The Long Crisis

Posts Tagged ‘AIG’

One of the most famous investors in the world is Jim Rogers, who was once a partner of George Soros. The highly successful billionaire and always outspoken Rogers has a strong reaction when you mention AIG and the current bailout mania. Rogers thinks that pumping more money into AIG puts the U.S. economy and the US dollar at risk of ruination.

“Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole U.S. goes bankrupt,” Rogers said in a CNBC interview.

“AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we’ll never start over.”

“You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world’s most powerful country,” said Rogers.

I have often wondered about the logic behind how you cure deep rooted problems of over leverage and of excessive debt by creating even more debt and leverage. Actually mountains of it all on US government credit and by depending upon the savings and investment of foreigners to fund it all. It’s like taking care of a drunk by pouring the staggering fellow another strong overflowing round of drinks. If you keep on doing that the poor fellow is certainly not going to sober up. He might even die of alcohol poisoning.

Yet the “best and brightest” of our over active public servants in Washington are playing the role of overly generous bartenders. The economy is being further poisoned by their actions even though it may seem to look better over the short run. AIG is but one of many crazy bailouts and schemes currently being funded by Uncle Sam with money that he does not have. The printing presses are starting to smoke as trillions are being churned out as a “keep the faith” currency.

As Jim Rogers says from his new digs in Singapore, “These people are nuts”.

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O.K. American suckers, errr, that is taxpayers, now we learn that a bill in Congress that would have limited the $165 million in bonuses paid out by AIG passed muster on the floor of the senate but was killed in committee and never saw the light of day.

Now there is a search in Washington, D.C. for whodunit. The provision wasn’t stripped from the bill by a lowly senate assistant clerk.

“It is the ultimate indictment of what Washington has become,” Sen. Ron Wyden, co-sponsor of the eliminated provision, said. “It’s a place where, again and again, the public interest is deep-sixed behind closed doors and without any fingerprints.”

According to Wyden, he “spent hours on the Senate floor,” working to get the bipartisan amendment passed. He succeeded — not a single Senator voted against the provision. “But,” says Wyden, “it died in conference.”

So who killed the bill? Wyden says that he doesn’t know.

So much for the new transparency in government. One of only 100 members of the powerful US Senate says he was kept in the dark about the progress of his bill in committee. What a country the US has become. We have a capital full of self serving “public servants” who are owned by special interest groups and won’t even let bills of merit come to a vote.

I think that President Obama is well intentioned and really hopes to bring change to Washington. However, the administration’s handling of the AIG affair is making the Obama government look weak and ineffective. President Obama started his term with an abundance of political capital. However, unless he shows some strong leadership soon that capital will be depleted by the end oh his first one hundred days.

Of course, a major problem in hammering the management of AIG over the bonuses is that AIG is 80% owned by the US government. So it is the government operating in a way that benefits Wall Street and undeserving companies like AIG that is at fault for not exercising proper leadership and demanding transparent procedures and oversight.

The Long Crisis is sure to continue as long as companies like AIG are considered “too big to fail”. The President will have to call their bluff sooner or later anyhow. He should make it clear that with this bonus measure AIG is on it own. It should be sink or straighten up and swim time at AIG. Obama must prove that he can be an effective leader or his Presidency will become ineffective at a time like no other when the US needs strong, forceful leadership.

A good place to start showing some transparency would be to solve the whodunit mystery.

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The famous highly successful investor and always outspoken Jim Rogers has a strong reaction when you mention AIG and the current bailout mania. Rogers thinks that pumping more money into AIG puts the U.S. economy at risk of ruination.

“Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole U.S. goes bankrupt,” Rogers said in a CNBC interview.

“AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we’ll never start over.”

“You are watching something in front of our eyes, very historically, which is basically the destruction of New York as a financial center and the destruction of America as the world’s most powerful country,” said Rogers.

I have long wondered about the logic behind how you cure deep rooted problems of over leverage and of excessive debt by creating even more debt and leverage. Actually mountains of it all on US government credit. It’s like taking care of a drunk by pouring the staggering fellow another round of drinks. If you keep on doing that the poor fellow is certainly not going to sober up. He might even die of alcohol poisoning.

Yet the “best and brightest” of our over active public servants in Washington are playing the role of overly generous bartenders. The economy is being further poisoned by their actions even though it may seem to look better over the short run as various stimulus plans have a short term positive effect.

AIG is but one of many crazy bailouts currently being funded by Uncle Sam. Soon it will be our dear uncle who will need a bailout. But who or what would be up to the task of sobering Uncle Sam up and getting him off his debt addition?

As Jim Rogers says from his new digs in Singapore, “These people are nuts”.

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