the root of the story. We all know how vulnerable the United States is to the Bank of China; one flick of the wrist could send US Treasury bills into a free fall. And so, as J.P. Morgan famously put it, we all come to prefer combination to competition. If the American financial system sees its way through the current crisis, it will have the Chinese, and some creative Sino-American diplomacy, to thank for it.

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