Wow! Finally, a thread with several genuinely interesting and funny conversations. Thanks to all for the entertainment.
UCGal: I’ve gone through AIG’s books carefully, and I don’t agree with several of Thomas Gober’s points. The truth is that AIG’s insurance operations were, overall, pretty good compared to other insurance companies and other financial institutions in general. Of course, most of the financial sector is in the toilet, so most companies have some issues.
DWCAP and others: Yes, the big show over $165 million in bonuses (that’s less than 0.02% of the amount Bernanke announced he was going to flush down the toilet just this week) and much of the other fireworks on Capitol Hill are designed to distract the weak-minded from the main action. We all know that scene from The Wizard of Oz. There is no single master manipulator, just a community of Democratic and Republican politicians hungry for votes and dollars, bankers and businessmen hungry for jobs and dollars, and 200 million voters with a perceived stake in higher asset prices.
Allan and davelj: Your support for Bernanke and others blowing bubbles from Washington DC is misplaced, I think. You see them as flawed but basically competent and trustworthy. They are just limited practical people administering the medicine the visionary Keynes prescribed 70 years ago. It has become very fashionable to dismiss the moral hazard concerns, and to attribute nothing but an altruistic concern for the greater economic good to those who advocate massive bailouts.
But what if all this is mostly just a massive and wasteful bailout for the reckless and irresponsible, under the guise of a rescue of our economic way of life? We’ll have a boost in the GDP numbers because of the bailout actions, but what if most of that is just lousy measurement of our real welfare? Does it really make us wealthier to keep hundreds of thousands of bankers at their desks instead of figuring out which other profession to make a career of? Or to pretend that our houses are all worth many, many years of someone else’s savings so that we can continue to fantasize about playing golf for 30 years when we retire and scale down?
I would be perfectly OK with 10 years of GDP 20% less than today’s, if a lot of the missing 20% was mortgage broking, asset managers, FNMA and Freddie and most of the other govt guarantee entities, and other people who add little value, or even destroy it. Yes, others would get hurt too, but we’d do fine overall. We really need a housecleaning at this point, a clean break with the past. We’re not getting it.
