Trickle Down Economics

Dear editor:

Now that the Sect. of the Treasury has received permission from Congress to spend that $700 Billion it approved last week for a Wall Street Bailout, I guess we should feel secure that everything is going to be OK and all those homeowners that face foreclosure will be able to save their homes. (Forgive me; I forgot we are not supposed to call it a bailout.) Don’t kid yourself. Both political parties caved, adding another $150 Billion in pork barrel, and the American taxpayer is going to be stuck with the bill. Need proof? Take the case of AIG.

Initially the Treasury Department granted AIG a bailout loan of $85 Billion (before the $700 Billion) after the company defaulted on $14 Billion of “credit default swaps” it had made to investment banks, insurance companies and others. These insurance instruments and bundled investments were completely unregulated and were described by Warren Buffett as “financial weapons of mass destruction.” Indeed they were. Anyway, these CDS instruments and the shortage of liquidity for AIG was the reason for the federal loan. How many homes were saved by these loans? Probably none. All it did was save AIG and help Wall Street.

But it doesn’t end there. Right after this, the company held a conference for top executives at a posh resort that cost over $400,000 of our taxpayer loaned money. This included all kinds of amenities including food, golf, drinks, and spa treatments. And earlier this week two former AIG chief executives testified before Congress and insisted that to their knowledge nothing bad happened during their tenure that saw them enriched with huge salaries, perks, bonuses and stock. “To their knowledge,” isn’t that the excuse used by the late CEO of Enron? I believe that reasoning was first used by Nazi leaders at the end of World War II and is known as the “Nuremberg excuse.”

But wait, it still doesn’t end there. The Federal Reserve in its infinite judgment has now loaned an additional $38 Billion to AIG because the first $85 Billion wasn’t enough. Of course the government will hold as collateral an equal amount of investment grade securities owned by AIG. Investment grade? Is there such a thing still available on Wall Street?

I guess this is all what Ronald Reagan called “trickle down economics.” We all know what that means. It’s like cooking steak on a hot charcoal grill. The meat goes to the Wall Street gurus, the banks, the CEOs, our politicians in Congress and in the White House, and the American taxpayer gets the hot grease that “trickles down” from the grill above.