The Real AIG Conspiracy
By Prof. Michael Hudson
www.globalresearch.ca/index.php?context=va&aid=12784
Global Research, March 18, 2009
It may seem odd, but the public outrage against $135 million in AIG
bonuses is a godsend to Wall Street, AID scoundrels included. How can the
media be so preoccupied with the discovery that there is self-serving greed
to be found in the financial sector? Every TV channel and every newspaper in
the country, from right to left, have made these bonuses the lead story over
the past two days.
What is wrong with this picture? Is there not something over-inflated
about the outrage led most vociferously by Senator Charles Schumer and Rep.
Barney Frank, the two leading shills for the bank giveaways over the past
year? And does Pres. Obama perhaps find it convenient that finally, at long
last, he has been able to criticize something that he believes Wall Street
has done wrong? Even the Wall Street Journal has gotten into the act. The
government's takeover of AIG, it pointed out, "uses the firm as a conduit to
bail out other institutions." So much more greed is involved than just that
of AIG employees. The firm owed much more to other players - abroad as well
as on Wall Street - than the assets it had. That is what drove it to
insolvency. And popular opposition has been rising to how Mr. Obama and Mr.
McCain could have banded together to support the bailout that, in
retrospect, amounts to trillions and trillions of dollars thrown "down the
drain." Not really down the drain at all, of course - but given to financial
speculators on the winning "smart" side of AIG's bad financial gambles.
"The Washington crowd wants to focus on bonuses because it aims public
anger on private actors," it accused in a March 17 editorial. But instead of
explaining that the shift is away from Wall Street grabbers of a thousand
times the amount of bonuses being contested, it blames its usual all-purpose
bete noire: Congress. Where the right and left differ is just whom the
public should be directing its anger at!
Here's the problem with all the hoopla over the $135 million in AIG
bonuses: This sum is only less than 0.1% - one thousandth - of the $183
BILLION that the U.S. Treasury gave to AIG as a "pass-through" to its
counterparties. This sum, over a thousand times the magnitude of the bonuses
on which public attention is conveniently being focused by Wall Street
promoters, did not stay with AIG. For over six months, the public media and
Congressmen have been trying to find out just where this money DID go.
Bloomberg brought a lawsuit to find out. Only to be met with a wall of
silence.
Until finally, on Sunday night, March 15, the government finally
released the details. They were indeed highly embarrassing. The largest
recipient turned out to be just what earlier financial reporters had said
was rumored: Mr. Paulson's own firm, Goldman Sachs, headed the list. It was
owed $13 billion in counterparty claims. So here's the picture that's
emerging. Last September, Treasury Secretary Paulson, from Goldman Sachs,
drew up a terse 3-page memo outlining his bailout proposal. The plan
specified that whatever he and other Treasury officials did (thus including
his subordinates, also from Goldman Sachs), could not be challenged legally
or undone, much less prosecuted. This condition enraged Congress, which
rejected the bailout in its first incarnation.
It now looks as if Mr. Paulson had good reason to put in a fatal legal
clause blocking any clawback of funds given by the Treasury to AIG's
counterparties. This is where public outrage should be focused.
Instead, the leading Congressional shepherds of the bailout
legislation - along with Mr. Obama, who came out in his final, Friday night
presidential debate with Sen. McCain strongly in favor of the bailout in Mr.
Paulson's awful "short" version - have been posing as conspicuously as
possible for the media to cover a deflected target - the AIG executives
receiving bonuses, not the company's counterparties.
There are two questions that one always must ask when a political
operation is being launched. First, qui bono? Who benefits? And second, why
now? In my experience, timing almost always is the key to figuring out the
dynamics at work.
Regarding qui bono, what does Sen. Schumer, Rep. Frank, Pres. Obama
and other Wall Street sponsors gain from this public outcry? For starters,
it depicts them as hard taskmasters of the banking and financial sector, not
its lobbyists carrying water for one giveaway after another. So the AIG
kafuffle has muddied the water about where their political loyalties really
lie. It enables them to strike a misleading pose - and hence to pose as
"honest brokers" next time they dishonestly give away the next few trillion
dollars to their major sponsors and campaign contributors.
Regarding the timing, I think I have answered that above. Talking
about AIG bonuses has effectively distracted attention from the AIG
counterparties who received the $183 billion in Treasury giveaways. The
"final" sum to be given to its counterparties has been rumored to be $250
billion, do Sen. Schumer, Rep. Frank and Pres. Obama still have a lot more
work to do for Wall Street in the coming year or so.
To succeed in this work - while mitigating the public outrage already
rising against the bad bailouts - they need to strike precisely the pose
that they're striking now. It is an exercise in deception.
The moral should be: The wetter the crocodile tears shed over giving
bonuses to AIG individuals (who seem to be largely on the healthy, bona fide
insurance side of AIG's business, not its hedge-fund Ponzi-scheme racket),
the more they will distract public attention from the $180 billion giveaway,
and the better they can position themselves to give away yet more government
money (Treasury bonds and Federal Reserve deposits) to their favorite
financial charities.
====
video:
Six Minutes with the Renegade Economist - Michael Hudson Special
http://www.youtube.com/watch?v=3pwAFohWBL4&eurl
The Upcoming Political Crisis in Washington
David Gordian | March 9, 2009
www.globalresearch.ca/index.php?context=va&aid=12627
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