With the dearth of investigative journalism and embrace of entertainment as news by our corporate press, sometimes the only way we learn about the important events shaping our world is when there is a dust up among our elite.
Right now we are privileged to have heavyweights within the financial industry duking it out in court. I’m referring to the AIG bailout case that began this week in Washington.
Luckily, there is a remnant of investigative writers out there, mostly on the internet. As author David Dayen writes “…regardless of the outcome, this trial should matter to every American. In fact, just in its first week, we’ve learned a lot of new information about how the bailout architects– then-Treasury Secretary Henry Paulson, ex-Federal Reserve chair Ben Bernanke, and former president of the New York Fed Timothy Geithner – conducted themselves amid the chaos of the financial crisis. And it doesn’t reflect well on any of them, with concealed information, bait-and-switches, and favorites played among financial institutions. As these three prepare to take the stand this week in the case, we should be pleased to finally have this debate about the bailout in public.”
Another bastion of investigative journalism is Naked Capitalism, whose beat is the world of finance. Founder of NC, Yves Smith, has been all over this case with two posts–part 1, and part 2, looking at all the documents that have come to light during the discovery phase of the trial. To me the salient point is one savvy analysts have long suspected: that the takeover of AIG by the government was initiated to hide all the losses of the Too Big to Fail Banks, who were AIG counter parties. Here’s Yves.
“AIG’s contention is that the driver of how its rescue was done was to force as many RMBS and CDO credit losses on AIG, so as to reduce the amount of support that would have to go directly to banks. In other words, it was to facilitate the bailout of the investment banks and banks that were perceived to be essential due to operating the payments system and large domestic and international over-the-counter debt markets. AIG could be handled more roughly because it was not a critical part of the financial plumbing and also had never done much to curry political favor. By contrast, if foreign investors were part of the rescue team, they would almost certainly have insisted on haircuts on the AIG credit default swaps, a large mechanism for laundering bailout dollars through AIG to banks and former investment banks like Goldman and Morgan Stanley.”
It’s simply amazing that 6 years after the bailout, we are just finding out these details. If you have any doubt that our elite feel they are above the law, follow this case, especially by reading Naked Capitalism, every day. Yves is having a fundraiser now, so if you’ve got some spare change, be sure to give a little to support all the great work she and her staff do.
And, no, I’m not calling our elite monsters, it’s just an analogy, silly. After all, they’re doing “God’s Work.”
* We also have whistleblowers to thank for a peek behind the curtain. Thanks Carmen Segarra.
Update: Too funny. New York Times reporter Andrew Ross Sorkin is now telling us that this is old news, and that all the cool kids knew all about it.