The AIG Bailout - April 2009

The Big Takeover

Is it Goldman Sachs or the Feds...
(oh sorry - they're one and the same...)
who are now fixing the mess?
(but didn't they create it in the first place?)

By Matt Taibbi

AIG Financial Product's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion; Cassano himself pocketed at least $280 million in compensation. Everyone made their money — and then it all toppled overnight.

Now for a sidetrack, read a mansion-dwelling veteran of that money-grubbing team publicize his sob story to the world and see what a sorry bunch of thieves they were (and still are...) Jake DeSantis (Executive Vice President of the American International Group's Financial Products unit) Resignation Letter >

There are plenty of people who have noticed, in recent years, that when they lost their homes to foreclosure or were forced into bankruptcy because of crippling credit-card debt, no one in the government was there to rescue them. See Outrage - Under Siege >

But when Goldman Sachs — a company whose average employee still made more than $350,000 last year, even in the midst of a depression — was suddenly faced with the possibility of losing money on the unregulated insurance deals it bought for its insane housing bets, the government was there in an instant to patch the hole. That's the essence of the bailout: rich bankers bailing out rich bankers, using the taxpayers' credit card.

In essence, the bailout accelerated the decline of regional community lenders by boosting the political power of their giant national competitors. Which, when you think about it, it's insane: What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking pool of Bigger Fish.

To fix this problem, the government should have slowly liquidated these monster, too-big-to-fail firms and broken them down to smaller, more manageable companies. Instead, federal regulators closed ranks and used an almost completely secret bailout process to double down on the same faulty, merger-happy thinking that got us here in the first place, creating a constellation of megafirms under government control that are even bigger, more unwieldy and more crammed to the gills with systemic risk.

As complex as all the finances are, the politics aren't hard to follow.
By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages... come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your #ss in jail instead?

But before you even finish saying that, they're rolling their eyes, because You Don't Get It. These people were never about anything except turning money into money, in order to get more money; valueswise they're on par with crack addicts, or obsessive sexual deviants who burgle homes to steal panties. Yet these are the people in whose hands our entire political future now rests.

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It offers a easy-to-understand layman's explanation of much of the financial shenigans the got us into our current economic crisis and a scathing summation of the gold ole boys behind it all. A must read for anyone concerned and affected (isn't that all of us?) with the current economic tailspin...

Read the article online >