March 16, 2009, Two Minutes Hate
The last time I saw this kind of a coordinated propaganda assault was, dare I say it, during the run-up to the Iraq War. And now, alas, it's "my side," led by my college classmate, The President, who rails against the current enemy the State, Emmanuel Goldstein... no wait... I mean... those greedy bastards at AIG's credit default group who are getting hundreds of millions in bonuses that the President wants back.
The thing is, of course, that just as then Senator Obama railed against a $150,000 junket taken by AIG executives during the debates against Senator McCain, this is a sideshow... a smokescreen... a diversion. The real action is the credit default swaps themselves... the question is not, of course, why the clowns in the credit default department are getting bonuses... the question is why they still have jobs at all. As soon as the Government invested dollar one in AIG, it should have shut down credit default swaps, and, should have introduced legislation in Congress providing that such contracts (which are literally insurance against loans not being repaid, which conveniently override what used to be banks' job and key function, to wit, assessing the creditworthiness of their borrowers and the value of their borrowers' collateral and the like) are illegal as violative of public policy. Further, such legislation should have provided that credit default swap contracts cannot be enforced in federal courts, that a statute of limitations on enforcement is reduced to six months, and that anyone who undertakes such a contract in the future shall be subject to life imprisonment. (Indeed, legislation could even be proposed to deal with the bonuses themselves, and yet... isn't coming down the pike... I didn't get a harumph out of you... oh yes... kabuki and all...)
The reason for the current smokescreen (led by the Diverter in Chief... Corporate America clearly could have done worse than you, Mr. President) is...because... today... AIG actually revealed... where the real money went: over $105 billion in taxpayer money went to various banks, including Goldman Sacks and a number of foreign institutions. The few hundred million that everyone from the DCCC to Move On dot Org wrote to me today to tell me to rail against is but a tiny percentage of the real outrage: the use of taxpayer money to subsidize the most successful institutions in the world on contracts that should be against the law, but more to the point are being honored at 100 cents on the dollar when they could have been unwound for a tiny fraction of that. The bonuses are merely symbolic... but conveniently cover for an appalling lack of Government oversight, mostly by the prior Administration, but the current Administration is hardly blameless in this regard.
As loathsome as paying big bonuses to the individual AIG staff members who orchestrated the original credit default swap fiasco is, these bonuses are miniscule compared the broader fraud being perpetrated on taxpayers to prop up the balance sheets of major financial institutions, who would have, absent the Government's bailout, taken a huge hit on these credit default swaps, and who could easily have been persuaded to take far less than full payment had any effort whatsoever been made to do so.
But just as the Bush Medicare prescription drug plan actually made it illegal for the Government to negotiate for lower prices, so it seems, did the AIG bailout... oh wait... it wasn't illegal... it just wasn't done. No matter. Why think about substance and the real dollars... when you have a convenient political bogeyman? (I mean, what person now fighting to keep their job, or for their unemployment benefits, won't immediately loath some prick who cost his company-- and now the American taxpayer-- hundreds of billions of dollars, and then gets a multi-million dollar bonus... sounds awful, right?)
But nowhere near as awful as the real story... the one we are coyly being persuaded to turn away from. Congratulations, Mr. President. Nice trick.
This has been... "Two Minutes Hate".
Update: (3/18/09)... One knowledgable, though controversial figure, agreed with my premise that, as far as AIG goes, "it's the payments to the counter-parties, stupid".