The rudderless Democratic leadership in Washington is grandstanding on the AIG affair in typical and predictable fashion. But the whole thing is a charade, a distraction. Obama and the House Democrats are playing a big game of three card monte. We’re all supposed to be angry about $160mm in bonuses–and I am indeed angry about this, as I am annoyed about the whole principle of bailouts-while forgetting that AIG was given $160B by the government that in turn was given by AIG to Goldman Sachs and various foreign banks under various CDS contracts. The whole sum is money from taxpayers to formerly rich people turned welfare cases. And we’re supposed to get mad about this smallish amount of money–.1% of the bailout funds AIG received–that AIG was obliged to pay out in contracts to employees. The bonuses are the equivalent of a rounding error compared to the scale of the bailouts and stimulus packages as a whole.
Even worse, this show trial of AIG’s CEO is happening on the very day the Federal Reserve announced that it will depart from its prior practice and will now be buying long term treasuries outright to the tune of $1T!!! This is printing money folks, a confiscation from all of us. The Federal Reserve’s actions takes from wealth-holders and our children in particular in order to keep this ponzi scheme of big government spending and fiat currency going as long as possible while avoiding the reckoning that Greenspan’s loose money policy has wrought.
The government is spending with abandon, but they want us all to think that a few measly bonus checks from a basket-case pass-through entity are the problem. It’s exactly what I’d expect from the likes of the corruption-ridden Barney Frank and the Chicago shakedown artist Barack Obama.
Bailouts are bad for many reasons. But the two worst are that they cost a ton of money, and, second, they get government in bed with business. As a result, we’re becoming increasingly numb as a people to the idea that a $1T here and a $1T there is no big deal, just as we’re getting used to the idea of the government has any business directing how private companies should spend their money. The bailout is an anti-capitalist virus that attacks our public finances and our commitment to corporate independence. We must let these companies fail or we’ll destroy free market capitalism. That is the real systemic risk.
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You are absolutely right, but the problem isn’t “big spending liberals.” Remember that Henry Paulson — former CEO of Goldman Sachs — was the architect of this scheme. The problem is anti-government guys in government. Not government itself.
http://culturalcapitol.com/2009/03/19/aig-execs-were-crooks-washington-post/
Paulson is certainly helping out his buddies, but he’s no anti-government guy. If he were, he’d have opposed this program in principle as unconstitutional and unnecessary. Economists–unlike paid Wall Street shills–generally were skeptical of the bailout and the stimulus and remain so.
Yes, and yes. But it’s the public’s fault too, for being unwilling to give themselves a crash course (pun intended) in macro-economics and the results of nations willingly handing over responsibility for virtually every aspect of life to the State — contemporary Britain, for instance.
The crisis was largely brought about by arcane financial practices that most of us never heard of previously. I, for one, can still understand some of them only dimly.
So fat bonuses to executives in a bailed-out company is the perfect focal point for anger, because it’s simple. But it’s like a cancer patient complaining about headaches.
I like how Bernanke decided to start this massive printing spree just as markets were starting to rally, banks were stabilizing, economic indicators were marginally improving, and panic was starting to subside. Companies and investors were starting to realize that what we are going to endure is a long tough recession, not the end of the world.
Bernanke’s desperate act may do more than generate inflation and wreck the value of the dollar. It may actually heighten the fear and uncertainty which is now at the heart of the problem. If he and Barack could stop trying to solve the crisis and calm down, maybe the rest of us could calm down as well.