Day: March 16, 2009

Why Are You Not Angry?

The continuing saga of AIG.

In a bid to avoid default, the American International Group (AIG) warned regulators that the “company’s collapse could cripple money market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm,” reported Bloomberg News on Monday.

AIG is seeking $30 billion in fresh capital to add to the $152 billion of taxpayers’ money already in place. The request came after AIG posted a $61.7 billion fourth quarter loss, the worst quarterly loss in US corporate history.

Quoting from a draft presented by AIG to the Federal Reserve Board and Treasury on February 26, labeled “strictly confidential,” Bloomberg News said the giant insurance firm is appealing for a fourth injection of taxpayers’ money to avoid a “catastrophic” collapse with consequences far worse than the demise of Lehman Brothers six months ago. The AIG statement warns, “What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means.”

American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.

The embattled insurer’s disclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.

The company, now about 80 percent owned by U.S. taxpayers, has received roughly $170 billion from the government, which feared that its collapse could cause widespread damage to banks and consumers around the globe.

But wait!  The best part of the story is yet to come……

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

PEOPLE!  Time to wake up and smell the damn coffee…..this continues to be a story of Washington helping Wall Street…..time for ANGER and time to retribution.

Is There An Economic Solution?

In a sign of the panic gripping Washington’s policy-makers, one of Barack Obama’s key economic advisors, Paul Volcker, has warned a gathering of his leading peers that the crash of 2008 might be “the mother of all financial crises… I don’t remember any time, maybe even the Great Depression, when things went down quite so fast, quite so uniformly around the world”. Volcker, chairman of the president’s Economic Recovery Advisory Board and former chair of the Federal Reserve, told a conference at Columbia University’s Centre for Capitalism and Society on 20 February that the crisis was “characterized by being very international” and was the product of deep global imbalances.

But it is not only for their candor about the scale of the crisis that Volcker’s Columbia comments are notable. The former Fed chief admitted to his star-studded audience (including celebrity economist Jeffrey Sachs, George Soros and three Nobel Prize winners) that the profession of which they were all a part had failed. The breakdown of the world financial system has “occurred in the face of almost all policy and intellectual analysis… Even the experts don’t know what’s going on”.

Obama’s chief advisor on economic recovery went on to concede that he himself had no answers, saying: “The first priority is to restore some semblance of stability and order in the market and restore the flow of credit. I’m not going to talk about that. I haven’t got—if I had the answer I might talk about it, but I’m not sure I have it, so I think we’ll neglect that for the moment.”

These admissions suggest that even the architects of the bank bailouts and of Obama’s new lending fund have no confidence in those policies and no alternatives to put forward. This is the fund that Obama claimed during his 24 February speech to Congress would “aggressively break [the] destructive cycle [of frozen credit]” by “helping to provide auto loans, college loans, and small business loans to the consumers and entrepreneurs…”

The significance of Volcker’s Columbia comments becomes clear when one considers his broader political role, in particular the respect Volcker commands among bourgeois economists as the senior ruling class “enforcer”. Apparently aware that Volcker would relish the opportunity to “tell it like it is”, Columbia University president, Lee Bollinger, introduced Volcker as having “a special place in the history of this country and of the world as… being a person who provided leadership at a critical moment and was able to see things and say things clearly, even when [people] did not want to hear them.”

Can We Explain Washington?

I spent many long hours sitting in my Public Policy class, desperately trying to stay awake or trying to come up with the perfect line for the stunning red head in the tight sweater—oh sorry—I digress.

I recall a policy known as incrementalism, which appears to be what the Obama administration is using.  The admin is trying this attempting to find the prefect balance for a solution to the economic situation the country finds itself in.

I know–what the hell do I mean by incrementalism?  This is a public policy that is a continuation of the previous programs with only incremental modifications or changes.  The policy makers generally accept the legitimacy of established programs and agree to continue the policies.  They accept the legitimacy because of the uncertainty of the consequences of a completely new or different set of policies.  And also because of the heavy investment in some programs precludes any radical change.

Also incrementalism is politically expedient.  It is important for reducing conflict, maintaining stability and preserving the political system.

With all this said–does any of it sound the least bit familiar?  Iraq?  Gitmo?  Bailout?  Etc…etc…etc……  To answer the question–YES it is all too familiar.  If you were voting for sweeping change in Washington, then you should have been reading my stuff from the onset of the election process—I said 2 years ago that no matter who was elected that NO sweeping change would come to Washington.

I do love my job!  Peace Out……

Afghanistan Moves Forward?

We invaded Afghanistan to get Osama and then to help overthrow the Taleban and bring democracy to the country…at l;east that is how I see it.

How have we done so far?  Well, they have had elections….but unfortunately voting is not all there is to democracy regardless of what GW wanted us to believe.

An Afghan appeals court overturned a death sentence Tuesday for a journalism student accused of blasphemy for asking questions in class about women’s rights under Islam. But the judges still sentenced him to 20 years in prison.

The case against 24-year-old Parwez Kambakhsh, whose brother has angered Afghan warlords with his own writing, has come to symbolize Afghanistan’s slide toward an ultraconservative view on religious and individual freedoms.

Kambakhsh was studying journalism at Balkh University in the northern city of Mazar-e-Sharif and writing for local newspapers when he was arrested in October 2007.

Besides the accusation that Kambakhsh disrupted class with his questions, prosecutors also said he illegally distributed an article he printed off the Internet that asks why Islam does not modernize to give women equal rights. He also allegedly wrote his own comments on the paper.

In January, a lower court sentenced him to death in a trial critics have called flawed in part because Kambakhsh had no lawyer representing him. Muslim clerics welcomed that court’s decision and public demonstrations were held against the journalism student because of perceptions he had violated the tenets of Islam.

No matter how hard we try…somethings will always remain the same.