I have read the word "bailout" used to describe the government’s purchase of AIG. It has been called a "takeover."
The word I have not read is the only truth here. AIG, the world’s largest insurance company, has just been nationalized.
Why hasn’t the n word been uttered in all the reporting on this event? Because it’s a political word, a word we use for people we detest, like Hugo Chavez. It’s a loaded word, a word conservatives use to attack anyone who dares disagree as socialist or communist.
But now, within the space of a week, the so-called most conservative government evah has nationalized the housing industry and the insurance industry. While some conservatives are starting to object, the fact is they brought this on themselves. They created the conditions which made nationalization necessary, forgetting what they claim to be one of their chief truths, that markets have no morality.
There is no such thing as economic justice. Anyone peddling that is peddling a lie. If you want justice, you need government.
What happened in both cases, making nationalization necessary, was a failure to properly regulate.
- Banking represents the creation of money. Mortgage brokers were
allowed to create counterfeit money (mortgages they knew would not be
repaid) and other brokers were then allowed to create more counterfeit
money (instruments based on those phony mortgages) in the world’s
biggest ever pyramid scheme. Values fell so that even honest mortgages
began defaulting, and that’s what killed Fannie and Freddie. - AIG was killed by "naked shorts." People sold stock that they not only didn’t have, but which didn’t exist. Now that the horse is out that barn door is being closed, but it’s way too late. When more stock has been sold than exists you have something right out of the 1870s.
It was inevitable that, in building their bridge to the 19th
century, the Bush Administration would create the conditions for panics
identical to those which preceded regulation. Barack Obama had it
exactly right that this was the failure of a "philosophy," even if that
word is too long for modern reporters to understand.
What angers me is that, in the short run, these nationalizations
were the right thing to do. Letting Fannie, Freddy and AIG go down
would have destroyed the world financial system, leaving the U.S. in
the same condition we were in 1837, after the Bank of the U.S. was killed and all the states reneged on bonds they used to build failed canals.
We are now getting lectured by the people who created these
conditions, who are calling the nationalizations scandalous. What’s
happening on the Far Right is more like a purge of the Trotskyites
than anything real. They caused it, they scapegoat the people who
caused it, and then they argue again for the same policies, only purer.
The Paulites have become outright Stalinists.
It is actually possible that the government will do fine, over the
long run, by these deals. Most of the mortgages made by Fannie and
Freddie were honest mortgages. AIG has plenty of assets (just not
liquid ones) to cover its obligations. Temporary injections of cash
into the system should, in time, calm the markets and let the
government come out with a profit.
But the lesson being taught by the Right is precisely the wrong
lesson. Markets must be regulated. There must be a cop standing by to
roust the Three Card Monty guys, to keep crooks from creating
counterfeit money, and to guarantee square dealing. Without cops there
is no square dealing. We have seen that in our time.
The task of financial regulation is now to build a new bridge, back
from the 19th century (where the Bushies have left us), over the heads
of the Paulites, and directly into the 21st century (where we need to
live).
It’s obvious, judging from his Golden speech, that Barack Obama understands this.
But it’s also clear that the nation’s media, especially its financial
media, is in the hands of modern-day Trotskyites and Stalinists, who
will not speak the truth, who will use language to lie, and who remain
determined to get away with it.
