March 20, 2009


What should we think about this bonus outrage, this “unkindest cut of all”? Throughout this obscene bailout regimen, as the Bush/Obama crew lurches from debacle to debacle, AIG has been in the vanguard of arrogance, with its psychopathic sense of entitlement and gleeful will to spit in the face of the taxpaying public and then walk away laughing. Now we see their funniest prank yet. 

Here’s a few thoughts:
1.What are CDSs? They constitute an insurance scam. It’s claimed that they’re insurance, and through this claim, with the blessing of the (non-)regulators, banks were able to greatly lessen the amount of capital reserves they had to hold.

But at the same time it was claimed they’re not insurance, and therefore shouldn’t be regulated as insurance; indeed that they shouldn’t be regulated at all. “Regulators” again acquiesced.

Worst of all, most of these bets weren’t even pseudo-insurance by the above loose, unregulated standard, but were rather flat out speculative gambling by parties completely unconnected to the underlying.

By no means are CDSs a feature of capitalism. They are rather the tool of parasitic rent-seeking fraud.

2. Summers and Geithner are whining about this? But they presided over the Clinton regulatory gutting. The CFMA is their baby. They personally own this policy which has established America as an anti-regulatory no man’s land. 

3. The cadres at AIG knew this was a criminal enterprise. They knew these contracts were insolvent and yet kept writing them, engaging in conscious fraud for their personal profit. Every step of the way they fully expected that if things went wrong, the losses would be socialized while their private looting operation would be protected, since this government is in the business of facilitating crime. These bonuses are what is called fraudulent conveyance, or looting in a very literal sense.

4. Government has lots of muscle to deploy here, if it cares to flex it. Why not promise to intensively interrogate every bonus recipient, to see what if any indictments are indicated?

5. In particular, I wonder what applications RICO might have here and in the case of the banks. (Would this be an abuse of RICO? I don’t believe so, if these really are the rackets they seem to be. Anyway, they’ve never been shy about “creative” RICO prosecutions before. Why start being shy now, when it might actually be worthwhile?)

6. Getting beyond the legalities: Summers is quoted in the NYT: “this is a country of laws”. No, it’s not. That’s why we’re here. This finance industry has consistently wanted to be placed outside the law. That’s been the entire focus of their anti-regulatory anti-legal lobbying campaign for decades now. And they got what they wanted. They are veritable outlaws, still rampant with the loot, still vandalizing and desecrating. So I’d be happy to treat them as the outlaws they are.

7. What could anyone involved here be thinking? I get that the AIG personnel are pure psychopaths and probably can’t help themselves by now. There’s nothing you can do with them; no rehabilitation is possible. You either let them continue to loot and destroy, or you don’t. But what could Obama be thinking? I don’t normally go in for hyper-Machiavellianism (if only because so few are competent to successfully carry it out), but this case is so extreme, so brazen, and so seemingly gratuitous, that I can’t help wondering if it isn’t actually a trial balloon to test the reaction of the people; to see whether or not the people really will stand for the Big Loot the adminstration clearly wants to facilitate for these corporations, where AIG is just one element among many.

Many commentators have reminded us how quickly insurrection can flare up, and we’re already seeing examples around the world, just as we did a year ago with the food riots. Do the American people have any of the old spark still in them? If they let this AIG affront go by with just the same old griping, if there isn’t a groundswell of elemental outrage DEMANDING that something severe be done to rectify this, then I guess the adminstration will have its answer. It’ll feel emboldened to go ahead.

8. One last point: they say these contracts can’t be broken? That spurned bonus claimants could sue? Let them! I’d love to see that. I’d like to see who has the audacity to go before the country and publicly demand a bonus. I’d like to see who would stand up in court under oath and defend his career in great detail. I’d like to see him go before the reporters and vouch for himself and his company. “Bring ’em on!”

But of course Obama and Geithner won’t force AIG to do that. Why? Because they too agree with the bonuses and want the bonuses paid out. That’s what Geithner’s whole career has stood for, and that’s what Obama’s presidency has so far stood for. Now we’ll see what comes next.    

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