Sunday, March 22, 2009

Forest for the Trees?



From the halls of Congress to the media punditry, all the news is about the AIG bonus scandal. Who did what? Who knew what? When did they know? Etc. Etc. Politicians get their chance to grandstand for the cameras, and everybody is allowed their moment of populism. But could everyone be missing the forest for the trees? And how is it that the former governor of NY Elliot Spitzer, sent into exile and disgrace following his prostitution bust, is the one who has the courage to point this out?

As the AP put it:

Spitzer says the AIG bonus issue is "penny ante" compared to the billions of the insurer's bailout money funneled to bad banks, and that Treasury Secretary Timothy Geithner owes America an explanation, quickly.

More after the fold...



Spitzer, in articles and interviews, points out that long ago, he was warning deaf ears about the money sucking black hole that has become AIG.

"We pursued AIG and Wall Street's structural failures in a way that others shied away from because it was politically unpalatable for them to address those issues," Spitzer told host Brian Lehrer Wednesday on WNYC Radio in New York City. "Now it is the flavor of the month. Everybody is jumping up and down serving subpoenas, beating their chests trying to be tougher than the next person."

On CNN Thursday, Spitzer said his initial probes came from AIG's "effort from the very top to gin up returns whenever, wherever possible and to push the boundaries in a way that would garner returns almost regardless of risk.

"Back then I said to people, AIG is the center of the web," he told CNN's Fareed Zakaria.

Whether his ability to find his voice in the midst of this mess will allow Spitzer some vindication is hard to say. But for now, he certainly gets to smugly say, "I told you so."

For more on Spitzer and the AIG debacle:

Crooks and Liars
In Eliot Spitzer's first interview since he resigned as New York's governor, he tells Fareed Zakaria that the problem with Wall St. isn't the individuals involved, but a culture that sought greater and greater returns without taking any of the risk. He also says he hopes Barney Frank will look more closely into the payments to Goldman Sachs via the AIG bailout funds.

Watch video and read full article here.

Slate
It's not the bonuses. It's that AIG's counterparties are getting paid back in full. Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars....So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

For full article, see here.

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