What if we let companies that are 'too big to fail' do just that? »
Posted By jovial 7 months, 3 weeks ago in Business & FinanceThe idea certainly seemed all right with throngs of Americans who were outraged by news that American International Group paid out millions of dollars in executive bonuses after it was rescued with taxpayer cash.
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jovial
Grew up In Brooklyn. Joined the Navy in 1976 stayed in 10 years. Aircraft Electronics tech. Worked for Major Govt. contractor then settled in California ...
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jovial7 months, 3 weeks ago
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It's seems that letting AIG go down the tubes is not a good answer. I'm open to discussion on that, but the author seems to feel that way as well. He does provide an alternate viewpoint, but what politician would sit by and gamble. If the worst case scenario played out it would paralyze the entire world economy. I sure wouldn't want to be on the receiving end of that blame, would you?
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willottica7 months, 3 weeks ago
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AIG is a problem because it "insured" a lot of bad debt by other banks. I would almost say that it did so fraudulently. Clearly, they have no ability to pay off that insurance when claimed. Instead, they ask the USG for more money, which they then use to pay the claims. Why are we rewarding them by letting them stay in business. Take the insurance off their hands -- any claims outstanding should become payable by the USG directly, and fire and prosecute the lot of them who set the scheme up in the first place.
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The argument that "if AIG fails, then all these other banks do too" doesn't hold water if the USG supports those other banks instead.
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sonofreasonComment removed: Hard Banned
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engineer7 months, 3 weeks ago
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I would let them fail!! The turmoil is there anyway. We as a nation cannot afford the bailouts. there thousands of businesses which fail. We don't bail them out. it's part of life.
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I don't feel sorry for them. If the money was given to the citizens and to businesses which make things, the country would be better off and employ many more people -
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Will13137 months, 3 weeks ago
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AIG .. as I understand would have collapsed the world economy...
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so let them fail.. I don't know.
bailing them out with NO OVERSIGHT.. the first bailout was the idea of
Paulson.. and Geither... congress did not approve the INITIAL money.. where we the taxpayer.. bought a percentage..
my concern....
why is it only people that worked for Goldman Sachs or Lehman that were qualified to be secretary of the treasury.. since at least Clinton...
scares ME. and something STINKS...-
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alakazam7 months, 3 weeks ago
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Why would the assets of a single private corporation control the ENTIRE global economy?
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No corporation should EVER be powerful enough to take the whole world down with it.
Sink them...They are Pirates...and of the very worst sort.
I do not believe there is anything on Earth that prospers under the bite of a bloodsucker. -
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scott42617 months, 3 weeks ago
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Thom Hartmann has been making the case that we should let AIG fail for some time now.
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I agree. We are living with the culture of deregulation that the Republicans championed and now AIG is shoving our noses in it and laughing all the way to the bank as long as we let them get away with it. They need to fail.
And now this 90% tax on AIG bonuses that the vast majority in Congress support is not really legal:
Article 1, Section 8 of the Constitution clearly states, "No bill of attainder or ex post facto Law shall be passed."
So we may be able to shame some of the money back, but the new bill to tax will not pass Constitutional muster... This could be a problem. And it seems that this latest mess rests with Tim Geithner (and a spinless Chris Dodd).
Look, I'm not above criticizing the administration here. President Obama needs to replace Geithner. And the sooner the better.-
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DarkWizard7 months, 3 weeks ago
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Scott,
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"Look, I'm not above criticizing the administration here. President Obama needs to replace Geithner. And the sooner the better."
I agree with you. I didn't think that making Geithner Treasury Secretary was a very good move. It has pigeon-holed our economic options to this whole Harvard-Rubinomics model that hasn't worked so far.
As for what can be done about bonuses, golden parachutes, and these absurd contractual agreements, I don't know that Article 1, section 8 would necessarily contradict or countermand the Bill that was specifically passed to handle the use of TARP money.
Personally, I'm all for letting the market work itself out. I really don't think any real changes can be made to the financial system as long as we are in a "fix it" mode. The system is broken and has to fail completely for restructuring to begin in earnest.
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fsev417 months, 3 weeks ago
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From what I understand they are trying to do just that. Sell off the profitable parts of the business (Like the one that holds a life insurance policy on me that I've been paying for almost forever) and some of their valuable real estate but no one can afford to buy them in today's economy.
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And what I find scary is that many people have claimed that the only people who understand the credit swaps and can help to untangle the mess are mostly the same people who got us into the mess and who's bonuses we are now trying to retrieve.
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obama-watchComment removed: Hard Banned
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obama-watchComment removed: Hard Banned1 Reply
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CHAM7 months, 3 weeks ago
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Let AIG fail. Break them up if they don't fail. Isn't that what we did with Ma Bell? We are still alive after that aren't we?
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Look,there has been $11.6 Trillion already allocated for bailouts. $10.6 Trillion of that was by Bush. AIG is down for $170 Billion Max. That means AIG is only 1.5% of the problem. Anybody wonder where the other 98.5% is going?
There is a New World Order all right. That new order is the group that is going to rule the world financially and you and I are going to be forced to pay for it.
Talk about Nero fiddling while Rome burned, this executive bonus thing is a real good diversion to keep us mushrooms in the dark. So we don't question the other 98.5%.
The Banks, Credit Card Companies, Financial Institutions, Fanny Mae and Freddie Mac, and almost as many NON-U.S. companies are going to get their portion of the $11.6 trillion. You all do know that more than 35% of the skin that was ripped off our backs will go to foreigners don't you?
People, this is the mother of all rip-offs. And we are dallying about $165 million, less than 1/1000th of 1 percent of the total loot stolen from you and me, AKA American taxpayers.
What should we do about it?-
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alakazam7 months, 3 weeks ago
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I think a strong argument could be made for the Anti-Trust clause being used against AIG.
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If the Global Economy cannot survive without you ?
Then you have not cornered the market...you have acted in a manner antithetical to Fair Trade.
A Private Corporation as World Arbiter?
http://www.youtube.com/watch?v=IguzgGx7y-8
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cowboygrandpa7 months, 3 weeks ago
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AIG has failed !!!!! Period.
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The government is now AIG at least for all intent and purposes. We the tax payers are paying for the claims of the under funded poorly managed joke of a company. Might as well stop all the bull crap. AIG is a just a front for the government funding the other financial hucksters of the world.
The economy is failing because of the stupidity of allowing the huge unchecked growth of capital consuming financial blackholes, such as AIG, Lehman, Goldman Sachs...
Best to allow them to be broken up into a more competetive group of companies instead of a large conglomerate. -
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reallypsst7 months, 3 weeks ago
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When a company fails in some cases it doesn't just go away,its accounts are often brought by other competitors and its assets are diluted,so that argument that aig is to big to fail is bs,what is going on with aig is the greedy executives who want to maintain their lucrative power.I remember ma bell the telephone co. it had the monopoly in communications and it was a monster,but then they broke it up and still made billions!
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amazed7 months, 3 weeks ago
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We MUST lose the "too big to fail" doctrine.
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I believe that it was NOT deregulation ('cuz that never REALLY happened) that caused all this, but a combination of "too big to fail" and a lack of enforcement of the regulations that WERE in place against the big companies because they were too complicated for the gov't auditors to bother with (as well as more than likely paying off nearly everyone involved).
If there are no consequences to your actions -- you don't end up bankrupt or out of business -- then you have no incentive to plan for the long term. Short term profit becomes your only motivator.
The support for my theory lies with the small, regional and local banks. Most of them are fine. Most of them did NOT make really risky loans and bad decisions because they knew they were NOT too big to fail and would have to live with the results of their actions.
That is a powerful motivator. It is all but gone from the large companies in this country and so, we are unlikely to do much better when we get the re-established because they know that we, the people, have no stomach for making them face the consequences of their actions.-
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jovial7 months, 3 weeks ago
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Let them fail under a Republican congress and a Republican President. Let them take the blame for our economy crashing. For 20% unemployment. For crime rates shooting through the roof. For governors having to ask for assistance from the National Guard to quell riots in our cities. I don't really think some of you grasp the seriousness of our situation. Even if you stuff all your money in a mattress and try to ride it out. Your money will devalue anyway. So before you act purely on emotion, have you really stopped and asked yourself what America would be like if all these companies and banks fell like dominoes worldwide?
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dunkirk7 months, 3 weeks ago
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Letting them fail is an interesting option but consider the consequences. Unemployment would rocket with a probability of approaching 20-25%, altho there are some who say we ARE in that ballpark now with the manipulations of the unemployment numbers. as unemployment goes up so does crime. What I think needs to happen is to stabilize the current mess and then demand reorganization with serious consequences for thoise that don't and institution of oversight to watch for exactly the types of credit swaps that intiated this mess. Penalties need to be severe and not a slap on the wrist. If your risky addventure can cause the global economy to fail then the penalty needs to be commesurate with that not a bonus handed out at taxpayer expense because the other guys that helped engineer the mess say your too valuable to lose.
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Will13137 months, 3 weeks ago
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companies like this got big.. because...
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Glass Stegall was repealed.. in 1999..
and any over sight of credit swaps by the SEC of Federal Trade Commission was eliminated.. by
Commodities Modernization Act... of 2000..
repeal both of those acts and you have a beginning..-
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dgoodii7 months, 3 weeks ago
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That might help the symptoms, but not the cause of the problems. Fiat money , congress and presidents that have no moral compass, have caused this. We spend money we don't have and expect others to loan us money to do it. Well the gig is up, no more money from others. We now have to stop all spending and focus on the true needs of the government. Most programs must be canceled, others restructured. The concept of federalizing all care and regulation must be shown for the failure that it is. These businesses must fail, so viable businesses can reform from the good parts. If not the future of US and Dollar are in doubt, worthless money buys nothing, we import a lot.
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simonsez7 months, 3 weeks ago
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When a big tree dies, it makes room for others to grow and prosper.
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BAC and C both grew by acquisition and became too large to be efficient. They do not go out of business when they are allowed to fail ... they re-structure to become viable again.
We can live without either one of them. We also don't need to save GM or Chrysler. Let them save themselves in bankruptcy ... -
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mrlecher7 months, 3 weeks ago
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You do not want to know what would happen if AIG "failed." "World-wide economic disaster" would be the the upside. What about no gas, no food, no electricity, no nothing. As the credit system collapsed, so would everyone's ability to provide anything... Your family and relatives would starve to death.
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Probably the only answer is to get everything stabilized and then break it all up. No one company should have gotten "too big to fail" and had so much financial influence. And unfortunately, the only way to prevent it is through...much regulation. Yes, it "restricts" them from making unlimited money, however, notice what happens when you don't regulate them. Letting make lots and lots of money makes them greedy, and nobody pays that much attention because they are making lots of money...until the butterfly sneezes and the whole house of cards collapses. And notice that because of a lack of tight regulation, the ones who caused the collapse are hardly being touched by it and are only being further enriched by efforts to contain it. And at present, it is all legal.-
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jovial7 months, 3 weeks ago
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That's an interesting take on it. I instinctively feel the same way. I usually am right about my gut feelings. I don't think any President in his right mind would step into office and try to increase the deficit by trillions of dollars. It's political suicide. The only reason he would do such a thing is if he knew that he had no other choice. The picture we are looking at is somehow incomplete. The real situation is extremely dire, and the President and his advisers know it. That's why they feel compelled to act.
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fsev417 months, 3 weeks ago
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One can get completely worn out following these threads on TARP, AIG, the stimulus, the current budget, the future budgets, the global economy and on and on. I've come to the conclusion that there is NOBODY that knows what the real depth of the problem is or what the correct solution is because no one has ever been here before. The old rules don't apply. It's a d*m scary place to be and I don't look for a quick resolution. We can only hope it doesn't spiral into world chaos where we revert to survival of the fittest or who nukes who first.
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Klarissa7 months, 3 weeks ago
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Jovial - I would agree with your statement except for: "The only reason he would do such a thing is if he knew that he had no other choice."
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He didn't even read the bill. He could have taken out the pork, concentrated on the banking industry, Freddie, Fannie (by the way, getting big bonuses) and the house market. Then, when the ducks were in a row, go after his grandiose plans, one at a time with TRANSPARENCY. -
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CHAM7 months, 3 weeks ago
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alakazam7 months, 3 weeks ago
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Double paying? I would not be surprised if it were not set up to turn into an endless series.
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Pay the same thing off four or five times through buyouts and leveraging that's already been done?
We already are...and it's just getting started.
It's all fiat though...none of it even exists outside of the minds of the guys cooking up these deals.
They money we have to pay back will be real.
Time to straighten this mess out.
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epiphannyy7 months, 3 weeks ago
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I watched a discussion on this the other day and a comment was made that really hit home. It was said, "when a company is too big to fail, that should send up warning flags that it is too big, period."
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I tend to agree. Our country shouldn't be so dependent upon any given company that its failure spells disaster across the board. That is why monopolies are so bad. It holds the country hostage for fear of failure and the catastrophe that would follow. It's time we start reevaluating these companies and reimpose the proper regulation to keep them in check. Monopolies aren't good for the country. They are only good for those who profit from them while they keep others from a fair competition in the market. It took the country nearly a half century to build a well balanced system of controlled capitalism, where everyone had a fair shot at prosperity and only a couple decades to destroy it all. I wonder if it will ever be "fixed" in my lifetime. I hope so, but we'll see.
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