Joel Bowman, reporting from
Chaos causes chaos...panics precipitate panics...bailouts beget bailouts.
Before we get on with the usual Rude ramblings, please allow us a moment to marvel at the unwavering magnanimity of the American taxpayer. It truly is amazing that, after picking up the $85 billion bar tab on behalf of AIG, the taxpayer's have again agreed to take on more risk, upping the open limit to $150 billion.
We're joking, of course, desperately trying to inject a little humor into a desperately humorless situation. Inside, we're livid. Any taxpayer would be.
The move to bolster AIG's bailout package comes as the insurance giant announced it lost a record $24.5 billion, or $9.05 a share, in the third quarter. After scaling back to initial $85 billion loan, the U.S. Treasury will buy up $40 billion of preferred shares and purchase a further $52.5 billion of mortgage securities owned or backed by the company, the Fed said this morning.
"Taxpayers will take on more risk to give Chief Executive Officer Edward Liddy time to salvage AIG," Bloomberg explains this morning. No doubt this is the first taxpayers have heard about the destination of their confiscated wages.
At the very least, John Q. Public might be wondering why, every time he reaches for a newspaper, he finds that his government has dished out more of his hard-earned money to prop up flailing Wall Street giants. Blow a few hundred billion here, lop a few points of the value of his money there, redistribute his earnings to moribund firms over there...pretty soon John Q. is going to start asking questions like, "Hey, where's all my cash going?"
The rub here is that most of it is not even his cash...it's not even cash he might earn in the future. The "money" comes from loans his kiddies and their kiddies will one day be saddled with.
We expect this kind of thing in communist regimes. In fact,
You can just imagine the Chinese government officials meeting before they made the announcement. After hours of head-scratching and consternation, one fellow leaps to his feet, "Wait, I've got it...cheaper credit!"
"Genuis!" exclaims another, "What could go wrong with that?"