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Joe Nocera offers a critical look at the reflexive move to a fourth bailout—this time $30 billion according to this morning’s reports, on top of the $150 billion provided in the earlier bailouts–for troubled insurance giant AIG.
Donn Vickrey, who runs the independent research firm Gradient Analytics, predicts that A.I.G. is going to cost taxpayers at least $100 billion more before it finally stabilizes, by which time the company will almost surely have been broken into pieces, with the government owning large chunks of it. A quarter of a trillion dollars, if it comes to that, is an astounding amount of money to hand over to one company to prevent it from going bust. Yet the government feels it has no choice: because of A.I.G.’s dubious business practices during the housing bubble it pretty much has the world’s financial system by the throat.
If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.
I don’t doubt this bit of conventional wisdom; after the calamity that followed the fall of Lehman Brothers, which was far less enmeshed in the global financial system than A.I.G., who would dare allow the world’s biggest insurer to fail? Who would want to take that risk? But that doesn’t mean we should feel resigned about what is happening at A.I.G. In fact, we should be furious. More than even Citi or Merrill, A.I.G. is ground zero for the practices that led the financial system to ruin.
Nocera takes a look at some of the abusive practices that are driving this amazing failure, but he misses an important aspect—the creative use of reinsurance transactions to make troubled subsidiaries look solvent. It’s hard to study this and not come away with a sinking feeling that we still don’t know the worst of it. And not to ask the obvious question: where were the regulators in the midst of this? That may be the still more pressing issue.
More from Scott Horton:
Conversation — March 30, 2016, 3:44 pm
Joseph Hickman discusses his new book, The Burn Pits, which tells the story of thousands of U.S. soldiers who, after returning from Iraq and Afghanistan, have developed rare cancers and respiratory diseases.
i. stand with israel
I listen to a lot of conservative talk radio. Confident masculine voices telling me the enemy is everywhere and victory is near — I often find it affirming: there’s a reason I don’t think that way. Last spring, many right-wing commentators made much of a Bloomberg poll that asked Americans, “Are you more sympathetic to Netanyahu or Obama?” Republicans picked the Israeli prime minister over their own president, 67 to 16 percent. There was a lot of affected shock that things had come to this. Rush Limbaugh said of Netanyahu that he wished “we had this kind of forceful moral, ethical clarity leading our own country”; Mark Levin described him as “the leader of the free world.” For a few days there I yelled quite a bit in my car.
The one conservative radio show I do find myself enjoying is hosted by Dennis Prager. At the Thanksgiving dinner of American radio personalities (Limbaugh is your jittery brother-in-law, Michael Savage is your racist uncle, Hugh Hewitt is Hugh Hewitt) Dennis Prager is the turkey-carving patriarch trying to keep the conversation moderately high-minded. While Prager obviously doesn’t like liberals — “The gaps between the left and right on almost every issue that matters are in fact unbridgeable,” he has said — he often invites them onto his show for debate, which is rare among right-wing hosts. Yet his gently exasperated take on the Obama–Netanyahu matchup was among the least charitable: “Those who do not confront evil resent those who do.”
Average number of Americans who are injured by chain saws each year:
A farmer in Kenya bit a python who tried to eat him.
A former prison in Philadelphia that has served as a horror-movie set was being prepared as a detention center for protesters arrested at the upcoming Democratic National Convention, and presumptive Republican presidential nominee Donald Trump fired his campaign manager.
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“Matt was happy enough to sustain himself on the detritus of a world he saw as careening toward self-destruction, and equally happy to scam a government he despised. 'I’m glad everyone’s so wasteful,' he told me. 'It supports my lifestyle.'”