In their continued acts of financial improvisation, after another Weekend at Bernanke’s that I discussed here, Lehman Bros. was regarded as “not too big to fail”, Merrill Lynch’s management didn’t need to wait and see if the Fed and Treasury felt that it was too big to fail and quickly accepted a shotgun wedding with Bank of America, and the behemoth world’s-largest-insurer (I think they are, anyway) American International Group, better known as AIG, tried to remain afloat amidst the financial meltdown.
Today, after some market turmoil (the Dow was down over 500 points yesterday, but rebounded a bit, a little over 100 points today on news that the Fed was holding a key rate around 2%… as if it had a choice)… AIG’s situation has convinced the improvising government officials that, like Bear Sterns before it, is, in fact, too big to fail, and hence, the Fed loaned AIG $85 billion (think of it as around 6-8 weeks months cost of the Iraq war), in exchange for, among other things, convertible warrants that it can use to take a 79.9% equity stake…
Assuming that the Fed manages to effectively manage AIG onward into continued solvency, expect it to dump the company at a humongous loss (to taxpayers), but a humongous gain to the happy insiders who get to eventually profit from it.
When the government is owned by business and corporate interests, we call that Republicans’ fondest hopes and dreams “fascism;” when, by contrast, business and corporate interests are owned by the government, we call that “socialism.” Fascism is a misunderstood term with an unfortunate Italian connection; the fact is that Americans have enjoyed having their government dominated by business interests for decades now. Socialism, by contrast, is always evil…an affront to God. This makes Fed Chair Bernanke and SecTreas Paulson… apostates… if not outright traitors.
I’m at a loss for words. This is the first time I have ever been so ashamed of this country.
tdog
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