Skip to main content

Top U.S., European Banks Got $50 Billion in AIG Aid

The insurer generated a sizable business helping European banks lower the amount of regulatory capital required to cushion against losses on pools of assets such as mortgages and corporate debt. It did this by writing swaps that effectively insured those assets.

So AIG got into a mess by helping international banks get around applicable rules (the CDSs that AIG sold are regulated neither as banking instruments nor as insurance, even though they are actually both).

The Economist, naturally, blames government (no link for now, their site is down):

Although politicians made the mistakes that allowed Sir Fred [of RBS] to get away with his cash, the row sustains the comfortable fiction that the government's sensible policies were traduced by greedy bankers. (...) Avoiding future disasters means allocating blame acurately; and most of it lies with bad policy, not with greedy bankers.

This, of course, coming from one of the publications that have most consistently pushed for de-regulation of financial instruments, in the name of "freedom" and wealth "creation," and supported investment banks' lobbying efforts to get rid of policies that put any kind of restraint on what financiers did (arguing along the way that bankers are smarter than regulators and will always find ways around rules)

The above explains why the Economist has officially become a joke (the Rush Limbaugh of finance?); thankfully, some financial publications are showing a bit more sense:

The UK government has to make a decision. If it believes that costly bail-out must be piled upon ever more costly bail-out, then the banking system can never be treated as a commercial activity again: it is a regulated utility – end of story. If the government does want it to be a commercial activity, then defaults are necessary, as some now argue. Take your pick. But do not believe you can have both. (Martin Wolf in the FT)

In other words: either banking is necessary, and it has to be made boring, or it is not, and we should let its current incarnation die.

The problem is that freedom has been equated with "freedom to make money", and "freedom to use money to influence and corrupt those in power", and that those that have been entrusted with the ultimate public good, money, have been busy siphoning off an increasing portion of it, while presenting this as being "successful" and as a desirable outcome. It was certainly successful within the narrowly defined vision of that word they have managed to impose upon society, but it was rather not desirable.

In any case, it's time to talk about the heart of the matter: the place of money in society, and how to trust those that have the power to move it around, for themeselves or on behalf of others.

Which fundamentally means getting rid of the grip financiers and financial analysts have on "Serious Opinion." That means keeping politics away from money, policy away from financial analysis, and  journalists and politicians away from bankers. The way to do that is to (i) bring back high rates of marginal taxation (because they make the pursuit of high incomes possible, and lobbying to make that both possible and easy a core activity), (ii) separate completely and hermetically regulated utility banking from the unregulated gambling/"investment" kind (break up the existing behemoths accordingly, identify regulated activities and send to prison anyone that does unregulated activities within a regulated entity), (iii) put up enough money for regulators to attract capable people (and fordid them from ever going to work for the industry they regulate), (iv) provide enough public money to fund political parties and campaigns so as to make private money irrelevant, (v) break up media groups.

Originally posted to Jerome a Paris on Sat Mar 07, 2009 at 07:58 AM PST.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

skybluewater, Deep Dark, PeWi, claude, bink, Lupin, Superskepticalman, Ed in Montana, Mimikatz, vicki, Aeolus, Chi, jotter, ferg, Rayne, Sparhawk, apsmith, gaianne, Trendar, Geenius at Wrok, NevDem, Powered Grace, RunawayRose, lazbumm, dengre, tommurphy, Shockwave, wu ming, meg, shycat, Jim W, GayHillbilly, eeff, devtob, MackInTheBox, WI Deadhead, frisco, ZAPatty, theran, RFK Lives, object16, MarkInSanFran, mataliandy, bara, eyeswideopen, alain2112, opinionated, bronte17, Zinman, robertdfeinman, BlackGriffen, wonkydonkey, leveymg, groggy, nyceve, OCD, srkp23, Geonomist, Patricia Taylor, luaptifer, JuliaAnn, Ignacio Magaloni, oceanspray, exconservative, ceebs, Yil, Eddie C, wader, Melanchthon, NMRed, scorpiorising, psnyder, Miss Jones, pat bunny, KevinEarlLynch, johnfire, grannyhelen, GN1927, hazzcon, inclusiveheart, walkshills, exlrrp, tomjones, CanYouBeAngryAndStillDream, Deward Hastings, valadon, kd texan, ganymeade, avahome, xxdr zombiexx, mm201, Gowrie Gal, rapala, madaprn, joanneleon, Recovering Southern Baptist, ExStr8, Bluesee, radarlady, NoMoreLies, TexasTom, bellevie, freakofsociety, UncleCharlie, greatferm, JanetT in MD, unclejohn, ek hornbeck, PBen, Simplify, basquebob, TN yellow dog, Clem Yeobright, YucatanMan, Gary Norton, ocooper, nailmaker, lotlizard, gerardbellavita, techno, SBandini, noemie maxwell, bookwoman, JanL, Land of Enchantment, simplicio, Asinus Asinum Fricat, fhcec, xaxnar, Reptile, elliott, danmac, MissInformation, Orinoco, Do Tell, tarheelblue, Patriot Daily News Clearinghouse, ainwa, myboo, sherlyle, 417els, BlueInARedState, profundo, dopper0189, Yellow Canary, liberalconservative, martyc35, Scientician, sabredance, KenBee, The Wizard, arlene, carolita, Lefty Coaster, NBBooks, tecampbell, StrayCat, Tanya, jasonbl, The Hindsight Times, taraka das, imabluemerkin, NearlyNormal, bleeding heart, el cid, ER Doc, soccergrandmom, MBNYC, Turbonerd, Nancy Hartley, JeffinQC, profh, Dianna, RantNRaven, chapel hill guy, revgerry, airmarc, DanC, PhilW, crystal eyes, kurious, Snarcalita, lakehillsliberal, Friend of the court, Hedwig, expatyank, Aaa T Tudeattack, Unrepentant Liberal, DBunn, ammasdarling, bigchin, One Pissed Off Liberal, lightfoot, BeninSC, asilomar, Fredly, byDesign, arodb, FWIW, moodyinsavannah, FishOutofWater, Richard Lyon, greenchiledem, Calvin Jones and the 13th Apostle, DWG, twinpeaks, Unbozo, Strabo, bnasley, RosyFinch, HCKAD, bobswern, jnhobbs, Moderation, Joffan, JML9999, eyesoars, Assaf, Hens Teeth, Terra Mystica, on the cusp, TomP, cville townie, condorcet, Boisepoet, wayoutinthestix, Remembering Jello, FG, theunreasonableHUman, OutCarolineStreet, Akonitum, geomoo, Tam in CA, mofembot, Gemina13, pragprogress, PMA, fool mee once, numen, valsagem, RunnerAAA, aigeanta, BYw, allie123, dzog, rhutcheson, watercarrier4diogenes, Wordsinthewind, 4km, El Yoss, Mr Tentacle, Neon Vincent, ChrisCook, TheOtherJimM, ManahManah, cantelow, be the change you seek, Stranded Wind, Inky99, Nebraskablue, velvet blasphemy, zackamac, John Shade, zbbrox, MKSinSA, obscuresportsquarterly, Stoneleigh, deutschluz, histOries Marko, maxzj05, FundaMental Transformation, math4barack, Hamlets Father, Larsstephens, ZAP210, BigVegan, CalGal47, dalys, ppl can fly, HKPhooey, Areopagitica, LaughingPlanet, Hamsun, fidellio, chrome327, scmonica, wvmom, Ronald Singleterry, polar bear, deboChicago, NY brit expat, ExpressStreetcar, pixxer, dlemex, DailyDrew, DrFitz, WayPastJaded, Betty Pinson, MsGrin, VincaMajor, skillet, Floande, nosleep4u, rasfrome, slice, Matt OBrien, Colorado is the Shiznit, Kineslaw, princesspat, datoo, thethinveil, Muskegon Critic, Wheever, muddy boots, gokinsmen, lizard people

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site