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.