Showing posts with label AIG. Show all posts
Showing posts with label AIG. Show all posts

Monday, November 17, 2008

Giving Money to Addicts

Ever since Ross Perot ran for President, I've just loved charts.

Bad news, well presented.

Amid the world-wide economic turmoil, my own private economic meltdown has been keeping me occupied, at the expense of this blog. But in the past few days some positive signs have got me feeling better! Still, actual cash would be even more appreciated.
Among our favorite columnists today, Billy "William" Kristol, legacy Harvard PhD and writer for either the Weekly Standard or the New York Times, or both, seems on the verge of some actual soul searching regarding conservatives' obsession with so-called "free" markets. Of course, a conservative's idea of a free market isn't really "free" at all. It is all dependent on various government constructs and police enforcement of made-up property rights. Take away those government interferences and we'll see a real free market. But that would be too scary.
Kristol hints at a rethinking of the innumerable and very obvious misconceived premises of recent economic thinking. Perhaps he is responding to an inadvertent personal glimpse of real life he's recently experienced, and realized that not all of us enjoy cradle to grave economic security. That real people suffer real consequences when jobs are lost. Or maybe he's just thinking in terms of realpolitik, that a cold and hungry Reagan Democrat will become a cold and hungry New Deal Democrat pretty quickly.

Hmmm. Squeezing my head makes my brain work better.

For these conservatives, letting the homos get married suddenly doesn't seem to matter quite so much when their money is swirling down the drain.

Of course, I don't know William Kristol. He seems pleasant enough on tv. But he's influential. And his public voice has helped lead public opinion of the elites that read the two rags he writes for down the wrong paths for several years now. So he deserves some serious criticism.

Likewise Alan Greenspan. I was stunned when he testified to Congress that he was surprised that banks and financial institutions did not "institutionally" impose more actively conservative risk management policies in their investments. Is he kidding? Can he possibly be that naive? The word "stupid" is in my head, but that can't be right. Can it? The folks who run these places are there to make money. For themselves. Did he not get that?

Oops. Sorry.

Markets are made of people. Institutions are made of people. People are not rational. People are selfish. People have agendas. Loyalty to their employer is way down the priority list, if on it at all, for most people. Investment executives are in their positions to "drive personal wealth." Their own. That is why executive pay, like structured financial deals, should ideally "align interests" of all the stakeholders involved. Of course, this doesn't happen that often. BECAUSE PEOPLE HAVE AGENDAS! So, they negotiate unobvious advantages for themselves into deals. Advantages like shifting all the risk to the sucker who provides the money. Thanks to the various recent bailouts, that sucker is now us. Thank you Congress!
I'm glad we learned from that Iraq War fiasco not to let fear rush us into imprudent action. These bailouts are obviously well thought out. What's the exit strategy again?

Free markets are a myth. We need fair and honest markets.
Banks and corporations are government creatures. Being government creatures makes these institutions subject to government restrictions. This doesn't have to cost a lot or even involve a lot of regulation. We can do it the conservative way, by unregulating!

Want to ease the pain of AIG's exposure to credit default swaps? Pass a law that the government will not enforce or aid in the enforcement of any credit default swap that was not given under applicable insurance regulations and has a proven insurable interest. Hah! What would happen then? I don't know because I can't find that anybody has modeled the results of this scenario. But it seems pretty obvious that nobody has modeled what is going to happen by having our civil courts available to enforce these illegal insurance contracts, and to pour hundreds of billions of tax dollars into AIG to honor them. That we are doing this without understanding the consequences, good or bad, is just plain crazy.

I do not want my taxes used for this. This is one screwed up mess.

Friday, September 19, 2008

The Day The Music Stopped

Banks For Sale - Cheap!!!

Good morning America. All the banks have gone crazy. Make sure you have cash on hand in case the ATM networks decide to play it safe and restrict access to your bank's accounts.

Tough day to be a banker.

BTW, does anybody else see some dark irony in the inability of insurance giant AIG to manage it's own risk?

ANYWAY, I really don't know how this mess all got started, but it has to end. At the bottom of the mess is the credit crunch in housing. This is what is killing Bear Sterns and Lehman Brothers and other investment banks. At least that's what we used to call them. I believe they are all just "financial institutions" now, thanks to a law called Gramm-Leach-Bliley or GLB.

That's Gramm as in Phil "Mental Recession" Gramm, the smiling fellow on the left in the picture below. Phil was a senatorial whore for the banking industry back in the day, and so pushed through GLB to repeal the old Glass-Steagall Act, which was passed back in 1933 to prevent another Great Depression caused by the collapse of our banks. I think we can all see what a great idea this was, and we should thank Phil accordingly. He's from Texas, you know, where the death penalty is enthusiastically enforced.

Old Boys Network

So, GLB got rid of the separation of banks, investment firms, and insurance companies. Now they could all merge into giant "financial institutions" that, it turns out, are "too big to fail." But fail they do, and tax money is used to prop them up.


Guess who voted for this brilliant idea! Republicans! Really. Check out the vote right here and see it split along party lines. Bill Clinton signed it though. Another nail in his legacy coffin.


Sandy Weill

What prompted all of this? Businessmen like Sandy Weill, who seems to have been president of most of Wall Street at one time or another, hired Gerald Ford and Robert Rubin and other lobbyists to push congress to dismantle Glass-Steagall. And it worked! Sandy even got an early exemption to pretend that the law didn't exist for 5 years before it was repealed, during which time he merged Traveler's Group with Citibank to form the world's largest financial institution. Wow! Impressive, but bad.

John McCain voted for the repeal. Joe Biden voted against it.

BTW, Glass and Steagall - both Democrats.

Senator Carter Glass

Congressman Henry B. Steagall