Blue Mass Group

Reality-based commentary on politics.

The extortion of America by AIG executives

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For more then a month I have been calling for AIG to be cut lose from the taxpayers, the level of obligation that I suggested far exceeded the capacity for our government to pay with out leaving little to continue to support the safety net programs like Unemployment that may be needed to see Main Street Survive. It now appears my opinions were closer to reality, trust me I take little solace in being correct in this case. Yet looking even closer at the evidence that is leaking out it appears that we are being forced to underwrite the Global Collapse. AIG it now appears did not just infect US banks but likely the worlds leading institutions. Their behavior has put at risk a global economy with effects that have certainly damaged our country in ways we have yet to hear about or see.

Yet, I see a broader issue and that is are we obligated as tax payers and a government to bail out a private corporation that has made commitments beyond it’s ability to repay and why is this or why are the victims any more damaged then say the victims of Bernard Madoff? Do we owe them a bailout for the governments failures and why not? If this has become the policy of our government then I fear the great experiment of a free democracy founded on a free market capitalism is doomed by the weight of the obligations that so few were allowed to make on the faith of people who were unaware the obligations were being made.

The executive team and board of directors that have sat atop AIG even when it was making these bad decisions continue to collect their 6 figure salaries and perks. Forgoing bonuses may be just the tip of a massive compensation package many are still enjoying and seem at little risk. They hold our Federal government hostage by the fact that if they are taken to task they will simply collapse the entire system and take us all down with them, Simple Extortion and we are to scared to call the hand. My venom for AIG is not solely motivated by this arrogant opulence but by the belief that Capitalism in it’s truest sense can not reward bad behavior simply because of  ‘we are to big to fail’. Also that putting off the inevitable certainly will cost us. That many more generations of our families will be saddled with the obligations, the ability to maintain a middle-income existence, as we currently know it will be impossible to maintain under the weight of the debt.

Once again I rise to suggest that the time has come to let the chips fall where they may, the need to dissolve AIG and more importantly to prosecute the leadership of AIG charging them with the same crimes we are charging Madoff with, is critical to getting past this dark period in American Capitalism to purge our system of the snakes that have twisted their way into our way of life and sucked the life blood from our future.  It is time for Attorney General Eric Holder to step up, it is time for the FBI to take American justice to the ivory towers of AIG and demand the same justice we would demand on the street. Until those we elect are willing to take the tough steps demanded by this fraud on the American Economy, I fear we will continue to see the economy slip and slide lower with a higher cost to each of us and the chance of a recovery coming in a foreseeable time little more then a dream.

As Usual Just my Opinion

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Comments

  1. Not just to punish to to show other financial executives that they have a duty which has both rewards for success, punishment for failure and prosecution for breaking our laws.

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    p>I do with they would stop talking about CEO and executive pay since this is taking away from the issue. In the grand scheme of things things their 6 figure pay is small. I’m not dismissing it but I am simply saying the issue of covering their poor insurance bets and the relationship or lack thereof between the Treasury and AIG is the issue.

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    p>We need to fix this fast and I believe Obama is not letting all the truth out here on purpose. There is some transparency that even he is afraid to let the American (and the world) public see. Next he’ll be stealing a much criticized George Bush line by telling us to go out and “buy something”.

    • I raise the issue of 6 figure compensation as an indirect example of the inability of a system trying to preserve their piece of the American Pie and as a result the inability to rationalize the pain they are inflicting on the Country as a whole.

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      p>AIG and many of the large banks Goldman Sachs included with the rest of the bunch have created Paper wealth that had only a value if the economy continued to climb. They have ignored history, which has shown that as growth gets out of control a reset if likely to happen. AIG in both of its Subunits one servicing Asia and one servicing Europe and much of the US were under writing risk with the premise that a fall will never occur. Even assuming that we merely experienced a down turn similar to that experienced in 2001, good business and actuary practice would dictate that they look at down turns similar to those experienced in a historical perspective such as 1958, 1974, 1981, 1983 along with 2001. It is clear that the evidence shows they did non of the due diligence we as Main Street expect out of the large members of our Economy yet here again the loss of a six figure job does not suggest survivability but you have to agree you are far more likely as the disgraced CEO of Citigroup or Merrill Lynch or AIG to survive even a serious lapse in employment better then a rank and file worker making 50-60 thousand a year with a mortgage, car payment and a child in college. This is the reality of the street and it is where the pain is being felt the sharpest and where the bill is being delivered to.

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      p>I agree “we can’t handle the Truth” and Obama certainly has changed his tone and address on the issue, really just short of relax it’s going to be ok. The problem is when for more and more people here on Main Street. The Policies they are pursuing are more in tune with the Paulson policies then an Obama mandated policy.

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      p>I do believe that we will see more if we are allowed to see the stress test reports unfortunately I do believe we are spending huge sums on security to protect this information from being made public at any time. Even as a Democratic Activist who would rather cut off my right arm then to see a Bushy policy continue I am unwilling to Jump off the cliff for the sake of supporting a Democratic Administration I can not agree with and for a growing number of Economists this opinion is growing by a factor of 10 every week.

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      p>Simple point is as GDP shrinks and as the needs of support safety nets need additional funds and as many believe the lessons of the Great Depression require both sacrifice and huge government spending we are empting the Treasury to bail out those who behaved badly.

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      p>If I set a scenario that suggested we would have to pump 10-20 TRILLION dollars into AIG and Citibank and BofA and that half would leave this country to pay off Banks from other countries who hold obligations from AIG at the same time when Real unemployment reaches the Low Teens how would you all feel then. I believe the evidence points clearly that this is the likely path we are on. Not a pretty picture for the rank and file Main Street USA family.  

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      p>As Usual just my opinion

    • You can’t just say, “I believe Obama is not letting all the truth out here on purpose. There is some transparency that even he is afraid to let the American (and the world) public see.” without backing it up, or at very least being more specific.  What truth do you believe he is not telling us?  As for buying something, individual spending is more likely to boost the economy than it is to prevent a terrorist attack.  Otherwise I agree with your first two paragraphs.

      • … to post a ‘hunch’ as long as you label it as such.  Assuming it is a hunch, he still may want to elaborate on any reasoning behind it.

      • I think the “code blue” life support we have been feeding AIG is indicative of a serious patient condition. I think the fact that we cannot get the true “worst case” scenario coverage about AIG leads me to believe they don’t want to tell us we may have to pony up another $500 Billion to over a $1 Trillion just to cover them.

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        p>As for “buying something”… I believe President Bush suggested this to help our economy get started again after 9/11 and had nothing to do with preventing a terrorist attack.

        • What we are seeing are comments that suggest the Problem with AIG is they are so over extended and to so many banks that if they fold or are sent to the wood shed that default will destabilize the entire system.

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          p>I believe the comments that can be attributed to a host of people and news reports and even Paul Krugman’s comments if you read between the lines just a bit you will see that if the inability to act is caused by something. That something is not because of who got the biggest donation to their election fund no amount of money could save you from this. So if you take all the crumbs left lying around by the Bush Administration, Henry Paulson, Chris Dodd, and Barnie Frank and an arms list of FED, FDIC and leading Economists you will see the picture is not oh well everything is hunky dory you will see that they are looking down into an abyss. I offered Warren Buffets comments as just one more crumb to ad to the pile.

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          p>I would be shocked if in the middle of this crisis that one any insider would come out and admit the facts I would also suggest that it is going to take a fair amount of forensics to figure out just who and how with enough certainty. That is not to say that there is not enough evidence to suggest the scope of the problem and the fear that exists that if you tell the whole truth many would one not believe you could dig us out of it and two what actions were actually going to be the correct action at this time. If I told you that (hypothetically) that 75% of all banks are either underwater on balance sheets because of the lost Value of their portfolio, or two that they purchased credit default swaps on their leveraged savings to extend out the ability to free up cash reserves to continue to loan, or third that the foreclosure rate of their portfolio exceeds their ability to cover those losses with out ceasing business and fourth any combination of 1-3 and a couple of other issues like car loans, credit cards, or Personal loans. Then please remember that a bank owns and pays for Buildings, equipment, employees, fees to Fed and FDIC as well as payments to investors. the only way they have day to day operating capitol is based on the rate and amount of payments on the loans as well as the fees and interests from new loans coupled with any growth in deposits but those are not as free as interest and fees are. With out this daily flow of capital growth eventually they reach a point where they can no longer do business as usual.

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          p>Sad but true I do think President Obama as well as you and I and far more people working more directly in the bank Management field are not fully aware of the full extent as the President’s is brought up to speed as they peer into each new closet there are no presents just more bones of a failed attempt to make profits with out restriction and the sobering effect it is having is certainly showing in his looks his demeanor his comments.

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          p>If the evidence was crystal clear I suspect there would be a far easier solution and we would not be discussing the points here.

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          p>As Usual just my Opinion

  2. Not only are we taking on the risks while this small crew reaps the rewards, it is only the US who is taking on these risks.  It would be nice to see our European “friends” who lean so heavily on this train wreck stepping up and not leaving it all to the American government.

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