Too Big to Fail, Too Dumb to Succeed

What has AIG done with all the taxpayer money it has received in the last six months? When will AIG be considered worthy of failure? What have current and future taxpayers received in return for our “rescue” of AIG? And how many more times will AIG turn to the Federal government for an infusion of taxpayer dough?

Do you feel screwed yet? Regardless of your gender, do you feel like you’ve been bent over a redwood stump and gang-raped by a bunch of lumberjacks?

I’m not disparaging lumberjacks here. I trust men and women who work for a living much more than I do the financial and political elites who run this country.

Of late my ire for the financial class has petered out. The Titans of Finance did exactly what any good Capitalist would do under similar circumstances: they took maximum advantage of every break, loophole and inch of latitude given them by the politicians; then the Titans got greedy and then they became cocky and in a very short time they ran the financial system off the rails, as under-supervised capitalists are wont to do every generation or so.

No, the Titans of Finance acted predictably, which is why I reserve outrage for the politicians – Republicans primarily, but plenty of Democrats, too -- who left the financial system to its own perverse devices, who got caught up in irrational exuberance, in the seemingly magical transformation of tainted assets into gold bullion, of suburban homes whose values knew no ceiling. I’m not an economist, but I watched this castle of sand being built and knew it was a façade that would crumble when the first big wave smashed against it.

But what really boils my blood is the fact that billions of taxpayer dollars have been forked over to incompetents and criminals without an hour of public hearings and open debate, without a vote by the people’s representatives, and largely without conditions for performance or repayment on the part of the recipients. Contrast Washington’s no-strings-attached giveaway to those deemed “too big to fail,” with our local school district, where a single expenditure of $10,000 is carefully scrutinized.

It’s straight corporate welfare, isn’t it? Doesn’t the same moral hazard theory apply to Wall Street elites as it did to single mothers receiving Federal assistance for childcare and job training expenses? Remember the fanfare and self-congratulation when the Clinton Administration ended welfare as we know it? If you can remember that far back, Congress cut those mothers off – for their own good, of course – because we simply couldn’t allow them to become dependent on federal handouts.

Even now, many months after the first handouts were made, the Treasury Department has only a vague idea of what has become of our money. Under questioning by Congress, Treasury officials shrug or offer vague explanations about the complexities of modern banking, derivatives and hedge funds.

Banks and giant insurance outfits rarely have trouble accounting for their profits or obscene CEO pay packages or the millions they save by moving production to China or Thailand. The only time their math skills fail, apparently, is when they’re asked to account for billions of taxpayer dollars.