Finding The New Ward Churchill to Distract From The Failing Financial Policies

Unlike Jeralyn, my distaste for Ward Churchill was manifest. I did not care for his grandstanding and, imo, imbecilic statements about 9/11. Of course, the defenders of the Bush Administration's disastrous Iraq Debacle would use Ward Churchill as a way to demonize all opposers of their catastrophic policies. Today in the NYTImes, Joe Nocera plays a similar game, this time over AIG:

Yes, the $165 million in bonuses handed out to executives in the financial products division of American International Group was infuriating. . . . But death threats? “All the executives and their families should be executed with piano wire — my greatest hope,” wrote one person in an e-mail message to the company.

What is Nocera's motivation in this? To marginalize objection to the financial bailouts and leave the discussion to "Serious People." Of course death threats are outrageous and I will go one further than Nocera - prosecute the e-mailer. But an idiotic e-mail has nothing to do with the real discussion going on here. It is a cheap trick from Nocera. Does he have a point to all this? As best I can make out, it is this:

By week’s end, I was more depressed about the financial crisis than I’ve been since last September. Back then, the issue was the disintegration of the financial system, as the Lehman bankruptcy set off a terrible chain reaction. Now I’m worried that the political response is making the crisis worse. The Obama administration appears to have lost its grip on Congress, while the Treasury Department always seems caught off guard by bad news.

There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson.

Why would that be? What "burned because of congress' actions? Why does it make it worse? Here are Nocera's platitudes:

IT IS DESTROYING VALUE During his testimony on Wednesday, Mr. Liddy pointed out that much of the money the government turned over to A.I.G. was a loan, not a gift. The company’s goal, he kept saying, was to pay that money back. But how? Mr. Liddy’s plan is to sell off the healthy insurance units — or, failing that, give them to the government to sell when they can muster a good price.

In other words, it is in the taxpayers’ best interest to position A.I.G. as a company with many profitable units, worth potentially billions, and one bad unit that needs to be unwound. Which, by the way, is the truth. But as Mr. Ely puts it, “the indiscriminate pounding that A.I.G. is taking is destroying the value of the company.” Potential buyers are wary. Customers are going elsewhere. Employees are looking to leave. Treating all of A.I.G. like Public Enemy No. 1 is a pretty dumb way for a majority shareholder to act when he hopes to sell the company for top dollar.

What utter BS. AIG as a going concern will have no value. The damage to its image is immaterial. AIG was going to be a bath we were going to take. We all knew this. Nocera is really full of it here. the real issue is how do we manage the loss, and specifically, who takes haircuts in the wind down of AIG. In truth, AIG should have been in receivership immediately and now that is precisely where it needs to go. enough of these charades of AIg coming back.

Here is some more nonsense from Nocera:

IT IS, UNFORTUNATELY, BESIDE THE POINT There is a much bigger issue that has barely been touched upon by Congress: the way tens of billions of dollars of taxpayers’ money has been funneled to A.I.G.’s counterparties — at 100 cents on the dollar. How can it possibly make sense that Goldman Sachs, Bank of America, Citigroup and every other company that bought credit-default swaps from A.I.G. should be made whole by the government? Why isn’t it forcing them to take a haircut?

But this is precisely why it is not beside the point. there is now a much better chance that the counterpart payments will be scrutinized because of the AIG bonuses flack. It never would have been discussed otherwise. Nocera is really piling on the BS in this article. Here is some more:

IT IS DESTABILIZING How can you run a company when the rules keep changing, when you have to worry about being second-guessed by Congress? Who can do business under those circumstances? Take, for instance, that new securitization program the government is trying to get off the ground, called the Term Asset-Backed Securities Loan Facility — or TALF. Although it is backed by large government loans, it requires people in the marketplace — Wall Street bankers! — to participate.

But the problem with the TALF plan is the TALF plan itself, which gives all the downside risk to the taxpayers and all the upside gain to Wall Street. The idea that no Wall Street entity will participate in a no lose proposition is simply laughable. Hell if the AIG bonus furor ends Geithner's absurd TALF plan, I count that as another positive. Nocera concludes:

In previous columns, I have been an advocate of nationalizing big banks like Citigroup. But after watching Congress this week, I’m having second thoughts. If this is how Congress treats A.I.G., what would it do if it had a bank in its paws?

It seems Nocera favors AIG style nationalization, where the "Masters of the Universe" call the shots and the taxpayers get left holding the bag. That is a crap idea and if that is what temporary takeover is going to be, then I am against it. It turns out Nocera is another acolyte of the "Masters of the Universe," with unveiled contempt for the "little people."

Speaking for me only

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    A bunch of AIG employees (none / 0) (#1)
    by jbindc on Sat Mar 21, 2009 at 08:27:35 AM EST
    are getting death threats.  There's no excuse for that. But for those who think people don't really care about AIG (looks at David Axelrod), I think you're sorely mistaken.

    Of course there isn't (5.00 / 2) (#2)
    by Big Tent Democrat on Sat Mar 21, 2009 at 08:31:09 AM EST
    But that is not relevant to whether the bonuses should be clawed back. It is relevant to the fact that NO ONE should receive death threats. Prosecute the people issuing them.

    but to crassly use them to demonize all opposition to the AIg mess is outrageous and cheap. nocera should be ashamed of himself.


    I agree (none / 0) (#3)
    by jbindc on Sat Mar 21, 2009 at 09:47:11 AM EST
    My point was that we are being told that real Americans don't care about AIG.

    No one should get death threats.  And certainly not these employees' families who had nothing to do with the bonuses being paid out.


    I Read Nocera's Column... (none / 0) (#4)
    by santarita on Sat Mar 21, 2009 at 10:46:27 AM EST
    as an indictment of Congress and the media for skipping over the bigger issue of the payments to AIG's counterparties  in favor of cheap political thrills.  It is interesting that the two stories came out in the same weekend.  The only reason that the counterparties' story  may not have been discussed (by Congress and the media) is because of its complexity.  Bonuses are so much easier to talk about.  (By way of example, the counterparties' story has been only peripherally discussed here.)  The big questions of whether there may have been unjustifiable preferential treatment and whether the counterparties got more than they were entitled to are extremely important to understand before further authorities or money are granted to the current stewards - Geithner and Bernanke.

    You are probably correct that the the American people wouldn't have paid the scant attention to the larger story without the bonus story.  But that doesn't mean that Nocera's point about the relative importance of the two stories isn't valid.

    The point about preserving AIG's value is that if we want to maximize our return from the sale of the various units of AIG (which include many profitable insurance units), then we shouldn't be messing around with reputational destruction.    

    And Congress right now is behaving like a bunch of politicians rather than lawmakers.


    Did you? (none / 0) (#5)
    by Big Tent Democrat on Sat Mar 21, 2009 at 11:13:19 AM EST
    How many grafs did it take you to get that reading?