The “swift and certain” collapse of the financial system just netted $36 billion for German and French banks, via the American taxpayer and the government bailout of AIG.
For those that do not know, AIG spent the last five years writing insurance contracts that would pay out in the event of a devaluation of mortgage backed securities. Now that these “baked” securities are worthless, AIG is on the line for hundreds of billions and maybe even trillions of dollars. The American government seems to think that the entire financial system is on the line and so they have decided to effectively guarantee the counterparties on these insurance contracts.
This guarantee means that my taxpayer dollars (and yours) just sent $36 billion to French and German banks. We also sent over $40 billion to Goldman Sachs.
To put that in context, the stimulus bill included only $27.5 billion for highway construction. It’s not the bailing out of foreign banks that bothers me but the idea that people who made bad bets don’t pay for them. If I buy stocks and my 401K decreases by 50%, there is no federal government to pay the difference.
If the government can’t afford to “bail” out students who are now defaulting in droves on their student loans, why can it afford to spend hundreds of billions and maybe trillions of dollars to subsidize the poor investment choices of the likes of Goldman Sachs?
Discontent is simmering in this country and it’s about to start boiling.
Interdisciplinary Traveler 