Washington bunraku theater
The furor over the AIG executive bonuses is, as others have already noted, largely misplaced. Why should anyone care about the disposition of less than 1/10 of 1% of the total bailout money? The whole thing is less than a day's expenditures in Iraq; it doesn't amount to a hill of beans.
It does, however, suggest that there are real culprits, and the government and media are carefully directing our attention away from them. In this bunraku theater, the puppeteers are shrouded in black and both our government and media pretend they aren't there.
If popular outrage allows the revocation of bonuses which were contractually obligated, why aren't other contracts being looked at just as closely? For example, let's take the contracts which sank AIG in the first place: the credit-default swaps. The bulk of the AIG bailouts have been paid out to banks. Rumor in the WSJ is that the banks in turn have paid out most of this money to the billionaire holders of hedge funds. These are the contracts which should be blocked. There is evidence that the CDS's were sold on the basis of false claims, aka fraud. The solution is to void the contracts. The hedge funds should return their payouts and get their premiums back, un-winding the whole mess. The banks would be instantly returned to solvency, and AIG with them. And the financial products unit of AIG would no longer have a reason to exist.
Even as the economy collapses, the profits are privatized by the wealthiest of the wealthy while the losses are being socialized onto the backs of the middle class (the biggest net taxpayers in the USA). This is what the kerfuffle over a few million in bonuses is about: giving the public a scapegoat while the real thieves escape with their ill-gotten gains. Like the "Two-Minute Hate" in Orwell's "1984", this is designed to exhaust our outrage without threatening the people truly responsible.
When will we learn? More to the point, when will Congress use its subpoena power to follow the funds through the banks and show us the real culprits?
Labels: AIG, bonus, credit default swap, hedge funds
¶ 3/26/2009 09:40:00 AM
