Scylla–I am late for work as it is, and cannot possibly absorb what is essentially a cram course in high finance in one sitting. I’ll be back.
I am not so simple minded as to think investment banker + greed= loss of my 401k. But I will say this: if this is not a partisan issue (and I think it’s too big for that), then I’d appreciate a bit more criticism on your part aimed toward the Reps who touted (and still tout) the whole “unfettered capitalism is king” mantra. It’s part and parcel of this.
I read a bit in Newsweek last week that called this whole thing a bubble and talked about the socio-dynamics of bubbles. It fits. But what I cannot swallow is the thought (widely held, apparently) that being leveraged 30:1(or whatever it was) is sensible. These investment bankers get paid the big bucks to deal with OTHER PEOPLE’S MONEY cooly and rationally. They did not do so.
Right now, I don’t see these AIG guys as scapegoats. I see them as very much part of the problem. I admit that they are only one small part of that problem.
So I’ve basically deferred any opinion I’ve had on this whole deal just because I don’t have the expertise to really dig into these huge numbers and what all the ramifications of AIG failing might be. However, I read this article (regarding ex-AIG-CEO Hank Greenberg) this morning, and one of the things that really pissed me off was this:
That was before this whole bail-out shit. That was just their SOP!
Now I’m too the point where I actively want them to go under, and I don’t give a shit what the ramifications are. This seems like the worst run company since Achmed’s Yamulka Stand went under. They just gave money away willy-nilly and then they have the balls to wonder what happened. And then the bigger balls to ask for billions of dollars of tax money as a bail out.
I’ve spent the last I don’t know how many years listening to my conservative friends and relatives saying things like, “Why should my money go to those free-loaders?” … referring to social programs. And none of those were in the several hundred billion dollars a month world.
I just don’t get it. Don’t take our money to help poor people, take our money and give it to corporations who pissed away their own money.
Funk that. This is ridiculous. Let AIG close shop. We’ll get over it. Fuck their executives.
See, this is what kinda confuses me - because it seems that at some point the various instruments got so “complex” that they ceased to be tied to anything of any inherent value.
And society wouldn’t be so harmed when the system becomes impaired if society hadn’t so readily and completely jumped into it as a means towards free wealth in the first place.
I’m just an ignorant schmuck, but I didn’t understand how the repackaging and reselling of the same debt created wealth in a sustainable manner. How could ANYONE - politician or wall streeter - think that this was sustainable in the long run? Instead, it seemed aimed at spreading and diluting the risk as widely as possible to be shared by society as a whole at some time down the line, while those on the inside reaped huge immediate benefit - whether salary, bonuses and gains, or re-elections.
It is consistent with a trend I find so distasteful in so much of society including law (my field) and insurance. No one wants to take personal responsibility for anyting. Instead they wish to collect fees for making the situation as complicated as possible, such that the general citizen end-user ends up holding the bag. Unfortunately, enough of the public are easily distracted by shiny short-term incentives that they are easily convinced to be complicit in the process until the final shoe drops.
It’s funny (well, in a sad sort of way)…this is exactly what AIG is trying to do at this point. They are trying to stabilize the hedge fund like parts of their business and isolate the really good and solid parts, disassociating them from the AIG name and, hopefully, selling them off to pay back the $70+ billion they owe the American people. In order to do this they NEED to retain some of their key people to do so…or else the whole thing will go completely tits up and we’ll lose all of that money (and probably all of the solid parts of the business too).
And yet, that’s what you want to happen…all because you think this is all about the executives. At a guess, you don’t realize that the vast majority of the executives who fucked this all up in the first place are long gone.
Liddy talked about this aspect during his grilling as well (again, several times…I counted 4). What he said is that A) If you want to know why AIG fucked up so bad then you need to bring in the former executives and CEO to ask them…none of them are still on the team. B) If you want to know why AIG needs to retain SOME competent people then you have to understand that these people have been reviled, threatened, spat on, etc etc (in many cases for decisions they actually opposed at the time), and they WANT to just leave, go somewhere else where all that shit isn’t falling on them (on Congresscritter had the nerve to ask Liddy why these people are so un-American as to want to quit before they fix the mess they created…and Liddy’s response was that they ARE American’s, and they DO want to help or they would have left already, that by and large the folks left weren’t part of the original problem and finally a person can only take so much).
Last time I checked we DO take ‘our’ money to help poor people (the amount of money we pay toward social programs in this country is staggering…the bail out of AIG was a drop in the bucket in comparison), and we didn’t give them the money to help rich folks…we did it in our own self interest. And unlike those social programs AIG is trying to pay that money back. Liddy said in both his opening statement and gods know how many other times when repeatedly asked about this, that AIG’s plan is to stabilize the company, firewall off and disassociate from the AIG name the good and financially solid business units, sell them off for a profit (once the market and financial environment stabilizes enough to allow someone to buy them), and to eventually pay back all of the money they owe the American people. If the market picks up we could, theoretically, actually make a profit off this.
It’s what I would have wanted to happen *before *we ponied up the billions of dollars of tax money to prop up a company that couldn’t get its head out of its ass long enough to actually run itself.
At this point, I think we’re all fucked anyway.
In the big picture, I just cannot rationalize in my brain how we could give billions of dollars in tax money to a multi-billion dollar corporation at the same time bitching and moaning because “my tax money goes towards food stamps and it’s not fair!”
We ‘gave’ billions in tax money to AIG because it was felt at the time (and still is) that if AIG went tits up our entire financial system would go with it. So, we tossed them a life raft because we were on the same sinking ship. It was in our own, collective, self interests to do so. At least that’s the theory. We bailed out the auto manufactures for political reasons…didn’t want to lose all those union jobs (or votes).
Our government doesn’t bail companies out for kicks…there is either an economic or political motivation behind each one. You will note that the government doesn’t save EVERY company that goes tits up.
Do you really believe that this hyperbole helps? AIG was a company with over a trillion dollars in assets. They didn’t get there because they couldn’t pull their head out of their asses, or because they were stupid. They fucked up, no doubt about that. And because of how big they are/were them going down would have hurt us…badly or even catastrophically. THAT’S why we ponied up billions…not to save THEM but to save US.
It’s as if the house next door were on fire and you are bitching about all the water we had to use to put it out. True, we used a lot of water…but now there is less chance OUR house will burn down.
I’ve been told tthat the free market economy is the only thing that will work. It seems though that that isn’t really true if the result is that a company working with in the free market fucks up so badly that we have to bail them out or the whole country will be one big soup-line.
So forgive if I’m not thrilled to see money thrown after money … while at the same time having to listen to assholes complain that actual individuals might benefit from a social program.
The post right above yours seems to be pretty in favor of the bail out. Granted I don’t know precisely **xtisme’s ** view on social programs, but I was conflating the two issues to illustrate a point, not to cast aspersions on anyone in particular.
I work in the government, and can understand some pretty complicated things. However, I have my limits. There are some things that are just too big, too convoluted for one person to wrap their head around it. That’s just a simple truth. That’s why (when we can) we slice things into smaller, more manageable pieces, in the hope that they can tell us what is going on in the bigger picture. Some things simply get too complicated.
Really. if it were simple, you wouldn’t need an entire government or an entire corporation to do things, it could be just some guy in his attic. You’re dividing the work and the needed knowledge, so mere mortals can get a handle on it. (snark intended).
I doubt Liddy knows EVERYTHING down to the smallest nit on the subject either. If he does, he isn’t human, he’s a superhuman.
Well, a couple of things. Not to get into a no True Scotsman thingy, but we have a REGULATED free market…highly regulated. One of the problems seems to have been that the regulations and the regulators simply could not keep up with the complexity and speed with which things were happening prior to the cliff. Liddy addressed this, saying we need some type of systemic regulations that are able to get a handle on risks across multiple sectors in a company.
I’d also say that there needs to be some kind of regulation on the amount of leverage a company can use. The norm seems to be 2-3 to 1…AIG was 10 or 11 to 1.
So, to answer your response…a free market DOES work, and works fine. But it’s not a magical money making machine that always works. By it’s nature it has adjustments…which can be quite painful. By regulation we TRY to smooth out the rough spots and to prevent some of the more flagrant excesses. Sometimes though this doesn’t work…as in this case. This doesn’t mean that because there was a failure though we have to toss the baby out with the bath water. After all, none of us were complaining all through the 90’s when we had the dot com boom, or for the last decade or so during the housing boom.
I’ll assume I’m the supposed asshole. However, you didn’t read what I said there. This is what I said:
My point wasn’t that social programs are bad. It was in response to you saying we should give money to the poor…to which I pointed out we DO give money to the poor. Lots of money to the poor. The point about comparisons to AIG are that, like social programs, bailing out AIG was thought at the time to be equally critical to keeping the economy afloat. And not just here in the US…there was real fear of a cascading effect world wide. So…we spent the money we had too and did what we thought we had to do in order to put out our neighbors house fire. We didn’t do it because we love our neighbor…we did it because we didn’t want OUR house to burn.
He doesn’t. That’s what I really liked about him…when he didn’t know he would say he didn’t know. When he was speculating he’d say he was speculating. When his figures were imprecise he’d point that out. It was…very refreshing. Hell, the owner of MY company can’t seem to do that…
Sorry, Scylla, but this is very much a partisan issue. But not so much a Democrat/Pubbie partisan issue, but a left-right partisan issue. I am not a Democrat, I am a radical lefty, I vote for the Dems because its the best I can do, and my duty as a citizen demands choice.
Over the years of conservative dominance, the Dems corrupted themselves into becoming the more centrist Republican party, they tied themselves into knots trying to “triangulate”, hoping to be more “business friendly” and tap into that huge pool of campaign cash that sloshed around from the Axis of Money.
Which political persuasion most generously views the needs of business and wealth, yours or mine? That is the partisan divide here, not party labels. And as much as I weep for the trials and travails of “Fred”, I am rather more pissed off over the losses of lesser folk, who seem to have escaped your notice in your rush to comfort the comfortable. People who struggled for years in hopes of a modest but comfortable retirement, not to be a burden on their children, not to be subject to the cold charity of their social betters. There’s at least a hundred of them for every “Fred” who so absorbs your compassion.
These people were looted, pillaged, and plundered, they are ruined. Who do you imagine bears the greater burden here, persons of my political persuasion, or yours? Persons who are enthusiastic over unleashing the power of capitalism, or those darkly suspicious?
Who was more right about this, me and mine, or you and yours?
Do we get to look at the broad scope of historical data separating your side from Scylla’s, or is this going to be like an anti-AGW cherry picking session where we only look at this economic downturn out of context?
If we look at it in a historical context then I’d say there is no question that your side is more wrong than right over all (which isn’t to say they are never right), while Scylla’s (presumed) side has been more right than wrong (which isn’t to say they are never wrong). We’ve had long periods of economic growth coupled with some nasty recessions and a depression…but overall it’s been one of almost constant economic growth and higher (or at least stable) standards of living.
Capitalism is the engine that drives the worlds economy, and it’s the engine that puts dinner on the table and cars in the driveways of those very people you are concerned about. With a free market system much of that wealth simply wouldn’t be there. On the other hand, socialism has softened the edges of capitalism, making it a bit more humane and a bit less harsh. They go hand in hand these days.
But to try and put ‘your’ side on a supposed higher moral ground is to ignore history…and to ignore the fact that nearly every well to do nation on earth that was formally more solidly in ‘your’ sides camp has moved to put in place a freer market…and ignore the reasons they have done so. It’s also to ignore some of your more excessive brethren and sistren and what they have done in the names of those people you feel for.
But the point is, nobody is actually doing what you’re complaining that people are doing. The very small number of people who oppose any social spending – or even cutting the trillions we already spend – are also likely to oppose the bailout. The widespread “bitching and moaning” you refer to mythical.
And xtisme points out, the financial industry is not a completely free market; in fact, it is probably the most heavily regulated industry in America. Much of the current mess comes from bad regulations and bad regulators.
In 2007 AIG contracts were written with a provision that the 2008 bonuses had to be held to 100 % of the 2007 level. They were well aware they were going to take a beating in 2008.They were just taking care of themselves . They had the system rigged in their favor and still do.
I’ll buy that I may be hyperbolizing, but … “The very small number of people who oppose any social spending …”
The Republican’s are a very small number of people? The bitching I’ve lamented (the “why should my money go to poor people”) is practically ubiquitous among conservatives.
I’ll assume I’m the supposed asshole. However, you didn’t read what I said there. This is what I said: