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 Eighty-five billion dollars. That's what the Federal Reserve is going
to lend American International Group Inc. That's a "b" on the -illion,
by the way, not an "m." Where is it going to come from?
The talking heads on TV, in tones ranging from dire to mocking, say it's going to come from the American taxpayers. True enough. The same folks footing the bill for the Fed's bailout of Bear Stearns Cos. (it's on the hook for billions in liabilities despite the J.P. Morgan Chase & Co. acquisition) and for Freddie Mac and Fannie Mae. We heard the same thing from the Fed and Treasury Secretary Henry Paulson about AIG that we did about Bear, Fannie and Freddie: We had to do it, to save the financial system, to save American pensioners and homeowners, to save the world!
But where's the money going to come from? Soldiers in Iraq had to put plating on their armored vehicles from whatever scrap they could find because the Defense Department wouldn't pay for it. They have to pay for their own flights home. Yet there's $85 billion for AIG. Where's the money coming from? Millions of Americans lack access to healthcare. Too expensive. Healthcare costs bankrupt people every year. But the Fed is somehow finding $85 billion for AIG. From where? Millions of American families are trying to find the money for college, but the college loan system is in shambles, torn apart by scandal and the credit crisis. Wall Street will tell you that AIG is important, because of the counterparty risk and its effect on the average American ... from Little Leaguers to pensioners. AIG, from the long tenure of Maurice Greenberg, has long been known for taking action no matter the risk; it has long had a love affair with derivatives. So if the Fed is going to bail out AIG, why didn't it do the same for Enron Corp.? It, too, trafficked in derivatives and excessive risk and big-moneyed managers. It had thousands of workers, too - many of whom lost their retirement savings. There wasn't $85 billion for them. But there is for AIG. General Motors Corp.? It still epitomizes the U.S. manufacturing base. But there probably won't be $85 billion for GM. Why? Because GM is no longer Too Big To Fail. Where's the money coming from? American taxpayer are broke; inflation is making basics more expensive, despite what government statistics say. And by definition, if the American taxpayer is broke, so is the government. But don't worry. The Fed will just borrow from whoever else outside the U.S. now hold trillions of dollars of our government's debt. It would be nice if folks at AIG could put up some token help, but they probably need it for other things, like medical or college bills, or financing their comfortable retirements. If you want to know the definition of moral hazard, it's AIG. - Anthony Baldo CategoriesComments
From: Weak Article,
The difference between (a) footing the bill for healthcare or defesne spending and (b) providing an $85bn interest bearing loan is simply that one is an expense the other is an investment. Effectively one could say the tax payers are funding it (indeed they will be if it defaults) but just as easily it could be seen as the US is a massive broker-dealer borrowing at their low rate and lending at a higher one. This should not be the business of a country, that's obvious, but let's just call your rant what it is... a rant.
Posted on:
September 18, 2008 5:09 PM
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The the vultures are circling and the fat lady aint started singin' yet