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AIG. Another Casualty of the McCain/Gramm Humbug, "Let the Market Work".

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.


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Rating: 3.7/5 (6 votes cast)


Comments (6)

J.R.:

Steve, how is this the free market at work? If it was, AIG would be filing for Chapter 11 and we wouldn't be seeing our tax dollars going to save a public corporation. Why are we becoming a nation where you have public risk with private reward? AIG should fail, just like Lehman Bros. The government should not get involved.

And a quick question, just curious what the folks on the other side of the aisle have been doing while this crisis has been forming? You know the Democrats who actually control Congress. Are they just poor innocent bystanders in all this. How is it that just the Republicans caused this. And why does Obama have 2 financial advisors from Fannie Mae on his team?

J.R.:

And Steve, the links from this blog post from Tom Maguire tend to contradict specifically what you wrote above. The links seem to suggest that the Democrats were heavily involved in less oversight and regulation than you would like to admit.

Steve Crickmore:

J.R., yes the the Democracts had a decided working class interest involved in Fannie Mae and Freddie Mac and definitely had their blinkers on, by ignoring warnings and setting up a system that only works when the housing market is going up and home equity is increasing.

And, I don`t know why Obama hired Jim Johnson to head up his veep selection team? a big mistake. Johnson, a Clinton crony made 21 million dollars, in one year as the former chiarman of Fannie Fae, a private mortgage company but one heavily subsidzsed by the government, and sure enough he had to resign from Obama`s selection team because of unethical loans.

Let me repeat Balzac's maxim 'behind every great fortune there is a great swindle', but on the whole I trust Obama more than McCain precisely (and he is being criticized by this) because after college he decided to do three years community organizing work and after law school voter registration work..Surely, he has his feet squrely on the ground and won`t be so influenced by the Wall Street investment tyccons, especially now. I can`t see him like John Edwards (or Chelsea Clinton for that matter) going into hedge funds.
Off topic, but even MItt Romney criticized Obama today for being a community organizer for three years after college, while Romney himself after college was a Mormon missionary in France for two years trying to convert people to Joseph Smith`s religion.

emmo:

The world's banks from London to Beijing all invested in pieces of America. Now, the rest of the world's governments are having to bail out their own banks just for owning American assets.

It already IS a global calamity. Paulson had the opportunity to buy into just a little of fannie and freddie and save shareholders, save FNM and FRE, and basically save America and the world.

Instead, once shareholders realised Paulson was going to let them drown, the companies crashed, and Paulson came to the 'rescue'.

Everyone got their fingers badly burnt, and the lack of banking regulation in America will drive investors to more stable countries, and more solid banks. That will be an absolute disaster for America, and will have a drastically negative effect on the economy within 5-10 years.

That's my prediction, unfortunately. I really, really hope I'm wrong.

Lee Ward[TypeKey Profile Page]:

The Bush administration played "hands off the markets" way too long. The wild swings in commodity prices for the last year are another example of the laissez faire Republican attitude towards regulation that hurt everyday Americans -- at the gas pump and at the grocery store checkout.

The price of oil did not rise and fall based on supply and demand - it was pure profit-driven market speculation.

And it helped drive this country into a recession.

Lee Ward[TypeKey Profile Page]:

I'd say the vast majority of knowledgeable people, and for the sake of argument I'll include some Republicans in that group, disagree with you, Chad.

Even John McCain is calling for more oversight and tighter controls.

And yes, it needs to be efficient, and not a bureaucracy. They are not mutually exclusive however.

And pinning this on Jimmy Carter? Lol - how pathetic.


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Publisher: Kevin Aylward

Editors: Lee Ward, Larkin, Paul S Hooson, and Steve Crickmore

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