Who would have thought that a relatively small number of people who couldn’t pay their sub-prime mortages would bring about the end of the American economy as we knew it? The latest development is an extraordinary one. As CNNMoney.com put it: “In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group…” Translation: the government has just loaned AIG $85 billion of YOUR taxpayer dollars.
The feds will, in turn, get a 79.9% chunk of the company. It is apparently hoped that when the company is eventually liquidated, the bailout bucks will be repaid to taxpayers.
Of course, this now global economic mess was not really the result of some folks going belly up on their subprimes. The real cause is the absolute greed of the investment community which felt itself immune from reality after the virtual protection given it over the past seven years or so by the Bush administration.
And, let us finally put aside this myth that European and Asian nations are smarter about these sorts of things than we are. Turns out they were just as stupid, greedy and, yes, maybe even criminal!
No matter. The bottom line is, we are now the proud owners of a giant insurance company that probably will soon be no more, as well as the mortgage titans Freddi Mac and Fannie Mae.
Getting back to AIG,if you think you had a bad economic year ( and there is a pretty good chance you did) just look at “poor” AIG–it lost some $18 billion in nine months and saw the price of its stock drop more than 91%.
Where do we go from here?
Damned if I know!!! And, I think it is safe to say from the way the past few days have played out, no one else knows,either.
I keep reading how the only thing that will save the day will be the resurrection of the real estate market in this country. But I don’t buy that any more than I believe it was just the real estate debacle that caused this world-wide economic crisis.
A whole bunch of things need to be changed, big time, before the economy settles down and returns to something akin to normal. It is easy, glib even, to point the finger of blame on the subprime lender who was, after all, just trying to put a roof over his/her head and ignore the far bigger and more sinister forces at play here: lenders, speculators, regulators, to name but a few.
And, whether John McCain or Barack Obama captures the presidency, the global economy will not be nursed back to health without these other cancers being aggressively treated.