The bailout of AIG has exposed more than just the collapse of Casino Capitalism. It exposes the governmental system to be as much a sham as our economy has been! How is it that $85 billion can just materialize to bail out this one insurance company (insuring for the most part, opaque, enormously complicated and risky investments) without so much as a session of Congress? Where is the appropriations committee in this matter? Where were they when the Bear, Stearns/JP Morgan deal went down on a Sunday?
What has been exposed here is the complete absence of the United States Government as it is supposed to work. In its place are Treasury Sec. Henry Paulson and Federal Reserve Chairman Ben Bernanke making decisions about spending sums of money equal to the budgets of many small nations – money that will have to be paid back by the taxpayers, who have seen none of the gilded rewards. You have had no say – nor have your impotent representatives.
I don’t care if you’re a Republican or a Democrat or an Independent: you should be mighty pissed-off right now, because you’ve just been pissed on! And your “golden shower” didn’t come with the “golden parachute” that was given to Merrill Lynch CEO John Thain! Mr. Thain was hired 10 months ago by the venerable, 96-year old firm, and sold it to Bank of America (on Sunday, of course) for about a nickel on the dollar it had been worth a year ago. For his efforts, he will be receiving an estimated $34 million. I know what you’re thinking: Only $34 mil?
Well, I’m thinking I’ve seen enough of these guys walk away after bleeding huge companies, their investors and stockholders - and ultimately every taxpayer in the country dry, without the good old-fashioned Eleven o’clock News PERP WALK!
AIG is insuring some $600 billion in securities – most of which are backed by the real estate market (or, in the case of municipal bonds, the projected property taxes on homes that are losing value and/or being foreclosed upon, and therefore will not be redeemable from the then-penniless municipality). Because of the amount of claims AIG has had to pay, their credit worthiness has gone down. As Standard and Poor’s or Moody’s lowers the rating, AIG has been required to come up with more and more collateral to cover their potential losses. They have little left with which to collateralize, and their efforts (along with those of other downgraded companies like Merrill Lynch and Lehman Bros) have sent commodity markets through the floor as they have been urgently cashing out everything from oil futures to precious metals and realty holdings. Platinum, for example, has halved in three months, as it’s been dumped to cover margins.
With nothing left to liquidate, and their ratings continuing to tank, they would have had to start defaulting on claims. Enter the Fed - and the 85 billion Weimar Dollars.
If the past 10 months of the Depression are any indication, it will probably keep the market level for another week or so, as each such move seems to do, then another shoe will drop. It's reckless and we're watching the whole system collapse – financial, governmental, and even judicial, as there appears to be not even any judge to step in and stop this corruption - nay, this perversion - of our economic and legislative systems.
