The U.S. government has agreed to provide an $85 billion emergency loan to rescue the huge insurer AIG, the The Federal Reserve said Tuesday. The Fed said the U.S. Treasury Department was in full support of the decision.
The Fed determined that a "disorderly failure" of AIG could undermine already fragile financial markets.
The government will receive an 79.9 percent equity stake in AIG, the Fed said.
John McCain has consistently seen the subprime mortgage crisis as `a market problem`..No surprise since he has always advocated more deregulation and relied on much of his economic policy, such as it is, from his ex-colleague and chairman of the Senate Banking Committee, Phil Gramm who failed to learn the lessons of Enron, even though Gramm lobbied and won a congressional exemption for Enron and it was his biggest campaign contributor and his wife was a well-paid director.
In spite of those ties or because of them, and due to McCain and Gramm's shared predilections for drastically less government oversight, Gramm became McCain's chief economic advisor... until early July, 2008 when he offered his characteristic opinion, on camera that we were only "in a mental recession" and we were "a nation of whiners". And this from a guy has been touted as the next Secretary of the Treasury. He still may be if McCain wins the election..Never underestimate the stupidity of....
Now the generic maligned American government (the maligned government in a strict Adam Smith economics sense) is having to to bail out, reluctantly the nation's biggest insurer, AIG. because of that bemoth's irresponsible and inept mangement of risk -the one thing an insurer is supposed to be good at. The Fed is providing an 85 billion dollar loan that it may never repay; in effect, AIG is being nationalized or socialized with an 80% public equity sake.
Of course, the general mantra that the government with all its stuffy and hidebound rules and bureaucracy would be much more ineffective than the expert private insurers for health care will continue unabated by right -wing free marketeers; "Praise the God "of private insurers and "pass the hat".
Gramm and McCain have continued to unashamedly promote the idea of privatizing social security and repeat the "let the market decide /the fundamentals are strong" (except there are no funds left) nostrum for every season, even when we have been in a significant downturn/ precipitous slide for more than a year.
McCain`s response like George W..Bush's is always that the free market is the answer ..except when it isn`t, and then when we have a full-blown crisis on our hands, McCain calls for another commission to study what went wrong, after the train wreck.
There is never any anticipation of any crisis with these politicians from the right..It is just business as usual with 'their home consituency' as George W. calls them. I say their GOP 'class interest' until the proverbial 's..t hits the fan' and then the Republican bosses run for cover, under the banal analysis that Wall Street has suddenly become 'reckless or greedy", (since when have they not). To the Phil Gramm`s or the John McCain's or the George Bush's or Dick Cheney`s of the world, who have been doing their rich corporate friends bidding for so many years, it is a symbiotic relationship...
That is until the curtain is suddenly pulled and the creative accounting has been exposed and we can see for themselves what has really going on in the public government absence from the marketplace. Who always has to take the ultimate responsibility for the collapse of a system, enpowered by deregulation politicians like Gramm and the 'laissez faire' attitude of an indifferent McCain? Ultimately it is the voter who keeps putting these people back in power.
Note: Wizbang Blue is now closed and our authors have moved on. Paul Hooson can now be found at Wizbang Pop!. Please come see him there!