AIG: Today it’s “Thank you, America.” Will it be “Screw you, America” tomorrow?

ScrewThis just in from NYT’s DealBook:

Rescued by a Bailout, A.I.G. May Sue Its Savior

The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”

By all means, give AIG a fair shake and read the NYT piece in its entirety. The board is indeed stuck between a rock and a hard place. If it doesn’t join the suit, it may face additional suits from shareholders for abstaining. If it does join the lawsuit, there will be plenty of pissed off Americans.

Here’s the thing going unmentioned by AIG at this juncture: the board could very well make the case that abstention is ultimately in the best interest of shareholder value. Heads may roll, but the case could be made. As noted by the article, it is currently unclear which direction the board will take. They will probably decide by the end of January. If they do plan to make the case for abstention, playing their cards close to the vest for now is a savvy move, perhaps, but nevertheless exposes the government to substantial legal costs in the meantime. Heads they win. Tails we lose.

The AIG bailout, and the Wall Street bailout in general, has already cost us too much. Should AIG join the suit and effectively tell the American public, “screw you,” they will have taken us from Too Big to Fail to Too Big to Jail to Too Big to Bail.

And what are we going to do about it?

[insert raucous, maniacal laughter here]

Not a damned thing, unless, that is, we think we can persuade the major shareholders that they should just accept the sentiments of the Federal Reserve Bank of New York and Judge Paul A. Engelmayer with grace and sit the fuck back down. Quietly. And gratefully.

The Treasury Department declined to comment. A spokesman for the Federal Reserve Bank of New York, Jack Gutt, said, “There is no merit to these allegations.” He noted that “A.I.G.’s board of directors had an alternative choice to borrowing from the Federal Reserve, and that choice was bankruptcy.”

A federal judge in Manhattan agreed, dismissing the case in November. In an 89-page opinion, Judge Paul A. Engelmayer wrote that while Starr’s complaint “paints a portrait of government treachery worthy of an Oliver Stone movie,” the company “voluntarily accepted the hard terms offered by the one and only rescuer that stood between it and imminent bankruptcy.”

[insert raucous, maniacal laughter here]

My prediction? We’ll take it up the collective pooper yet again. Maybe next time we’ll elect a president, hell, we’ll have a choice of candidates who won’t be hellbent on shoveling our money straight into the voracious maws of these modern day Gilded Agers?

[insert raucous, maniacal laughter here]

Who am I kidding? Keep it up, America. Great job.

Talk about your unintended consequences.

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Image credit: Photo of screw by LawPrieR, licensed under Creative Commons.

Nota Bene #119: Think! It Ain't Illegal Yet

“My wife and I were happy for twenty years. Then we met.” Who said it? Continue reading

Nota Bene #118: VOTE!

“I am not fit for this office and should never have been here.” Who said it? Continue reading

Nota Bene #103: Betelgeuse, Betelgeuse, Betelgeuse

“To take people from the music world and give them the same kind of credibility that you give me, Morgan Freeman, Laurence Fishburne, Forest Whitaker—that’s like an aberration. I know there’s some young actor sitting in New York or L.A. who’s spent half of his life learning how to act and sacrificing to learn his craft but isn’t going to get his opportunity because of some ‘actor’ who’s been created.” Who said it? Continue reading

Darth Vader meets Mel Brooks

400risk_gameOur illustrious leadership is haggling over the super-sized bailout like it was the end of the world.  My god, do you know how much money we’re talking about?  Actually, i do.  It’s roughly equal to what the Department of Defense spends every year.  And for those kind of duckets we get our ass kicked by guys wearing dress shoes without socks.  To make matters worse, we’re going stone broke in the process of losing to pick-up teams.  We can call ourselves the Harlem Globetrotters all day long but that don’t make it so.  I have no use for the American Empire, but if an Empire it shall be does it have to be such a half-assed failure of an empire?

Continue reading

Rove lies: Fannie, Freddie caused housing bubble

Karl Rove today wrote in the Wall Street Journal that “Mythmaking is in full swing as the Bush administration prepares to leave town.” He claims that the Bush Administration tried to rein in Fannie Mae and Freddie Mac and that these two government sponsored enterprises were responsible for the housing bubble. Further, Rove says “[t]he housing meltdown is largely a story of greed and irresponsibility made possible by government privilege.” He’s right, but almost everything you need to know about who’s making myths here and who was the benefit of government privilege can be said with two numbers:

Fannie/Freddie Bailout Amount TARP Bailout Amount1
$200 billion
$700 billion
1Troubled Asset Relief Program, the bailout program for all the other financial bodies who supported the bubble.

Continue reading

Nota Bene #52

nboctoberLink of the Week (as opposed to the Weakest Link)

Warren Strobel, McCatchy’s Nukes & Spooks, blogging from Tehran:

. . . rumors are running rife in Tehran’s huge central bazaar that the United States is on the verge of establishing some sort of diplomatic office in Iran for the first time since shortly after Iran’s 1979 revolution. That would probably cause a mass stampede, since half of Tehran seems to have a relative in the United States, and even many that don’t would love to have a U.S. visa. Continue reading

Nota Bene #48

Links of the Week (as opposed to the Weakest Link)

Michael Lewis, Portfolio, The End:

Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism.

James Howard Kunstler:

Personally, I believe the age of Happy Motoring is over. Many Americans have already bought their last car — they just don’t know it yet. Continue reading

Nota Bene #47

Link of the Week (as opposed to the Weakest Link):

John Heileman, New York magazine, The Next New Deal:

“Personally, I think the depth of the Obama realignment is being underestimated,” says the Republican media savant Stuart Stevens, who helped elect Bush twice. “They have basically invented their own party that is compatible with the Democratic Party but is bigger than the Democratic Party. Their e-mail list is more powerful than the DNC or RNC. In essence, Obama [was] elected as an Independent with Democratic backing — like Bernie Sanders on steroids.”

In other words, the Democratic party is but a brigade of the Obama juggernaut. Continue reading

Nota Bene #46

Link of the Week (as opposed to the Weakest Link):

Shaun Mullen at the Moderate Voice:

It is no accident that there are so many older African-Americans waiting in the long lines at early voting stations. These folks have long memories and they fear that they won’t be able to vote on Election Day because of the usual reasons given for suppressed minority turnouts — faulty machines, improper registration cards, not enough poll workers. Continue reading

Nota Bene #45

Link of the Week (as opposed to the Weakest Link):

In an American Prospect article, “Business as Usury,” Thomas Geoghegan writes: “Had we protected the poor and the weak, the problems of our mighty banks might not be so great. Why don’t we have a ‘National Usury Act’? Why, in the party of William Jennings Bryan, is there no one demanding an interest cap on our Visa cards and our MasterCards?. . . We may be the first society since the Code of Hammurabi to be operating with no law against usury at all.” Can the last sentence possibly be true? Continue reading

Nota Bene #44

Link of the Week (as opposed to the Weakest Link):

From a McClatchy blog, on something called the Reverse Bradley Effect: “. . . a new study today says that polls may be UNDERestimating Barack Obama’s support by 3 percent to 4 percent nationally [in] a reversal of the so-called Bradley effect, in which support for African-American candidates is overstated when people talk to pollsters but then vote against the candidate in the privacy of the polling booth. ‘If you call people on the phone today and ask who they will vote for, some will give responses influenced by what may be understood locally as the more desirable response,’ [psychologist Anthony] Greenwald said.” And then, apparently, vote for who they want. Continue reading

Nota Bene #43

Link of the Week (as opposed to the Weakest Link):

From American Raj, a new book by Eric Margolis: Abdullah Azzam “ran a dingy little rooming house next to his office for Muslim mujahedin headed for Afghanistan that came to be known as ‘the base’ or ‘the centre,’ and in Arabic, ‘al-Qaida.’ Rarely in history has an international revolutionary movement sprung from such modest origins.” From humble beginnings, a little acorn grows.

From “Reversal of Fortune” by Joseph Stiglitz at Vanity Fair: “We learned from the Depression that markets are not self-adjusting — at least, not in a time frame that matters to living people.” There’s only so long you can put off your retirement because of a down market.  Continue reading

The latest GOP idea for the economy? LIE some more!

by JS O’Brien

Republican Representative Candice Miller of Michigan has a truly marvelous idea for getting the economy back on track:  lie through your teeth.  I suppose this shouldn’t be surprising, since it seems to be the first option for Republican politicians everywhere.

So, let me explain what she wants to do.  Currently, accounting rules require banks to value assets (like mortgage-backed loans) at their current market value.  Miller wants to allow banks to … well … value them differently … somehow.  I mean, it’s not what you can actually sell those assets for, it’s what you can … ahm … pretend you can sell them for!  If you can pretend those assets are worth more than they are,  you can make the bank look as though it’s more solvent than it is.  Then, if the other lenders are butt stupid, they’ll lend money to you based on what you say about your bank’s solvency instead of what the situation really is.

What a great idea!  Let’s convince lenders to lend money based on underlying value that isn’t there.

Oh, hey, haven’t we done that already????

Nota Bene #42

Link of the Week (as opposed to the Weakest Link):

It’s Judgment Day for McCain” at the Wall Street Journal Thomas Frank writes: “Last week, Republican presidential candidate John McCain called for a commission to ‘find out what went wrong’ on Wall Street. … Mr. McCain has a special advantage to bring to any such investigation — many of the relevant witnesses are friends or colleagues of his. In fact, he can probably get to the bottom of the whole mess just by cross-examining the people riding on his campaign bus.” [Emphasis added.] Continue reading

US politicians pass an important threshold with negative House bailout vote

by JS O’Brien

I am in my 50s.  In my lifetime, I have seen partisan politics become increasingly bitter, increasingly childish, and increasingly focused on personal, political wins at America’s expense.  When the chairman of the Federal Reserve and Warren Buffet tell me that the American financial system needs an influx of capital in order to keep from collapsing, I tend to believe they believe it, and if they believe it, given their level of expertise, I would generally take their advice.

Today, American politics passed a threshold.  If anyone thought that our politicians, especially in the GOP, still care more about America than their own re-election campaigns; if anyone thought they still had a core of political courage that could, in extremis, overcome their own, petty rivalries; if anyone thought there was still a kernel of greatness in an American political landscape that produced the likes of Thomas Jefferson, Alexander Hamilton, James Madison, and Abraham Lincoln, I doubt they still believe today.  Their OWN PRESIDENT, their PARTY LEADER, came to the House Republicans and told them that this is a grave crisis, and even then they scuttled the agreement. Continue reading

Worst Week: Gonna be a big one for John McCain

This could be a Very Bad Week for Sen. John McCain.

Last week, McCain attempted a stunt for the ages, announcing that he was “suspending his campaign” so that he could rush back to Washington, where he was apparently desperately needed in order to pull together an economic bailout package. He called on Sen. Barack Obama to stop stomping the shizzle out of him on the campaign trail join him in pursuing a non-partisan solution that would ease the suffering of his cronies on Wall Street the American people.

Needless to say, the plan fizzled, and for a variety of reasons.

The end of the Millennial Generation

By Greg Stene

We may be witnessing the absurdly quick end to the Millennial Generation.

This coming Monday, September 29th may take care of it all.

For years:

  • we had the advertising world getting a handle on the Millennials at a huge cost and professional upheaval of all it once held true
  • we had the world of employment turning itself upside down to accommodate the Millennials’ justified lack of employer-loyalty, work performance on their own terms, and the quick-shift from employer-to-employer they represented Continue reading

Motives for McCain's intervention strategy begin to emerge (updated)

by JS O’Brien

Yesterday, Senator John McCain announced that he was suspending his campaign to return to Washington to provide leadership in the effort to save the American economy from what George W. Bush says will be a “long and painful recession.”  By yesterday afternoon, Senate leadership had announced that they were very close to a bipartisan agreement on the Bush Administration’s plan to buy up bad debt, thereby freeing capital markets to continue to provide crucial lending to businesses and consumers; lending that many call “the life’s blood of the economy.”

Senator McCain, Senator Obama, President Bush, and congressional leaders met yesterday afternoon with the congressional leaders thinking they were near a deal.  By the end of the meeting, there was no deal, participants were visibly upset, and an attempt by Treasury Secretary Henry Paulson to convene an evening meeting failed, as the House minority leadership refused to send a negotiator. Continue reading

An urgent request

Please Respond Immediately Forthwith In Confidence

Dear American:

I cordially correspond today to request you to support an urgent secret business relationship with a transfer of funds of great magnitude which is most seriously important.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused urgent need for large transfer of funds of 800 billion USD. If you would assist me in this transfer, it would be most profitable to you. Continue reading