Perry Glasser

Getting Hosed on Wall Street

In Business, Economics, Wall Street on September 20, 2008 at 1:52 am

Unless you’ve been in a cave this week, you may have noticed that the American financial system is in meltdown.  Georgie Bush, the ring-leader of the gang that got us into this mess, ponied up $48 billion to bail out AIG, a re-insurer. That’s an insurance company for insurance companies, insurance being the business of spreading risk, and re-insurance being how BIG honkin’ insurance companies spread BIG honkin’ risk. Everybody insures their car, but not everybody seeks a check every year because an accident. The risk is spread among everyone who is insured; only the unlucky have to dip in the well.  Get it?

In exchange for saving AIG, the American taxpayer now owns 90% of AIG.

Now, don’t let the rhetoric fool you. When a government seizes ownership of what was a private asset, it’s called “nationalization.”

And, for the folks in the cheap seats, what do we call an economic system where the state owns assets? Come on, you remember…did you mutter “Socialism?”

KEEERECT! 

Up in Flint, Michigan, they have their fingers crossed that the US government will soon define General Motors as too big to fail. With GM’s stock price roughly where it was when Ozzie and Harriet were on TV, the good people of Flint may get the weird idea that if taxpayers own General Motors, then taxpayers can kick in a billion here and a billion there to keep those folks working. Never mind that GM is poorly managed, can’t design a car that doesn’t fall apart in 2 years, and somehow has not noticed that world oil supplies are finite and so investing a few bucks into R&D for a half-decent hybrid might prove wise…naaaaah! In our new socialist state, why not rescue GM?

Whose Bailout is This, Anyway?

Oh, and just in case there is a skeptical reader who wonders why Glasser does not understand the importance of protecting investors, take a look at today’s Wall Street Journal, page C1, where the Deep Pockets at such grave risk are named. Astride your tax dollars, Georgie has ridden to the rescue of the Abu Dhabi Investment Authority to the tune of $3.5 billion; GIC Housing Finance, Ltd, an Indian mortgage lender, to the tune of $850 million; China Investment Corp for $2.96 billion, Kuwait Investment Authority for $300 million…

Whew! I am sure glad those people have not taken a bath. A financial bath, anyway…

Yeah, yeah, yeah…full faith and credit of the US is at stake, right? As seen from the White House lawn, we need credit…but not to rescue some poor schmuck in Flint or even get some poor woman in East St. Louis some prenatal care worth a damn.  

Nope, we gotta save the assets of the people who have financed Georgie’s foreign adventures. We’ve got a President who spends but does not tax, and has spent trillions to wage wars against shepherds and goatherds to instill democracy in a part of the world untouched by the Age of Reason, places where women are murdered for the disgrace of having been raped.

The Mess

And that’s how we got into this mess. Sure, the rhetorical dodge that created a new class of assets called “subprime mortgages” to replace that old standby, “uncreditworthy,” is choking the American economy, but combined with prosecuting two wars without a single tax dollar (or single legal photo of combat) is an expensive affair. We are making war on shepherds with borrowed money. Trillions of dollars.

I know I feel safer…

So this week we are wiping out bad investments from bank balance sheets to regain the confidence of the investment community, the “investment community” being filled with heavy hitters who also–not coincidentally–buy the notes that enable us to prosecute two wars. 

Who is getting hosed?

–Perry Glasser

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  1. Fantastic post. Our government can bail out all the corporations (or entire economic sectors), but where is the money coming from? From taxpayers? Not even – most of it comes from foreign loans. We’re putting band-aids on a gaping wound, just hoping it will heal sometime. I’m no economic expert, but this is going to be bad. Real Bad.

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