Also at This Blksista’s Page
Eliot Spitzer’s downfall always had an air to me of being a political hit. A few weeks before, the prickly governor of New York had announced that he was going to take dead aim at Wall Street excesses; his Rottweiler nose had already picked up the scent that something big was about to happen, and he wanted to get there before it did.
Unfortunately, the call girl scandale du jour caught up with him, and the former state attorney general that Wall Street loved to hate had to resign from a great height. Since then, Spitzer has been writing occasional columns for liberal blogs and other mainstream media while attempting to get his personal life back on track. Yesterday was one of those occasions on Slate, and Spitzer didn’t fail to deliver. He was requesting that people not get suckered in by externals and outrage; that there is something deeper afoot:
Why are AIG’s counterparties (Goldman Sachs, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, etc.) getting paid back in full, to the tune of tens of billions of taxpayer dollars? […]
[Because t]he appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
The day before yesterday, I had said just about the same thing: that these guys were getting paid once again when the Feds had already given them a bailout:
Plus, isn’t Merrill Lynch now owned by Bank of America, and Wachovia by Wells Fargo? Just what do we owe them now?
The MSM, the Congresscritters–they aren’t asking the right questions, Spitzer believes. Anything else is mere posturing for the cameras, while the populace feeds on distrust of the Obama Administration.
- What was the precise conversation among Bernanke, Geithner, (then-Treasury Secretary Henry) Paulson, and (Goldman Sachs CEO Lloyd) Blankfein that preceded the initial $80 billion grant?
- Was it already known who the counterparties were and what the exposure was for each of the counterparties?
- What did Goldman, and all the other counterparties, know about AIG’s financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn’t they bear a percentage of the risk of failure of their own counterparty?
- What is the deeper relationship between Goldman and AIG? Didn’t they almost merge a few years ago but did not because Goldman couldn’t get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG’s business model was not to pay on insurance it had issued.
- Why weren’t the counterparties immediately and fully disclosed?
It doesn’t look as though any of these questions were answered yesterday etiher. Liddy being called to Congress was cosmetic only–to smooth things over rather than answer these hard questions. This was to keep the scheme going as long as possible until the principals get everything they want.
If Spitzer had gone in and done his worst, the whole thing would have crashed and burned before our eyes much, much earlier. Bush, Paulson, and everyone else were trying to keep things together for McCain; or to have an exploding cigar ready for a Democratic president. I know this sounds like a conspiracy theory, but not all of them are crackpot.
And it’s the same guys wanting the government to cushion them against their own bad decisions by foisting this whole thing off on the taxpayers. Just how many times is Bank of America going to be bailed out, for instance?
The last time this happened was on Hoover’s and Roosevelt’s watch. And Roosevelt and his people just let those empty, fake banks crash. They had other things to do.
And where is Barack Obama on all this? Beyond taking responsibility, it’s really hard to tell. If he focuses just on the former Massas of the Universe instead of the people who really need help, he’ll be turning his back on them just like Clinton did with his social programs in the wake of the Republican “contract on America.”
Your thoughts?
the whole point of saving AIG was to protect the counterparties Normally, we would not bail out an insurance company. We insure deposits, not insurance and credit default swaps. But if AIG didn’t honor its insurance, it would bring down every major bank and investment firm in the US and many in Europe.
Respectfully, I have to disagree. This is looking increasingly like the same guys getting paid 3, 7, 15 times over. Forget the counterparties…they are phantoms and are going to go down anyway. I don’t buy anymore that all of them will go down because of AIG. Some will and some won’t.
well, imagine if Goldman Sachs had to eat all of the losses from seeing their insurer default on all their insurance. Obviously, they couldn’t take that kind of a hit. The thirteen billion they lost to AIG exceeds the $10 billion Warren Buffet pumped into them last year.
Boo, I don’t get your logic. Nicholas von Hoffman said that these banks are phantoms and they should be LET GO. To me, credit unions are more banks than they are.
fact is, we’ll never know if U.S. and EU companies entwined with AIG will fail because of AIG going under, because we bailed them out. I tend to agree with blksista, that this was somewhat overblown, precisely because there is SO much money involved here. AIG and the rest clearly do not want to take on all of the pain (responsibility) for their stupid, high risk investments; instead they want to dump it on the poor and middle class who essentially have zero wealth to begin with.
again, Obama/Geithner/Summer’s refusal to just nationalize AIG, Citigroup and the rest of the Zombie banks sends entirely the wrong message to the poor and middle class, but it sends the right message to the people “who really count in the U.S.”; the wealthy investor class.
watch for Geithner’s announcement coming regarding
his hideous PPIF fund.
in the end, this will be the largest transfer of wealth from the poor/middle class to the wealthy investor class in world history.
Thanks for this diary. completely agree about Spitzer that a weakness was exploited (tragically for him and for us). imo Obama has a much more difficult job than Roosevelt because of who he is. Roosevelt could say f* you to them, he knew them all from prep school and college. They’d call him a class traitor but not mess with him. IMO Obama has to focus on change via health care, education, energy policy and a constructive foreign policy. he’s got to manage this, but his and our long term prospects would be crippled or destroyed if he took it on the way Spitzer or Roosevelt could.
yes, it’s unfortunate because we clearly need bulldogs like Spitzer (working for us) in regard to the Wall St. Casino.
obviously there is NOBODY like Spitzer working for the SEC.
saw him once campaigning on a NY street corner for/ with Morgenthau. what a dynamo! his energy vibes extended out in about a 4 block radius. would be so great having him on the case now.
Of course Spizer’s downfall was a political hit. I’m right with you on this, as well as your other suspicions. I also have a sense that Obama will, in fact, adhere to the pattern. It’s all come down far too neatly.
Getting paid back for your losses twice.
If I set fire and burn down my own house, my insurance company complains about paying me once.
These guys get paid twice.
You can see why they say they are earning their bonuses.
Spitzer may be thanking his lucky stars it was purely a political fall and not one from a great height literally, say about 10,000 in a small plane.
But I repeat:
Go here to read the rest of my take on this plus Booman’s airy dismissal of the one source I quoted (out of the 839,000+ posts on google) as being “crazy”.
I certainly hope so, Ollie.
But sometimes I wonder.
Sometiems I wonder if all of the people who miss this perfectly obvious connection are really simply dupes of the hypnomedia.
Sometimes I wonder how I keep from going under. Uh huh ha ha ha.
It IS a jungle.
And not just sometimes.
And not only for the denizens of the deep ghetto, either.
Bet on it.
Web station WTFU signing off once again.
Wake The Fuck Up.
Those of you who are not simply feigning sleep.
AG
Cute.
I wonder how many people who are screaming about the bonuses understand that it is less than 1% of the total AIG bailout? What’s happening to the other 99%+ of it?