Answering your questions about AIG bailout and its impact on the economy

Written by Kristen Miranda

CHARLOTTE, NC (WBTV) - Before we can understand why insurance giant AIG had to be bailed out by the federal government, we have to understand the role it plays in the insurance industry.

According to the Insurance Information Institute, AIG is the largest business insurer in the United States.  The company is huge employing 100,000 people in 130 countries.  In the US, AIG only offers auto and home insurance.  So, the company's consumer-level business is what got them in trouble.

Instead, the company insured hundreds of millions of dollars in sub-prime mortgage loans.  As we know by now, this wasn't a good business move.

Most people like Turbo Hobbs want to know if their money is safe.

The experts say if you have insurance through AIG, you don't have much to worry about.  The company promises it is still paying claims and says it will pay back the federal bailout, your tax dollars.

If your stock portfolio includes AIG, you lost money.  However finance experts tell us don't panic and sell more because you can't lose too much more.  Instead, wait to see how the company comes back.

That leads us to an email question we got from Jeff who lives in North Charlotte.

"Given the fluctuating stock market, should I leave my 401K alone or talk to my financial planner about possibly moving my money to different accounts," he asked.

Some financial planners tell me they're getting this question regularly the past few days.  One Charlotte firm tells us, historically, investors sell too late into a bear market and invest back in too late on the upswing.  Leave your long-term investments where they are now, they say, as long as you have a diversified portfolio.

"I don't know how much further devastation our economy can go through," said Nancy Kellough today.

It was the number one comment we heard today but industry experts say this is probably not the bottom.

Something we are going to watch for you is the fear growing about the likelihood of multiple bank failures and the strain that would put on the FDIC.  That's the organization which insures the money you have in the bank will still be there if your bank fails.

The fund is at its lowest level since 2003.  At the same time, the number of troubled banks is at a five-year high. This would impact every one of us.

Consumer Reporter Kristen Miranda will continue to answer many of the questions you have about the financial industry.  If you have a financial question, click here.