Critics of government get all worked up when Washington spends money stupidly, or does something manifestly stupid. There was a even senator from Wisconsin, William Proxmire, who used to hand out “Golden Fleece” awards for such things.
The Pentagon’s notorious $600 payments for toilet seats that were $12 in local discount stores, or $434 paments for hammers that were $10 in the local hardware store were good examples of this.
But nobody seems to be screaming about the incredibly wasteful rescue of AIG, on which the government has spent first $85 billion and now another $37.5 billion.
Bad enough that the Treasury Department is pumping an astonishing $123.5 billion into a private company to prop it up, but what no one has mentioned is that at the time of the initial announcement of an $85-billion bailout, the insurance giant’s stock had crashed so far that it could have been bought outright by the government for a scant $7 billion! That’s small change by today’s standards. (Today, after all the bailout money, the company’s total market capitalization—the value of all its shares combined–is still only $7.37 billion.)
For $123.5 billion, the taxpayers have gotten warrants that could, if exercised, end up giving “us” 80 percent of the company, but if the government had just gone ahead and bought 100 percent of AIG right away, it would have only cost about five percent of that amount.
Talk about a “Golden Fleece” award!
The money is now flying so thick and fast–$700 billion here, $37.5 billion there, $25 billion to the auto industry, $900 billion to buy up short term corporate debt, hundreds of billions of dollars more to buy stakes in failing banks–that we’ve simply lost sight of what we the taxpayers are getting for our money, or whether the government is even bargaiining for good deals.
Treasury Secretary Henry Paulson reportedly came up with the initial $700 billiion figure for the Wall Street bailout off the top of his head, with the only consideration being that the number be large enough to “shock” investors into feeling confident.
Before another dollar of borrowed cash is spent on this binge, Congress should call urgent hearings to look into what’s being paid and what the taxpayers are getting for their money. Any deals–like the AIG boondoggle–that were clearly bad should be halted and reconsidered.
My suspicion is that with AIG, ideology intruded. The Bush administration doesn’t want to be seen as simply nationalizing banks and insurance companies–the kind of thing they condemn Venezuela’s Hugo Chavez or Cuba’s Castro for doing. But they are doing that anyhow, and on a much bigger scale than Chavez or Castro ever dreamed of–just not overtly. And to avoid overt takeovers, they are spending many multiples of hundreds of billions of dollars just taking over the liabilities of companies that they could have taken over lock, stock and barrel for a fraction of the cost.
Left out of consideration is the incredible carnage this is certain to cause down the road. Every penny that is being spent on this rolling bailout is borrowed money. As an NPR reporter quite accurately noted in a report yesterday on Britain’s colossal $900-billion bailout of UK banks, that borrowed money will have to be repaid by taxpayers over time, and will come at the expense of other things that the public wants, like Britain’s vaunted National Health Plan, education, etc.
We don’t hear much about that on the reporting, even on NPR, about the US bailout, but it is equally true here. The bailout is doing to the nation’s public funding in a few short weeks what Ronald Reagan and his budget director David Stockman tried to do over the course of two presidential terms off office: bankrupt the government to kill off social spending.
As of this point, if all these allocated funds being thrown at financial institutiions are spent, there will be no money left for health care, education, infrastructure, environmental protection, national parks, Social Security, welfare assistance, or critical things like consumer protection and worker safety. Truth to tell, there won’t be any money left for the military either–probably the only good thing you can say about this mess.
It’s enough to make one think that this is all some final disastrous plot by the Bush/Cheney administration to bring on a collapse of what remnants were left of the old New Deal and Great Society programs before leaving Washington. And that’s not such a wild notion. The whole eight years of Republican rule in Washington has been a giant wrecking game.
If some KGB mastermind, back in the late 1960s (perhaps young Vlad Putin?), had dreamed up a scheme to capture the child of a leading American political family, and re-program him to become a kind of “Manchurian Candidate” who would return and work his way into the presidency, from which high office he would destroy the country, he could not have accomplished more than President Bush has done.
The financial fiasco and the subsequent bailout boondoggle is the final blow–one from which the nation may well never recover.
DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006 and now available in paperback edition). His work is available at www.thiscantbehappening.net