Bailouts for Everyone!
I'm truly disgusted by what's going on at the Fed tonight. I don't believe for a second the BS about "protecting taxpayers" by providing a failing corporation with a taxpayer-funded "bridge" loan for more than twice the amount that AIG said it needed only days ago. With all the other "liquidity" out there available to banks, if AIG's collateral were believed to be any good, why wouldn't someone else -- or a group of someones -- stepped in to provide this financing?
And how on earth does a scheme which results in only an 80% stake in case of failure not constitute a bailout? If no one will loan AIG a penny, and it must be a taxpayer-funded bailout, then taxpayers should get 100% of everything in case of default.
Don't like the deal, AIG? Then walk and find some other suckers.
The Fed is flapping its lips about the need for an "orderly" unwinding of these assets, but now that everyone knows AIG is dead, who's going to step up and pay what the failed managers and government stooges believe the stuff to be worth? What we have here are sellers with zero bargaining power in a market full of panicked and ruthless buyers -- if any buyers can be found at all.
Unfortunately, the Federal Reserve Act gives Bernanke and his gaggle of enablers pretty much limitless power to put taxpayers on the hook for private companies' failings. All that's necessary is for them to tell us all that it's in our best interests to bail out the millionaire managers and the fake risk-taking investors.
They claim this particular bailout is authorized by Federal Reserve Act 13(3), which I quote below.3. Discounts for Individuals, Partnerships, and Corporations
In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.