Archive for the ‘AIG’ tag
AIG. Was the Bailout From Hell a Mistake?
AIG = Ask an Idiot and Get
The word du jour right now is “rathole”, a rather ugly expletive that equates to plughole, drain, succubus, and other such unpleasantries. It may however be too polite a phrase for what is going on right now with the bailout of AIG, the government’s new pet project that looks like it’s going to hand the downpayment on fixing the nation’s health care shambles to Goldman Sachs and their ilk.
Just like everyone else in this country, I’m spitting with fury at the idea that the government is handing over money to keep these clowns out of the poorhouse. The bonuses should have been blocked way before they went public, and the fact that the President is being exposed to ye olde “What did you know and when did you know it?” game only eight weeks into his administration does not bode well.
Then there’s the irksome question of whether the meeting where it was decided to keep AIG alive in September of last year was actually a little joke played on us by Goldman Sachs. (After all the key people around that table were Paulson, ex-boss of GS, Blankenfein, current boss of GS, and Tim “someone put me out of my misery now” Geithner). We’ve known for years that Goldmans was a class above every other investment bank, but their ability to game the system seems utterly unparalleled now.
Finally, there’s this little nugget. We were told that if we’d let AIG die the global banking system would have collapsed. That the $1.6 trillion in Credit Default Swaps (CDSs) that they sold to the world’s top financial institutions who’d sunk their dough into those toxic assets would suddenly go away, leaving them totally exposed, and toppling like dominoes. Makes sense, right? I mean, if the insurance company backing those toxic assets goes belly up then the world’s banks are left holding the bag. Stands to reason.
Or does it? With the caveat that I really don’t know what I’m talking about, I’m not so sure. And here’s why. Read the rest of this entry »
The AIG Gravy Train – It Just Keeps Getting Worse
when the insurers need insuring to insure the economy doesn't go totally belly up, that's what i call insurance
Joe Nocera of the New York Times wrote a great post today which adds more grist to the mill on the price discovery issue relating to AIG’s credit default swaps (CDSs). Not only does the government end up propping up the most destructive derivative behavior around, but it does so while allowing AIG to maintain the confidentiality of their shady transactions.
And guess who that protects? You’re spot on. It shields AIG’s counterparties, banks, investors, and lenders who were looking for a way to ‘insure’ themselves on the quiet while they pigged out at the trough just before the fall. Nocera makes the point that this doesn’t sit well with the President’s call for transparency and he’s right. But it’s yet another example of the contradictions that Obama seems to be displaying. High principle on the one hand and almost Bush-like duplicity with the status-quo on the other. It’s becoming increasingly clear that Tim Geithner is lurching from crisis to crisis just like his predecessor. But the situation is far worse now. Paulson was a stooge and everyone knew it, a placeholder and agent for the Street. Geithner is supposed to know better. But he doesn’t seem to be able to escape the shackles of hide-bound “group-think”. Wasn’t the President supposed to put a stop to this kind of thinking?
AIG. Another $30B? Enough.
Frank Rich’s piece in today’s NYT suggests that a populist backlash against corporate malfeasance and greed could do serious damage to Obama’s agenda, and give the GOP a bridgehead from which to fight back. On the very same day, AIG is apparently to receive another $30bn of taxpayer largesse. This might be the straw that breaks the camel’s back, and for a myriad of reasons both economic and moral.
Firstly, either the government should have let AIG die and backed their Credit Default Swaps, or else let the CDW’s lapse and allow legitimate price discovery for the CDOs on that basis. The CDWs prop up fictitious value at our expense which is exactly what we shouldn’t be doing. Secondly, last week Congress removed billions for education spending. This week it gives that money to AIG? We’re about to try and overhaul the healthcare system. The $150 billion that we’ve committed without accountability to a dead company could have been a useful downpayment on the single biggest drain on the US economy. Is Tim Geithner trying to be Hank Paulson, because his leadership at Treasury shares the same “making it up as he goes along” characteristics.
Obama is getting all squirly on us. First he signs up a centrist cabinet and give progressives like Robert Reich and Howard Dean the cold shoulder. Then he dumps bipartisanship in favor of a progressive budget. And now he gives yet another handout to the street by protecting their crazy CDOs. Who is he? The answer is we still don’t know.