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Obama vs. AIG
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03/16/09 09:35 AM ET
The Wall Street Journal just reported that President Obama is trying to avert a political firestorm by directing his Treasury secretary to take every legal step possible to stop AIG from awarding $165 million in bonuses.
The president and many in Congress are doing what they do best: seeking to put the blame on someone else while pretending they had nothing to do with the problem at hand. President Obama, Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) all voted for the TARP bill that gave the Treasury secretary billions of dollars to allocate with no congressional oversight or accountability.
How the chickens have come home to roost — again. I despised TARP when first proposed by then-Secretary Henry Paulson, as I do now: billions of taxpayer dollars down the hole with no oversight. Now the same politicians who wrote the legislation that led to millions of our tax dollars being wasted refuse to look in the mirror and acknowledge that their haste to create a new multibillion-dollar program was done without the proper vetting and safety mechanisms built in to protect the people they ostensibly represent.
For his indignation and outrage, I wonder if the president will remind the American people of his support of the legislation that brought us this mess.
Don't hold your breath.
The president and many in Congress are doing what they do best: seeking to put the blame on someone else while pretending they had nothing to do with the problem at hand. President Obama, Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) all voted for the TARP bill that gave the Treasury secretary billions of dollars to allocate with no congressional oversight or accountability.
How the chickens have come home to roost — again. I despised TARP when first proposed by then-Secretary Henry Paulson, as I do now: billions of taxpayer dollars down the hole with no oversight. Now the same politicians who wrote the legislation that led to millions of our tax dollars being wasted refuse to look in the mirror and acknowledge that their haste to create a new multibillion-dollar program was done without the proper vetting and safety mechanisms built in to protect the people they ostensibly represent.
For his indignation and outrage, I wonder if the president will remind the American people of his support of the legislation that brought us this mess.
Don't hold your breath.
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Comments (20)
The fudpuckers running the legislative branch should have seen this coming. You would think Obama's teleprompter would have warned him about this.BY Robert Rosencrans on 03/16/2009 at 17:12
http://www.ritholtz.com/blog/2008/11/what-obama-geithner-aig-fiasco/
If the rule of driving money to the strong banks (see “View from the Top: A Prime Solution to the US Banking Crisis”) safety and soundness is to be effective, it must be applied to all. And now you know why we have questions about the nomination of Tim Geithner to be the next Treasury Secretary. If you look at how the Fed and Treasury have handled the bailouts of Bear Stearns and AIG, a reasonable conclusion might be that the Paulson/Geithner model of political economy is rule by plutocrat. Facilitate a Fed bailout of the speculative elements of the financial world and their sponsors among the larger derivatives dealer banks, but leave the real economy to deal with the crisis via bankruptcy and liquidation. Thus Lehman, WaMu, Wachovia and Downey shareholders and creditors get the axe, but the bondholders and institutional counterparties of Bear and AIG do not.
Few observers outside Wall Street understand that the hundreds of billions of dollars pumped into AIG by the Fed of NY and Treasury, funds used to keep the creditors from a default, has been used to fund the payout at face value of credit default swap contracts or “CDS,” insurance written by AIG against senior traunches of collateralized debt obligations or “CDOs.” The Paulson/Geithner model for dealing with troubled financial institutions such as AIG with net unfunded obligations to pay CDS contracts seems to be to simply provide the needed liquidity and hope for the best. Fed and AIG officials have even been attempting to purchase the CDOs insured by AIG in an attempt to tear up the CDS contracts. But these efforts only focus on a small part of AIG’s CDS book.
The Paulson/Geithner bailout model as manifest by the AIG situation is untenable and illustrates why President-elect Obama badly needs a new face at Treasury. A face with real financial credentials, somebody like Fannie Mae CEO Herb Allison. A banker with real world transactional experience, somebody who will know precisely how to deal with the last bubble that needs to be lanced - CDS.BY Bill Hussein O'Stalin on 03/16/2009 at 17:25
After all, we bleeding heart progressives usually believe in second chances, maybe we should give them a Mulligan. Maybe Graham has an answer for us, "nation of whiners" not withstanding.BY smilinjack on 03/16/2009 at 23:48
Republicans - putting power first, America second.BY uk visa on 03/17/2009 at 05:52
Since ordinary citizens don't have standing to file certain lawsuits, maybe someone up there, with standing of course, can do the right thing and get some justice for plain old U.S. Citizen!BY Lewis A. Morris on 03/17/2009 at 05:53
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