Few exchanges have so captured the disconnect that makes this situation so politically explosive. We're collectively taking our country's future in our hands, spending vast sums of money to keep these companies from suffering the consequences of their own folly and (in many cases) criminality. And in return we're receiving cavalier dictates about pay-outs and bonuses from executives who by any reasonable measure work for us -- dictates we promptly accede to. There's a beggars can't be choosers problem there. And the disconnect is so mighty that it fuels the impression that the whole enterprise is not what it seems, not what we've been told, that in addition to picking up the tab we're being played for fools.And while that's correct, the real problem with AIG is that CEO Edward Liddy can actually tell Timmy and Ben to go intercourse themselves with farm implements because AIG really does have the global economy over a barrel. If AIG goes under, the global financial system goes under with it. Period. Checkmate.
So nothing will be done in the long run. We'll continue to shovel money into the AIG furnace and shut the hell up like good little boys and girls, or the counterparty system will annhilate the entire system of global finance, leading to a total collapse of the whole pyramid. Lehman Bros. was allowed to die, and as a result the global banking system nearly went under. It will not be allowed to happen again with a much, much larger company like AIG.
AIG knows it can do whatever it wants to do right now. It's bulletproof. If it wants to give bonuses, it will. Honestly, what's the government going to do about it? Let the largest insurance company in the world go bankrupt and collapse the world?
Ask yourself how AIG was allowed to get this large and this important in the first place: complete failure of Federal oversight. Those are the people we need to be angry at here, not just AIG...Democrats and Republicans alike.
[UPDATE] Obama is trying to pursue "every legal avenue" to block AIG's bonuses. There's really not much the government can do, frankly, short of mass firings and forcing AIG to break contracts to employees.
[UPDATE 2] Or as Atrios says, if it's a problem, just nationalize the assholes already. If Marcy Wheeler is right over at Fire Dog Lake, they're basically extorting billions from us with this little bonus plan. Pay up or else, they say. The "or else" needs to be "We own you and we're firing all of you. Now."
We have to continue to bailout AIG or else the world financial system will go under. Or so we have been told. Do we know this for a fact? I don't know. Maybe yes, maybe no. Makes for a powerful case for extortion doesn't it? We already have an 80% stake in AIG as a result of the bailouts and according to the Washington Post article I read this morning nationalization would have avoided the bonus controversy. Why are we so afraid of full nationalizationven even if it would only be temporary? There is one thing we could do to try and bring some sanity to this situation. Since credit default swaps are at the heart of the AIG mess and are the 800 pound gorilla in the room that hovers over everything Obama tries to do to fix this train wreck of an economy that Bush gave him one solution is to declare all credit default swaps null and void. Even if only temporarily until we get a handle on who is holding these things and in what amount. These things are not registered openly and until we get control over these things all the money Obama spends to bail us out will not do us much good. AIG still has around $300 billion dollars of exposure in these things that could go bad. While some of these CDSs are legitimate in the sense that the person who takes them out had a personal stake in the asset being insured most are not and have the potential to bring down the world economy. Wall Street would howl with outrage because many of them expect to cash in on these things but it is time for Obama and the world community to put their foot down and say NO MORE! The more they delay doing this and the more Obama continues to bail these clowns out the better the "opposition party" will look to the average American, many of whom have very short attention spans and will soon forget about Bush and blame Obama. We know who that opposition party is. Heaven help us.
ReplyDelete