The real reason we bailed out AIG

In reading through the news over the past few days, it’s apparent that many people are upset with the multiple AIG bailouts.  Some are upset that executives are getting bonuses (I am too) but I think the real reason for the bailouts in the first place is far worse than a few boneheaded executives paying themselves with our money – or as Bernanke says, we paid them by “printing money”.

The real reason is so billions in bailouts could be funneled to other financial firms without having to disclose it.

For example, the Washington Post reports The funds were paid from the government’s initial $85 billion emergency loan in September and included major firms such as Goldman Sachs, Societe Generale, Deutsche Bank, Merrill Lynch, Morgan Stanley, Bank of America and Barclays.

The government has already publicly bailed out Goldman Sachs, Morgan Stanley, and Bank of America  with hundreds of billions of dollars – and I think this is simply an underhanded way to funnel billions more to them to avoid bailing them out again.

The money AIG talked about in this report was from the original $85 billion bailout last year, and doesn’t include anything from the 2 subsequent bailouts.

TIME says AIG, under pressure from Congress and the press, also released the number of the counterparties to many of its credit default swaps. AIG had decided to insure the value of certain paper owned by the likes of Goldman Sachs (GS), Morgan Stanly (MS), and Deustsche Bank (DB). When the value of that paper fell, AIG was on the hook to pay off the “insurance” which kept the likes of Goldman from having to book large write downs. Those write downs might have pushed Goldman into a difficult financial situation.

And by “difficult financial situation” they mean bankrupt, broke, out business Bear Stearns/Lehmann Brothers broke.  That’s the real reason for the AIG bailouts.  Paulson and Bernanke didn’t have to publicly give their old buddies more money – they could pass billions to them through the guise of AIG bailouts.

On the subject of bonuses, The says Another issue on the table is that AIG and government officials have created a human-resources Catch-22. The firm plans to dole out $165 million in bonuses to keep the employees who created the very derivative products that ultimately destroyed AIG as a private, independent entity. The firm says it is contractually obligated to pay those bonuses, and that the employees have critical knowledge about valuing and winding down its toxic assets.

Really?  Critical knowledge about valuing and winding down the toxic crap on their books?  I’m not too bright, but I think that if your company lost $61 billion in the last quarter alone, there ain’t no one with critical knowledge at your company!

“Maybe [regulators] should have asserted more control at the start, back in the fall,” says David Steuber, co-chair of the insurance-recovery practice at Howrey LLP. “But now they’ve made some of these people indispensable, and those people are going to need to be compensated at or about the market rate.”

Oh come on!  these people are “indispensable?”  Maybe so, because there aren’t a hell of a lot of people capable of screwing up a company this badly.  Dudes, you freaking lost $61 BILLION in the 4th quarter alone – how “indispensable” can you be?!?

Are you “indespensable” because the average wino off the street might have only lost $1 billion?  Get a life assholes – you would not have a building to go to work in today if taxpayers hadn’t given you over $170 billion.  And you think you deserve a freaking bonus?!?  WTF have you been smoking, snorting, or shooting?

Idiots.  Kick their asses out on the street and stop giving them our money to blow and pass on to their buddies.  Let the comapnies who made bad bets on derivatives suffer the consequences and go broke.



One Response

  1. […] AIG was “saved.” There’s a lot more here – some of which I talked about in a previous post – but read it for yourself. gk Sphere: Related Content Tags: AIG, bailout, […]

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