Eliot Spitzer’s Take on AIG

Former Governor Eliot Spitzer of New York, a month before the world crashed in on him, February 2008 (Courtesy: J.P. Wauthier)

Governor Eliot Spitzer of New York, a month before the world crashed in on him, February 2008 (Courtesy: J.P. Wauthier)

Eliot Spitzer’s downfall always had an air to me of being a political hit. A few weeks before, the prickly governor of New York had announced that he was going to take dead aim at Wall Street excesses; his Rottweiler nose had already picked up the scent that something big was about to happen, and he wanted to get there before it did.

Unfortunately, the call girl scandale du jour caught up with him, and the former state attorney general that Wall Street loved to hate had to resign from a great height.  Since then, Spitzer has been writing occasional columns for liberal blogs and other mainstream media while attempting to get his personal life back on track. Yesterday was one of those occasions on Slate, and Spitzer didn’t fail to deliver.   He was requesting that people not get suckered in by externals and outrage; that there is something deeper afoot:

Why are AIG’s counterparties (Goldman Sachs, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, etc.) getting paid back in full, to the tune of tens of billions of taxpayer dollars? […]

[Because t]he appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

Yesterday, I had said just about the same thing: that these guys were getting paid once again when the Feds had already given them a bailout:

Plus, isn’t Merrill Lynch now owned by Bank of America, and Wachovia by Wells Fargo? Just what do we owe them now?

The MSM, the Congresscritters–they aren’t asking the right questions, Spitzer believes.  Anything else is mere posturing for the cameras, while the populace feeds on distrust of the Obama Administration.

  • What was the precise conversation among Bernanke, Geithner, (then-Treasury Secretary Henry) Paulson, and (Goldman Sachs CEO Lloyd) Blankfein that preceded the initial $80 billion grant?
  • Was it already known who the counterparties were and what the exposure was for each of the counterparties?
  • What did Goldman, and all the other counterparties, know about AIG’s financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn’t they bear a percentage of the risk of failure of their own counterparty?
  • What is the deeper relationship between Goldman and AIG? Didn’t they almost merge a few years ago but did not because Goldman couldn’t get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG’s business model was not to pay on insurance it had issued.
  • Why weren’t the counterparties immediately and fully disclosed?

It doesn’t look as though any of these questions were answered today etiher. Liddy being called to Congress was cosmetic only– to smooth things over rather than answer these hard questions. This was to keep the scheme going as long as possible until the principals get everything they want.

If Spitzer had gone in and done his worst, the whole thing would have crashed and burned before our eyes much, much earlier. Bush, Paulson, and everyone else were trying to keep things together for McCain; or to have an exploding cigar ready for a Democratic president. I know this sounds like a conspiracy theory, but not all of them are crackpot.

And it’s the same guys wanting the government to cushion them against their own bad decisions by foisting this whole thing off on the taxpayers. Just how many times is Bank of America going to be bailed out, for instance.

The last time this happened was on Hoover’s and Roosevelt’s watch. And Roosevelt and his people just let those empty, fake banks crash. They had other things to do.

And where is Barack Obama on all this? If he focuses just on these people instead of the people who really need help, he’ll be turning his back on them just like Clinton did with his social programs in the wake of the Republican “contract on America.”

Your thoughts?

~ by blksista on March 18, 2009.

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