>Readers must distinguish the Fed, which is an instrument of the government but technically not part of the government in regulating monetary policy. Distinguish the Fed from Hank Paulson who is President Bush’s Secretary of Treasury. Remember that the Secretary said the government would not bail out the world’s largest insurer, and it didn’t. It appears that was left to the Fed.
The interesting thing about it is this: When you consider who oversees AIG you go back to the State of New York’s Insurance Department. Something to understand about insurance companies–and I don’t care how big they are, whether they’re State Farm Mutual and AIG or some Podunk Mutual in Sorrysville, Alabama, in America they are regulated by state insurance departments. The irony is that despite the fact the Feds have no jurrisdiction over AIG, that they would come in with federal funds to bail them out.
I find this quite extraordinary and there is an awful lot of impropriety in this. Are we getting to the stage in the financial world that the Federal Government must take regulation of insurance away from the states? If so, there’s a legal backlog of thousands of pages of record showing they have no business doing so. This is an old states rights issue and what has happened with this takeover is the precise thing we’re talking about–a takeover of regulation of one insurer. Because you can’t see the Fed just idly sitting there letting AIG do something that is not in keeping with “the Fed’s good judgment” now can you? This whole thing is a mess. It reeks of socialism at its worst. What is this country coming to?
Can you imagine the Federal Government, the new owner of AIG, now being regulated by the State of New York? But that’s precisely what has happened. Or has the Fed placed AIG in the same company as Social Security with all of its stumble-bum decisions? Can a state legally oversee the Federal Government? With AIG, a best case can be made that the state is the only jurisdiction that has the power to do so.
Even a better question: We know AIG didn’t go under because of its superior insight and management ability. When we the people now own the giant insurer with liabilities estimated at more than $450 trillion, what happens to “we the people’s” pocketbooks if this stumbling giant continues to stumble under federal government oversight–which is even more likely now that government has its hands in things?
Who then will bail out the taxpayers who will be called upon to come up with that $450 trillion–assuming, of course, all of AIG’s invested reserves also go curplunk? What we have been doing to less developed nations (LDN) for years and years is coming home to roost. Through companies like MAIN, and Halliburton many LDNs have mortgaged their souls to the devil in the name of U.S. imperialism and the effort to create international empires.
Ecuador is a good example of a poor nation developing oil wells, oil lines, and building power plants, roads and other infrastructure for which their leaders has hocked the soul of every poor citizen. They can never live long enough to pay it back. Third world debt has grown to more than $2.5 trillion, and the cost of servicing it–over $375 billion per year as of 2004. It’s more than all third world spending on health and education and more than twenty times what developing countries receive annually in foreign aid. Over half the people in the world survive on less than two dollars per day, which is roughly the same amount they received in the early 1970s. Meanwhile, the top 1 percent of third world households accounts for 70 to 90 percent of all private financial wealth and real estate ownership in their country; the actual percentage depends on their country (James S. Henry, “Where The Money Went,” Across The Board, March/April 2004, pp42-45. For more information, see henry’s book: The Blood Blood Bankers: Tales from the Global Underground Economy (New York: Four Walls Eight Windows, 2003).
The reason I mention third world countries is because they don’t have money and have become indebted up to their ears. We Americans are quickly following in that pathway. Our country is broke and our leaders don’t know. Isn’t it about time we elected a president and Congress with conservative values?
To my question about who will bail out us taxpayers, the answer is no one. We’re the pocketbook of last resort. Maybe we could call up King Abdullah bin Abdul Aziz Al Saud. He could help, but would want the State of New York in exchange. Or, maybe Hank Paulson, who knows a lot of people in China because he was a good Boy Scout, could talk to Chinese President Hu Jintao. Maybe good old Hu could bail us out. But he would want the State of California.
Good, give them California and New York. Let Hu deal with the Spanish immigrant problem. Good, give them New York. Let King Abdullah deal with the Democrats and the Jews in New York.
In my view, the Feds have no business throwing around taxpayer money to salvage an insurance company. That’s state business. Maybe we would end up there, but where’s the good-sense protocol? If you’re Bernanke you naturally would have had unch with New York Governor David Paterson and NY insurance commissioner Eric A. Dinallo and ironed out an agreement beforehand. Everyone should have been placed on the same page here, and I fear they weren’t.
There will be a lot of political backlash on this Fed move. John McCain was right–we should let AIG fail, and that’s pretty much what the Bush Administration decided to do rather than expose our national assets on a private enterprise like this. Of course, Obama was silent. He doesn’t even know to this day and hour what he would have done because he’s an “empty suit”–a deadhead.
A lot of national leaders must have quizzical looks on their faces this morning. Commerce Committee Chairman Daniel K. Inouye (D-Hawaii) should call for hearings and start questioning the likes of Greenspan and Bernanke. Ask them how they feel this is all going to fall out? At the least, Bernanke has overstepped the bounds of his authority.
And at the most, he has done something that should have called for pre-counseling from others, including the Treasury and the President. How does Bernanke even know the U.S. Treasury has enough money in the bank to pay for this kind of socialistic maneuvering? If we’re halfway broke, who delegated him to completely break the bank?
When we look into what has turned out to become the AIG fiasco, we’ll find the U.S. is on the ropes with money. In fact the U.S. is broke, and our elected officials haven’t yet awakened to that prospect.
It is quite interesting for the Fed to use taxpayer money this massively when they have no accountability. Blog onto this story. Do you believe the Fed should be so powerful, first off; second, doesn’t it seem weird and wrong for a private group like the Fed to be able to tap into your pocketbook and mine whenever they please?
My position is that this is very wrong. In this case, the Fed has stepped way beyond their previously-given mandate. Maybe Congress should look into what the Fed can or cannot do and change something here.
Or maybe not. Can you imagine how badly the Fed would perform–not to say that Alan Greenspan and Ben Bernanke have been angels and highly competent--if we had a political hack making these decisions? Who is to say Bernanke is not beholden to somebody–perhaps many of AIG’s biggest stockholders? If anyone has information on that, sound off, please.
The following fits in nicely with this from Slate:
In for a Pound
Posted Wednesday, Sept. 17, 2008, at 6:42 AM ET
News keeps pouring out of Wall Street and all the papers lead with the Federal Reserve‘s startling decision to lend insurance giant American International Group up to $85 billion in a bailout deal that would give the government control over the company.
The New York Times calls it “the most radical intervention in private business in the central bank’s history.” In exchange for its cash, the government would get a 79.9 percent equity stake in the company. The Washington Post notes that the rescue package “effectively nationalizes one of the central institutions in the crisis that has swept through markets this month.” The Wall Street Journal points out that this is “a historic development, particularly considering that AIG isn’t directly regulated by the federal government.”
The move marked an astounding about-face for the government that had been resisting AIG’s pleas for help over the last few days and earlier chose to let Lehman Bros. fail rather than put forward more taxpayer money. “The main difference between the two situations: AIG is so huge and its operations so intertwined in the financial system that the Fed feared an AIG failure could harm the broader economy,” USA Today summarizes. Or as the WSJ puts it: “This time, the government decided AIG truly was too big to fail.” The Los Angeles Times notes that while Fed officials said the action was due to the fact that AIG insures the assets of millions of Americans, it seems the main reason “was fear that the company’s failure could weaken or destroy nearly a half-trillion dollars’ worth of financial protection that AIG provides Wall Street firms and the biggest companies of Europe and Asia.”
To continue reading, click here.
Daniel Politi writes “Today’s Papers” for Slate. He can be reached at firstname.lastname@example.org.
Join the Fray: our reader discussion forum