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AIG makes me angry too
The more I read and think about AIG, the closer I get to having a conniption. Even Bernanke said it yesterday: nothing makes him angrier than the way AIG has been run. He admitted this insurance company was operating like a hedge fund. So, as Barry Ritholtz asks this morning, why are the taxpayers making good on hedge fund trades gone bad?
I also enjoyed reading investment advisor Mike Shedlock's take on AIG. He calls to task Bernanke's argument that letting the whale fail will make things worse:
There is no need to prevent another Lehman. Instead, there is precisely a need for more Lehmans. The sooner we stop trying to prop up failed institutions, the sooner the economy recovers.
As I said in a post a couple weeks ago: "I'm afraid we're forgetting how to draw lines. Paulson drew one (with Lehman), and it backfired. That doesn't mean every line we draw will wreak havoc." Maybe with Lehman, it was the timing. The government has pumped so much money into the financial system since then, it has to be in a better position to withstand failures. Maybe now, as Shedlock says, the government needs to let the system heal. Ask any successful entrepreneur about failure and what it meant to their success.
As for AIG, to make matters worse, there's another story today that the company is still paying four public relations firms. Is that as bad as a bailout recipient taking clients to a golf tournament? I don't know, but as DealBook points out, the taxpayers aren't getting much in the way of public relations:
Despite a series of outsize bailouts, the company has given little clarity on taxpayer losses to date, or provided much communication directed toward taxpayers at all.
Then again, maybe that means that from A.I.G.'s perspective, its public relations army is worth every penny.
Let them all fail. We've been told by Bernanke, Paulson and Bush that the economy was sound before the bubble burst. Now the same people are telling us that we need to bailout banks and insurance companies or else. Why should we believe them? They've been wrong every time. The FED can bailout whomever it wants without any congressional oversight or approval. And to all those Obamites out there who blame or are told to blame the greedy capitalists; True capitalism says let the Banks FAIL!!! How can B.O. blame the wealthy and greedy and support the bankers who are the most corrupt of all. There should be no bailouts ever. Capitalism did not cause this mess. The FED caused this mess by creating the cheap credit in the first place. If you don't give the alcoholic any alcohol he can't get drunk!
Let it fail? AIG has failed. AIG is failed. It took me a while to grasp the magnitude of the AIG bailouts, too, until the most recent earnings report from this "company". I realized that their most recent massive loss is only a way to account for the pass-through of federal funds to the thousands of gamblers who insured their bets with AIG. The federal government is using the corpse of AIG simply as a conduit to pass bailout money directly to the thousands of gamblers. Their losses are being covered. Their insurance claims on their bad bets are being paid. Thousands of them, all over the world. And by pretending that a company called AIG is getting the bailout, the government gets to pretend that the wildfire is contained.
RB is right. My conservative mom railed for 20+ years at being forced to pay dues to the teacher's union, which she despised. But eventually, she came to believe that because she'd paid in so much, she should get something back from it. It was gradual, but it was a complete change, based only on the money extorted from her over 35+ years.
Mojo,
You are right except for one small but important detail. It is the FED that is using AIG as the conduit. The FED must be audited.
HR 1207 introduced by Dr. Paul would accomplish that. The bill has bi-partisan support. Call your representative and inform him/her of this bill.
First, I don't understand why "non-human primates" can't be shipped across state lines anymore. Second, AIG may be the mark of the beast. Or the best. The best at getting bailouts. It is possible AIG could fail. In order to prevent a catastrophic loss, the US could do a couple of things. Option 1: stop the phony War of Terror, dismantle all foreign bases and SAVE YOUR MONEY. Option 2 (Zionist tested, fascist approved): get an insurance policy from AIG. Risky, so the premiums will be hefty. Now AIG could buy treasuries, F&F junk, etc. But counterparty risk is high, returns are low. Better returns to be had from alphabet soup. After all, with money this cheap, and risks this high, an insurance company - kinda sorta - can't be blamed for trying to stay ahead of the game. That wouldn't be prudent. Like a good neighbor, put your trust in the rock.
