Greetings. I'm on vacation in Florida this week. I'll either post a lot or not so much - maybe somewhere in between. We'll see. I will note that I have not forgotten about some posts that I've discussed in the past as future topics. I do still plan to complete my series on the credit crisis by looking at the short term Treasuries market and subsequently looking at the relationships between LIBOR, the Fed funds rate and Treasuries. I'd be pleased if I got to that this week. Also, a while back I promised a look at Congressional voting patterns and categorizing members of Congress. This is still coming too. I did some work on this late last year which left me unsatisfied with the results... I'll get back to this after I finish up some of the financial stuff mentioned above.
Ok - so, looking back at the week... I wrote a post on AIG earlier today which was one of the items which occupied my thoughts this week. I frankly have been quite angry and disgusted over this whole mess. The government should have never got in to this mess. Now that it has, I have no sympathy for those firms who have taken the money - especially AIG and any other firm who is essentially owned by the government.
One of the biggest issues with this whole thing is that any firm which is considered to be a "systemic risk" seems to be destined for bailouts ad infinitum. AIG (or Fannie Mae, Freddie Mac, Citigroup) can essentially do whatever it wants until it is fully nationalized (i.e. owned and run by the government). All of the leverage and bargaining power rests in these firms since the government has played its hand. These firms will not fail.
When the AIG bonus situation percolated this week, Tim Geithner stated that he would withhold the equivalent amount (some $150M) from future bailout payments to AIG (typically on the order of $30-50B at a time). Now, think about this. First, the bonuses represent no more than 0.5% of any single bailout that AIG has received. Second, I thought we were giving bailout funds to the extent absolutely necessary to keep AIG alive. If any amount is held back, would that cause AIG to fail. If not, then why are we giving them that much in the first place? And we can't give them less or else they fail and we have a global financial catastrophe.
Ok - I really am sick of AIG.
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A little over a week ago, I wrote an article on earmarks. Ron Paul (R-TX) defended his position on his official Congressional website for his constituents and anyone else who wants to listen/read. Have a look here.
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Good night.
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