Our Truly Courageous

David Leonhardt attempt to present the attitudes of the major Players behind the AIG bailout. He does a fair job on one level, and a totally distortionary View on the other. The Players all knew that all these Companies–Merrill Lynch, Bear Sterns, Lehman Brothers, AIG, Fannie and Freddie would need a Cash source since last March; a Time frame from when they were first allowed to review the Books of these Companies. They started to curse in private back then, as they realized that at minimum, these Companies needed about as much Cash as Taxpayers pay in IRS taxation per year. The Decision was made quite early to save the major Players, the Ones who could forcefully create great difficulties for Politicians trying to obtain elected Office. They ran through the Options, and chose a Game Plan which protected both themselves, the heavy Players, and the Politicians; it becoming a strategy to play your average Americans.

Merrill Lynch had to go without supply of Cash, because this Organization only needed Time to work out its liabilities; the Scenario did not need an Example of efficient Management returning their Government loans. Bear Sterns held Investors who were heavy political Players, who could bring major political clout to the Mix; their at-Risk Investments had to be covered. The Above had to be done without heavy federal funds advanced, because what was to come later would bring major Shock to the American Polity. They now turned to the rest of the Problem, which is interconnected; the knowledge of systemic failures in one Company meant failures in the rest of the financial markets.

The next Problems managed was Fannie and Freddie, the true organic destruction of the Fed policymaker positions. Fannie and Freddie should have blown the Whistle several years before, but did not, all basically because of political pressures to ensure that adequate supervision to unsound investiture would not be exercised. The leadership of Fannie and Freddie could not be vilified, without their blowing the Whistle on the Politicians. Everyone had to escape with a whole Skin, or Everyone was going to lose some Hide. Fed policymakers took the brave stance of letting Everyone slide without Comment.

Lehman Brothers was left to the Wolves, because their Investors were not major political Players; Lehman being the plebeian Investment vehicle for Those without clout. Fed policymakers estimated they could attain a reputation for great policy acumen without serious danger by letting the Company fail; also aware that the brokerage side of Lehman would remain strong. AIG was long known to be the mahogany in the Woodpile. It is so huge and expensive with Risk equal to multiples of total Federal Government revenues, and it had to be covered, else Everyone in the financial markets would be looking for a new Job. It will not be swallowed without a lot of Pain. Others may laud the efforts of the Policymakers, but where were they some 2-3 years ago? Just set it down to the fact I am a vengeful person! lgl