By Mr. Curmudgeon
The Bloomberg News Service reports that while U.S. Treasury Secretary Timothy Geithner was heading the Federal Reserve Bank of New York, he requested that “too big to fail” American International Group (AIG) not make public that billions of taxpayer dollars earmarked for the ailing insurer was actually being funneled into some of the nation’s major banks and brokerages. E-mails from the New York Fed to AIG executives show Golman Sachs, Deutsche Bank, Merrill Lynch and Generale SA received “100 cents on the dollar for credit-default swaps they bought from the firm,” Bloomberg reported.
As you may recall, AIG issued insurance policies to protect investors against losses should mortgage-backed securities decline in value. When real estate prices looked as if they would never come down, AIG thought issuing such policies was like taking candy from a baby. When the real estate bubble eventually popped, due to an avalanche of sub-prime mortgage defaults, investors dusted off their old insurance policies – or credit-default swaps – and headed to AIG. Making good on these policies would have swamped AIG, driving them out of business and, many believe, pushed the world into an economic depression worse than that experienced in the 1930s. The Fed, it seems, was eager to head off any public outcry that might have curtailed Congress from enacting a bailout scheme that allowed AIG to make good on policies issued to a favored few. In other words, the game was rigged from the beginning.
Oh, I almost forgot; last Christmas Eve, as Sen. Harry Reid and his Democrats voted to saddle you with a costly and dictatorial health care bill, President Obama signed an executive order before heading off for a little rest and relaxation in tropical Hawaii. Obama ordered the Treasury Department’s $200 billion dollar cap on taxpayer funds provided each of the semi-governmental mortgage giants Freddie Mac and Fannie Mae be removed. Obama’s Christmas gift to little Freddie and Fannie is access to unlimited taxpayer funds until the year 2012. Just in case you have forgotten, it was Freddie Mac and Fannie Mae who, at the urging of such worthies as Rep. Barney Frank (D-Mass), bought a mountain of bad sub-prime loans in the name of “affordable housing.” The collapse in home prices caused by these policies has had its desired effect – homes have never been more affordable.
Whether it’s bailouts to AIG, Freddie Mac, Fannie Mae or the bottomless pit of a new and dangerous health care program, the dwindling number of employed Americans is going to have to work a lot harder if our masters in Washington are going to keep up with the demand for our money. It’s all for our good, Obama assures us. It’s an investment in the future. It’s the same kind of investment made by Freddie and Fannie, AIG and the financial firms on Wall Street. Like them, Obama is operating on the erroneous in assumption that the United States is too big to fail.
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