The Great Bailout

Peter Tchir via Zero Hedge

The AIG moment was the first time that the US threw any pretense of real capitalism out the window.  Bear Stearns at least was done by JPM with government help.  Fannie and Freddie were taken over, but they were always quasi government entities.  It was AIG that was truly special.  The government didn't even attempt to see if the banks had managed their exposures at all.  The government didn't even care if they had.  They panicked and saved the banks from their own folly - they didn't give capitalism a chance.  The US has never truly recovered from that.  The entire system looks to government support more and more.  Since AIG the Fed has been running at least one massive easing program or another constantly.  The government is lurching from spending program to spending program to keep the economy churning.

At the first signs of weakness we beg for the FED or ECB or the government to do something big and fast.  The European credit crisis seemed a final chance to put some capitalism back into capitalism.  To allow dumb decisions to pay the price for failure.  To reward the institutions that had properly navigated through the risks.  There was even a brief moment when it looked like Germany would do that - would force those who failed to pay the price and support those who had taken the best steps.  But now with Dexia bailed out and some super SIV on the way, it looks like we are once again heading down a path of not allowing failure - in fact we are once again rewarding failure and living beyond your means.  It isn't communism, but it certainly doesn't fit any classic definition of capitalism.


  1. Bram:

    He's talking about the wrong AIG moment.

    The AIG Moment was in 2005 when NY Attorney General Elliot Spitzer decided he needed some high-profile scalps for his run for Governor. He managed to force out AIG CEO Hank Greenberg who had been with the company almost since it's founding and owned a sizable amount of AIG stock. Greenberg had literally built the company.

    Since then all criminal charges against Greenberg have been dropped, the state is steadily losing the civil cases, and Spitzer has been exposed as the creep he is.

    Meanwhile, Greenberg was replaced by an incompetent boob acceptable to the state of NY. The rest is history.

  2. tomw:

    I have yet to meet anyone who thinks the Federal bailout of Wall St was either prudent or necessary. The old saying is to let 'the chips fall where they may', and it should have been updated and applied rather than a Troubled Asset Recovery(?) Program.
    Paulson sold a bill of goods, along with Helo Man and whoever else made up the 'team'... We all get to pay for the Wall St bonuses of the houses that did not fall as they would have in another world.

    P.S. the main point was that no CITIZEN wanted this merde to happen, just the givers and the recipients... AKA Congress & Wall St.

  3. Jeffery Fields:

    I am in complete agreement with Tom W.No citizen did want this to happen! J.

  4. steve:

    This basically describes the most difficult part of convincing people of the necessity of capitalism. First, you have to convince them that the current system isn't actually capitalism.