[Peace-discuss] Decoys?

[C. G. Estabrook]

[Wall Street has the USG (Obama and Bush) enrich them under cover of a financial 
emergency.  -CGE]

	The Real AIG Conspiracy
	Michael Hudson
	March 18, 2009

It may seem odd, but the public outrage against $135 million in AIG bonuses is a 
godsend to Wall Street, AID scoundrels included. How can the media be so 
preoccupied with the discovery that there is self-serving greed to be found in 
the financial sector? Every TV channel and every newspaper in the country, from 
right to left, have made these bonuses the lead story over the past two days.

What is wrong with this picture? Is there not something over-inflated about the 
outrage led most vociferously by Senator Charles Schumer and Rep. Barney Frank, 
the two leading shills for the bank giveaways over the past year? And does Pres. 
Obama perhaps find it convenient that finally, at long last, he has been able to 
criticize something that he believes Wall Street has done wrong? Even the Wall 
Street Journal has gotten into the act. The government's takeover of AIG, it 
pointed out, "uses the firm as a conduit to bail out other institutions." So 
much more greed is involved than just that of AIG employees. The firm owed much 
more to other players – abroad as well as on Wall Street – than the assets it 
had. That is what drove it to insolvency. And popular opposition has been rising 
to how Mr. Obama and Mr. McCain could have banded together to support the 
bailout that, in retrospect, amounts to trillions and trillions of dollars 
thrown "down the drain." Not really down the drain at all, of course – but given 
to financial speculators on the winning "smart" side of AIG's bad financial gambles.

"The Washington crowd wants to focus on bonuses because it aims public anger on 
private actors," it accused in a March 17 editorial. But instead of explaining 
that the shift is away from Wall Street grabbers of a thousand times the amount 
of bonuses being contested, it blames its usual all-purpose bete noire: 
Congress. Where the right and left differ is just whom the public should be 
directing its anger at!

Here's the problem with all the hoopla over the $135 million in AIG bonuses: 
This sum is only less than 0.1% – one thousandth – of the $183 BILLION that the 
U.S. Treasury gave to AIG as a "pass-through" to its counterparties. This sum, 
over a thousand times the magnitude of the bonuses on which public attention is 
conveniently being focused by Wall Street promoters, did not stay with AIG. For 
over six months, the public media and Congressmen have been trying to find out 
just where this money DID go. Bloomberg brought a lawsuit to find out. Only to 
be met with a wall of silence.

Until finally, on Sunday night, March 15, the government finally released the 
details. They were indeed highly embarrassing. The largest recipient turned out 
to be just what earlier financial reporters had said was rumored: Mr. Paulson's 
own firm, Goldman Sachs, headed the list. It was owed $13 billion in 
counterparty claims. So here's the picture that's emerging. Last September, 
Treasury Secretary Paulson, from Goldman Sachs, drew up a terse 3-page memo 
outlining his bailout proposal. The plan specified that whatever he and other 
Treasury officials did (thus including his subordinates, also from Goldman 
Sachs), could not be challenged legally or undone, much less prosecuted. This 
condition enraged Congress, which rejected the bailout in its first incarnation.

It now looks as if Mr. Paulson had good reason to put in a fatal legal clause 
blocking any clawback of funds given by the Treasury to AIG's counterparties. 
This is where public outrage should be focused.

Instead, the leading Congressional shepherds of the bailout legislation – along 
with Mr. Obama, who came out in his final, Friday night presidential debate with 
Sen. McCain strongly in favor of the bailout in Mr. Paulson's awful "short" 
version – have been posing as conspicuously as possible for the media to cover a 
deflected target – the AIG executives receiving bonuses, not the company's 
counterparties.

There are two questions that one always must ask when a political operation is 
being launched. First, cui bono? Who benefits? And second, why now? In my 
experience, timing almost always is the key to figuring out the dynamics at work.

Regarding cui bono, what does Sen. Schumer, Rep. Frank, Pres. Obama and other 
Wall Street sponsors gain from this public outcry? For starters, it depicts them 
as hard taskmasters of the banking and financial sector, not its lobbyists 
carrying water for one giveaway after another. So the AIG kafuffle has muddied 
the water about where their political loyalties really lie. It enables them to 
strike a misleading pose – and hence to pose as "honest brokers" next time they 
dishonestly give away the next few trillion dollars to their major sponsors and 
campaign contributors.

Regarding the timing, I think I have answered that above. Talking about AIG 
bonuses has effectively distracted attention from the AIG counterparties who 
received the $183 billion in Treasury giveaways. The "final" sum to be given to 
its counterparties has been rumored to be $250 billion, do Sen. Schumer, Rep. 
Frank and Pres. Obama still have a lot more work to do for Wall Street in the 
coming year or so.

To succeed in this work – while mitigating the public outrage already rising 
against the bad bailouts – they need to strike precisely the pose that they're 
striking now. It is an exercise in deception.

The moral should be: The wetter the crocodile tears shed over giving bonuses to 
AIG individuals (who seem to be largely on the healthy, bona fide insurance side 
of AIG's business, not its hedge-fund Ponzi-scheme racket), the more they will 
distract public attention from the $180 billion giveaway, and the better they 
can position themselves to give away yet more government money (Treasury bonds 
and Federal Reserve deposits) to their favorite financial charities.

	
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