The Invisible Hand Part 2 - Why Have A Government?
Thursday, October 2nd, 2008
Congress And The Bailout
I just deleted several hundred “spam” comments from my comment moderation queue. The mysterious originators of these comments, which are then automatically generated in huge numbers around the Internet, aim to attract or influence commercial traffic in their direction. I don’t really care whether the operation works. I presume it does, since otherwise why would they keep doing it? But I care about having to delete all of those messages when I have better things to do with my time.
A couple of weeks ago I was on the phone with my friend in Australia just after the AIG bailout and he mentioned that had AIG gone under he would have been left in the hole for several hundred thousand dollars. Many clients of his medical business have insurance with AIG. The fingers of this particular invisible hand spread far.
But why did AIG, with its trillion dollar balance sheet and stalwart history of conservative risk management need to be bailed out?
Joseph P. Cassano AIG Financial Products
Well, if the NY Times has its story straight, AIG’s problems were catalyzed by the overreaching overconfident overpowerful work of one man — Joseph J. Cassano, a former executive with Drexel Burnham Lambert — Michael “the-junk-bond-king” Milken’s old investment bank. Cassano helped found AIG Financial Products in London and built it into a very profitable, very independent entity within AIG that leveraged AIG’s tremendous financial strength and standing to sell ever more speculative products. AIG Financial Products, being drastically overleveraged, eventually imploded. Cassano left and now lives quietly in a Knightsbridge town-house. (I love this picture from the NY Times; Cassano peering around the corner in his bright red shirt like a con at the perimeter of the prison yard.)
When McCain debated Obama last week after supposedly spending several days in intense economy-recovery sessions he didn’t seem to have much of a grasp on what had happened to cause the problems in the first place, nor on what needed to be done to avoid them happening again. It was as if invoking the specter of regulation caused him such shudders that it wobbled his brain off-kilter.
John McCain at a loss
Ideally, regulation is what we do when we don’t want something bad to happen. Avoiding regulation is something we do when we care more about a belief or concept than real-world consequences.
The Bush administration has been bad for America and the world for many reasons, but there has been one overriding and all-pervasive reason for its badness — the arrogance of favoring faith over fact. The administration has consistently argued for, lied for, evaded for, invaded for, and bullied for its ideologies in the face of the evidence against them. They have set the bar very low for what a government can do to manipulate and subvert in the name of ideology and get away with it.
All that being said, when the congress began beating up on Paulsen and his three page proposal I felt for the first time in a long time that we were seeing government in action. Rusty, creaking, inept as it may have been, the house gave us the hint of an idea of what it should be doing for us — working in our best interests. For once we got a glimpse of the invisible hand.
Related posts from around the web:
Walter Williams and Bryan D. Jones: The Most Important Election … - Choose McCain and likely opt for a third term of the governing philosophy that has pushed the United States back toward the economy of the Great Depression. Select McCain and keep the governing approach of unregulated free market …
McCain Touts Plan to Privatize Bailout [3rd attempt] - “The problem with the earlier plan,” McCain explains, “is that it relies on big government to save the banks. My plan puts the bailout in the hands of the free market, which is the only solution that works in times like these.” …