The mysterious rise of AIG

There is no reason under heaven that AIG (AIG) should be up from $33 on Wednesday to over $50 today. At least it has sold off a bit in the afternoon.

AIG's new CEO Robert Benmosche told Reuters that he is being put upon by the press for being paid $7 million and having a huge villa in Croatia where he has been spending a recent vacation. Since taxpayers have put $180 billion into AIG, having a new chief with a big pay package is hardly reason to rejoice.

Benmosche also said that he would meet with Hank Greenberg, the man who built AIG into the largest insurance company in the world. Since Greenberg left the firm under a cloud of shame, it is difficult to understand why that would cause the shares to rally.

Benmosche also said he wanted to slow the sale of AIG's assets, perhaps because he believes that the company can get more money for them later. On the other hand, taxpayers might want to get back some of their investment sooner rather than later.

AIG is not out of the woods yet. It is not clear what liabilities it still has on its balance sheet. That means the government may have to put even more money into the firm. Another pull of capital from the US could wipe out what is left of AIG's common equity. The company's market cap is under $7 billion.

AIG has more reasons to be trading close to zero than at $50. But, when almost everything is trading up and there is some odd fever spreading among investors, rationality loses its power.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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