RSS Feed MenuYou can’t really blame the AIG stuff on the Democrats. Paulson and Co. decided to be deliberately nontransparent, which led inexorably to where we are. No one in DC seemed to understand who exactly they were bailing out and why. It’s overwhelmingly the counterparties and it’s the debt-holders of these institutions–those who would take haircuts if these financial institutions were airlines or telephone companies or railroads or any other company that went into bankruptcy. It is only to a modest degree the shareholders, who’d get entirely wiped out if they were owners of an airline, telephone company, railroad, etc. It is also, of course, the employees–which is why one is right to be indignant about employees taking cash out of these companies until the government gets paid back, whether you call it a bonus or any raise beyond what people were making before.
Only when the taxpayers get involved are the creditors of all these bailed-out institutions able to recover amounts at face value. To see where the creditors would wind up if any of these failed, check out the very public estimates of Lehman recovery values. It is true that avoiding bankruptcy of financial institutions (as opposed to airlines, etc) has some benefits–the avoidance of cascading liquidations that could ripple through the economy. But just because it would be bad to allow financial institution debt-holders and counterparties to suffer a full scale evaporation of their positions (Lehman again) — especially when your overriding public policy objective is to salvage the financial system — does not mean they should get paid back at 100 cents on the dollar with the taxpayer at risk. Does one really suppose anyone would’ve said no to (say) a 15% discount on their AIG CDS contracts when the alternative of bankruptcy might mean a discount of 50% or more? There, I just saved the government $25 billion, enough to bail out the entire car industry. For the life of me, I will never understand why the sophisticated deal people on Paulson’s team did not as a condition for throwing all this money at AIG consider some mechanism like this — if not when they were immersed in the first panicky flush of $80 billion, then during the subsequent bailout tranches.
gblittle // Mar 20, 2009 at 4:32 am
Yes Paulson is to blame but how can you let Democrats and even Republicans off the hook. Remember that Paulson’s plan was originally three pages long and by the time the House and Senate got done with the document it grew to over 1,000 pages. One would think that in adding all the extra pages, especially since most of these guys have legal backgrounds, every loop hole would have been covered. Well we find out they we not and even loop holes added. I also doubt that anyone even read the completed document either. It’s so nice to hear our leaders grandstand on how evil, immoral and corrupt Wall Street and big corporations are. It’s time these same leaders look in the mirror. If anyone should be fired and taxed at 90 percent because of failure it should be our elected officials starting with Dodd, Franks, Pelosi and Reid. Right now I’m looking forward to the 2010 elections. If the voters don’t fired them then we have no room to complain ever again.
Bulldoglover100 // Mar 20, 2009 at 8:42 am
This article is spot on……but will the rabble rousers listen? No….they will continue to beat this horse until more Indepenents and Republicans leave our party when they find out, ONCE AGAIN, that our party lies like a dog.Paulson knew what he was doing and he also knew he would not be around to catch the blame….Republican brand is starting to stand for ALWAYS Party over Best Interesxt of this Country…..I just saw where the Wack Job from Wasillla just refused over half of the stimulis money for her state that is in dire straights…..all so she can run in 2012. It sickens me.
krove // Mar 20, 2009 at 9:59 am
Thank you for a rare spot of realism in a sea of ideological rhetoric. Really good to see here well done. Both sides deserve blame in the AIG mess. I think the white house was right to correct the bill and allow the bonus’s where there was a long standing contract. The government should follow the law as it stands, they just cannot ignore what is in place. I don’t agree with the 90% tax that has been applied to these payments either. That is retroactive change in tax policy to effect a small number of people. In effect the same thing cancelling a payment of a legal contract.
barker13 // Mar 20, 2009 at 11:23 am
“You can’t really blame the AIG stuff on the Democrats.” (*SNORT*) You can’t…??? Hmm… someone help me out here… WHICH PARTY has had absolute control of BOTH Houses of Congress (for all intents and purposes) since January 2007? Next: Which Party has not only had control of both Houses of Congress since January 2007, but control of the Executive Branch (aka: The Presidency) since January 20th of this year? The author has GOT to be kidding…!!! BILL
sinz54 // Mar 20, 2009 at 1:35 pm
Barker13: TARP was the brainchild of Paulson, and okayed by Bush. It wasn’t Pelosi’s idea, it was Paulson’s idea.
barker13 // Mar 21, 2009 at 9:06 am
re: Sinz54; 1:35 pm — Sinz… I hate disingenuous people – I truly hope you’re not one of them. No one ever said, nor inferred, that TARP was the “brainchild” of Pelosi – or Reid for that matter. And yes, I’m well aware that TARP was Paulson’s plan. But, Sinz, that doesn’t change nor distract from my point: This is not and was not a dictatorship of Paulson (or Bernanke). The “buck” stops at three desks to one extent or another in our republic – the sitting President’s desk, the sitting House Speaker’s, and the sitting Senate Majority Leader’s desk. Down the road I suppose the buck may one day rest upon the desks of five of the nine members of the Supreme Court, but for the purposes of this discussion, it’s not upon the “ADVICE GIVING” component (i.e. Paulson, Bernanke, et al) that applause or blame falls, but rather, it’s upon the shoulders of our democratically elected political leadership which duly PASSED/SIGNED the legislation into law. Surely you understand this. So… what started with BUSH/PELOSI/REID continues – at a multiplied pace and scope – under OBAMA/PELOSI/REID. Hmm… bottom line… let’s call our screenplay “Three Left Wing Democrats and a Rino.” (*SMIRK*) To reiterate… no one is saying Bush avoids his share of the blame; just the opposite – it was Bush who first took us down this path… WITH the full cooperation of Pelosi, Reid, and the Democrats. (*SHRUG*) Any other questions or comments, Sinz? BILL