When the Feeling Fades: Bernanke Slams Down the Phone
Ben Bernanke (Federal Reserve Chairman) is pissed off. In a recent 60 Minutes interview he expressed considerable chagrin at the financial situation the U.S. faces (of course, he has nothing whatsoever to do with it) in a rare face to face interview. Because nearly everything the Federal Reserve Chairman says publicly could trigger massive fluctuations in the stock market, Bernanke decided to wait until things couldn’t get any worse before addressing the nation he serves.
Bernanke consented to an interview because of the “extraordinary times” we are experiencing in our country. Now I don’t know about you my dear readers, but I might use “extraordinary” to describe Katy Perry’s ahem… lung capacity, but I would definitely not be using the word to describe the extreme economic conditions that a lot of American’s are facing today; an unemployment rate over 8%, spiraling personal debt, and 401k’s worth about…$401 (at least I hope mine is still worth that much).
Also addressed by Bernanke in his interview was the shocking news of how American International Group (AIG) has spent the nearly $170 billion that the United States (we own over 80% of the insurance giant now) has lent them over the last four months. I’m going to oversimplify here, but basically AIG got into trouble by insuring risky mortgage loans for financial institutions like Citigroup and Goldman Sachs. When consumers began to default on these loans, the financial institutions turned to AIG to collect on their policies. AIG however, hadn’t planned for a financial meltdown and did not have the money to pay, so they turned to the government to help bail them out. At the same time, these financial institutions also turned to the government for help, help that was gladly provided by our elected officials.
So what did AIG do with all of that money? Well some of it went to bonuses for the very executives who sold these insurance policies to Citigroup and their ilk. SAY WHAT????
Bernanke expressed his feelings most strongly on this particular case, claiming that several times he has “slammed down the phone” in frustration over the AIG situation. Jeeezz, slow your roll Ben, and you better take an extra nitroglycerin pill for the old ticker. After all, I’m sure the millions of American’s who are now out of work do not take kindly to random destruction of innocent office equipment.
Now if Mr. Bernanke said that several times he had gotten so frustrated that he had driven his Lexus through the plate glass windows of AIG’s Manhattan headquarters, discharged several 9mm rounds at the fancy chandeliers, thrown a grenade or two at the Bentley’s stacked in the parking lot, and then pushed the executive helicopters off the roof, I think we might be a little more compassionate towards his rageaholic tendencies. Oh well, I suppose you have to be a little bit of a hothead to become the 4th most powerful man in the world.
Thanks for not only an over simplification but also the just plain inaccurate explanation on how AIG got into touble. AIG didn’t issue risky mortgage loans to other companies. They sold credit default swaps to them. They agree to pay should the underlying loans go bad. most of these were on MBS’s to foreign banks. Yes the US owns roughly 80% of AIG (which is up about 300% over the past couple weeks for some odd reason, and they gave them lots of billions and some went to bonuses that were already guaranteed. But here’s also what the governent did that will cost more than the bonuses. Rather than just have money on hand to cover the underlying securities that go bad, they decided the would just straight up purchase the securities from the banks that held then for par value.WHAT??? Why would we pay 100% of the face price (roughly 100 cents on the dollar according to msnbc.com) for these securities??? Its makes ZERO sense. Secondly its not bailing out AIG since most of these securities AREN’T BAD (yet) so AIG doesnt even have an obligation to pay on them. On top of that most of the banks that the US gave AIG money to then buy the underlying securities from are INTERNATIONAL. Yes we are buying the potentially risky securities of foreign banks with US taxpayer money at 100% of the value. No potential gain – only potential losses. This is pretty much the dumbest thing ever. I can undertand buying the assests to reduce AIGs future exposure … but for face value when they would surely unload these at a 20%-30% discount where there is at least the POTENTIAL to gain. That like you giving me $100 and me saying well then most you can turn this into is $100 but most likely i’ll give you $70 and you still giving me the money. stupid. No the executives should not have gotten bonuses, but $150MM is a small fraction of the billions upon billions we have pumped in blindly.
To be completely honest, I have seen no intelligent thought applied to any of the bailouts or stimulus packages that we have paid for, and I dread the coming repercussions. And these are the same lawmakers who are concerned about Clemens and Bonds using PED’s? I’m glad our priorities are properly aligned!