Jim Manzi has some useful thoughts:
Commentators on both the Left and Right seem to think that if only we could get the right person to take over these companies and clean up the financial mess, everything would be OK. All it takes is somebody competent and honest, because the answers are so obvious. A rotating series of scapegoats has been created. Paulson? Fool. Geithner? Moron. Liddy? Stooge. It’s funny how their idiocy didn’t seem to surface so much in their prior careers.
Maybe the issue isn’t with the men we’ve selected, but with the problem we’ve asked them to address. Some problems don’t have solutions. The American electorate seems to be intent on re-learning the lesson that how to effectively manage socialized means of production is one of them. The tuition for this course tends to be pretty steep.
I’m sure that Liddy is deeply regetting that he took the job, particularly given the (lack of) financial compensation. The notion that a government, or any one person, is smart enough to run an economy is what Hayek called the fatal conceit.
[Update early evening]
It’s cliché to say there’s a lot of blame but going around — but there is a lot of blame to go around.
Everywhere you turn in this mess, you can find government right there. To say this is a private-sector failure is ridiculous. It’s like Forrest Gump, where he keeps showing up at historic moments. Everywhere you look in this mess, again and again, you see government.
The most infuriating thing about these clowns, both in Washington and the press, is how a non-existent free market and “deregulation” keeps getting falsely blamed for this as an excuse for bigger government and more regulation.
Actually, one person does a better job than government, because with government you get stupidity plus the inconsistency of committee decisions.
Which is why, of course, when you start down the road of planned economies with the intention of having your democratically-elected government (a.k.a. The Supreme Soviet) run things, you inevitably find yourself forced to empower a dictator before things totally fall apart.
You can see clear traces of that operating today. People ask government to do management jobs that are beyond its powers. It does a terrible job, and then folks start calling for czars and such, thinking the problem is not enough power rather than not enough wisdom.
the actual correct solution would have been to
force AIG into Bankruptcy. A bankruptcy court judge
would appoint a special master to unwind the
CDS positions, would oversee all payouts, and
if the Treasury were sitting as the entity providing
Debtor In Possession (DIP) funding to meet
cash flow and liquidity needs, then, it would all
follow well established law and procedure.
When a firm is under court supervision, the special
master sits in a corner office with a green eyeshade
and approves all expenses with an eye to maximizing
creditor payments.
The problem with the Bush Administration is they
liked to make up things like TARP rather then follow
the rules and procedures. Lehman and Bear went
into Bankruptcy court, and the world didn’t end.
AIG and the others could also.
Maybe “some problems” don’t, but AIG’s problem does – let it go bankrupt.
What were people expecting when they bailed out AIG with all those billions? That they’d just sit on it? That’s madness. A business must pay its employees and creditors. An insurance business but honor the policies its written. If the taxpayers weren’t willing to pay for this stuff they should never have given money to AIG in the first place.
If the taxpayers weren’t willing to pay for this stuff they should never have given money to AIG in the first place.
Er…speaking as someone who writes a $20,000 check to the government every year…I sure didn’t volunteer to give any money to AIG.
I don’t even recall the issue being on the ballot any time recently.
Letting Lehman go bankrupt is what triggered the crisis. If they’d let AIG go bankrupt as well the Dow would be under 4,000.
The problem is having companies that can’t go bankrupt without taking the global economy with them.
To refine my earlier comment: no one can be sure what the consequences of letting AIG go bankrupt would be. But clearly there is a non-zero chance of the result being catastrophic. That’s why it hasn’t been allowed to happen.
Christ, Jim, that’s silly. There’s a nonzero probability that if I am allowed to go bankrupt it could be catastrophic for the world. Don’t you know that in 6 years’ time, if I have the leisure for it because I’m not working my ass off in a minimum wage job because of the bankruptcy, I and I alone will hold the key to finding a cure for the bird-flu epidemic with a 98% mortality sweeping the planet? No? Well, let me assure you that there is a nonzero probability that this statement is true.
So, you better send me all your money right now.
The problem with the Bush Obama Administration is they
liked to make up things like TARP rather then follow
the rules and procedures.
Fixed
…clearly there is a non-zero chance of the result being catastrophic.
Really? A non-zero chance?
And that’s your criterion for implementing another policy that has an even greater chance of being catastrophic?
Have you ever taken a course in math, or logic?
You’re right, non-zero isn’t an interesting threshold. And no one can precisely quantify the risk posed by letting AIG fail.
Before Lehman failed the experts (Paulson, Geithner, etc.) evidently thought that there’d be no major repercussions. Instead there was a credit freeze, a bunch of bank failures, a stock crash, etc. It took $350B of TARP money just to stabilize the situation. And AIG is far more tangled with the world’s banks than Lehman was.
So if you were in charge, and the people who knew about this stuff told you that letting AIG fail would run a 30% chance of a 10 year depression, Dow 3,000, 20% unemployment — would you let it fail? How about a 20% chance? 10%?
Some risk is unavoidable, but a leader would have to be crazy to ignore the risks posed by an AIG bankruptcy.