OMG I wish they were joking!

[catsittingstill]

Here's one in the eye of the unregulated free market economy---

1) The Feds bailed out AIG with 85 billion of our tax dollars. (1)  (Note--this is not socialism--Socialism, as John Scalzi pointed out before me, is when you nationalize successful companies.(2))

2) The CEO who ran AIG into the ground?  Want to know what he got paid for doing that?  Forty-seven million dollars.(3)  Just for reference, the average American makes something like 2.5 million dollars (before taxes, of course) in a lifetime of work.  So this guy got 19 times as much money in a year as the rest of us will make in our lifetimes.  For running AIG into the ground.  Nice work if you can get it, I guess, and you know, making a company fail?  I could do that. 

Maybe I should start sending out resumes.

And, the happy thought for the day (and thanks to Pandagon for pointing it out here (4))--aren't you glad W didn't manage to invest Social Security in the stock market?

I still have no idea why LJ links have stopped working for me.  Is anyone else having trouble adding links?

(1) http://news.yahoo.com/story//ap/20080917/ap_on_bi_ge/aig
(2) http://scalzi.com/whatever/?p=1767
(3) http://www.cnbc.com/id/25482825
(4) http://pandagon.net/index.php/site/comments/government_to_bail_out_aig_to_the_tune_of_85_billion/

Comments

[randwolf.livejournal.com]

"Privatize the profits; socialize the risks," as liberal economists have been saying for a while. It's a bit late to jail half the Senate, including John McCain and his economic adviser Phil Graham, and impeach Reagan, but it might not be a bad idea anyway. I have doubts that AIG's CEO Sullivan is at fault here regardless of how tempting a target he presents--he trusted the financial system, and was under a huge amount of pressure to buy the paper that turned out to be bad. The people mostly at fault are the various right-wing government officials, going all the way back to Reagan, who removed all the regulatory and legal checks intended to prevent mass fraud, and keep it from wrecking the financial system. As for the reasons to do this--the big bankers, who are mostly leading this charge, are very afraid of a financial collapse. So far there's been some big loans written, and some big payouts, but people haven't gone back to keeping their money under the mattress.

[later note] Oh, and Alan Greenspan. Hangin's too good for 'm.

Krugman is doing a good job of covering this. Brad Delong isn't covering it so much directly, but has a good economics blogroll. [added] Delong does get in a zinger, though. Links are working for me, but I type the HTML.

Caw!

[admnaismith.livejournal.com]

It's hard to fault the financial industry over this.

I mean, if I was told my winnings would be mine to keep, and my losses would be farmed out to the taxpayers, I'd probably speculate fast and foolishly, too.

[randwolf.livejournal.com]

Do you think that most of them were thinking this, though? My impression is that the huge majority believed the the talk about self-regulation. The chief banker of the USA--Alan Greenspan--actually reassured them! I would place the blame with the ideologues, especially Greenspan and the corrupt mortgage bankers.

[admnaismith.livejournal.com]

I think they were acting out of "rational self interest", like economic experts are taught to do. They took risks because the costs were socialized and the rewards were just for themselves.

Seems to me, the alternative to that is that they were just plain stupid. Which I admit is always a possibility, but part of me is always biased enough to assume that the rot at the very top is reasonably intelligent (if not wise) about the things that mean the most to them, like gathering money. Then again, I also tend to assume they chuckle like Sydney Greenstreet or Edward Arnold whenever they do something particularly atrocious, so take my assumptions as you will.

[randwolf.livejournal.com]

It's not so easy to see a bubble when one is in it, so I don't think either malice or stupidity on the part of most investors, even professionals, need be invoked. See Robert J. Shiller, passim.

[randwolf.livejournal.com]

One of the problems I'm already seeing--and this concerns me very much--is that there's a faction of the public which seems to think that letting the big banks go under would somehow be "good" for anyone. It is hard to imagine--literally, I am having trouble coming up with scenarios bad enough--disaster on the scale that would bring.

[admnaismith.livejournal.com]

They're Libertarians.

They believe that the only consequence of massive bank failure would be to teach the banks what a mistake they are making by choosing to fail, and to put them on notice that they are under the Law of Unregulated Markets, where only the strong survive--and then they will be more careful about bad loans, and this won't happen again, and everything will be just peachy.

They similarly believe that the government has no business inspecting meat and enforcing food safety standards, and in fact does harm by such things by making it expensive to do business. Most food producers, they say, should regulate themselves. Any producer selling unsafe food will lose out because when people die from eating their unsafe food, people will notice and not buy from them and they will go out of business, and the problem will be solved and everything will be just peachy, except for the ones who naively bought the unsafe food before it first became obvious how unsafe it was.

[bigbumble.livejournal.com]

Bring back the 90% tax bracket.

[admnaismith.livejournal.com]

That was in the 1950s, right? Conservatives are always being nostalgic about the 1950s. It was America's economic Golden Age. They ought to be just fine with anything that reconstructs the 1950s.

[dan-ad-nauseam.livejournal.com]

In all fairness to AIG, the report on what went wrong indicates it wasn't the same kind of stupidity as all the banks.

It was a different kind of stupidity. They overinvested in insuring corporate bonds against default -- without realizing that bond defaults tend to come in waves because the first major default triggers a loss in market confidence.

[randwolf.livejournal.com]

Cue Mandelbrot on market statistics.

"Doesn't anyone here know how to play this game?"