The Wrongologist

What’s
Wrong Today:

Here are two points
on a curve generously supplied by two Chairmen of AIG, the former Chairman, and
the current Chairman:

First, On Monday, Maurice Greenberg, the former
chairman of AIG sued the US Treasury and the Federal Reserve Bank of NY for $25
billion.  The lawsuit against the Treasury contends that the
takeover of AIG discriminated against the company and its shareholders by
charging onerous interest rates on loans extended by the government and by
taking an 80 percent interest in the company over the objections of shareholders.

Between 2008 and 2009
the funds we put into AIG’s bailout
were increased at least four times, swelling to $182.3 billion in taxpayer
money, comprising loans
from the Fed plus purchases of questionable mortgage assets.

Second, Steve Miller, the current chairman of
AIG, when asked by Bloomberg
TV’s Betty Liu for his views on Occupy Wall Street, said that:

·        
Most
Americans lack the gray matter to understand the global economy

·        
You [the taxpayers] got your money back and a profit

·        
What
would have happened if Wall Street had been allowed to just implode? I think it would have been devastating for
our whole economy and that would
have been far worse for Main Street than what did happen….

So,
What’s Wrong?

Arrogance and mendacity. What’s in the coffee at AIG
headquarters? How can two guys who have held the same job see the facts so
differently? Easy, it suits their respective wallets and worldviews:

·        
Greenberg
wants the courts to return the supposed value his AIG shares had before the
government bailed it out. In other words, he is looking for a personal bailout
from taxpayers, saying that he was treated “unfairly” by the NY Fed and the Treasury.
He says he deserves a bailout because things weren’t really that bad at AIG. 

·        
Miller
wants us to believe that the average guy is ignorant about how Wall Street and the
country works and can’t understand that saving AIG was good for Main Street, because
things were REALLY that bad at AIG.

One guy now thinks he
needs a personal bailout because things weren’t that bad. The other guy justifies
the actual bailout because things were really, really bad, even though you and
I can’t understand it.

A few facts:

• It’s been almost three years since AIG was bailed out. AIG
  still owes taxpayers $49.4 billion. But Mr. Miller, you
  said on TV that we got our money back!
• A significant amount of the original
  funding, $52.5 billion, was placed in special
  purpose investment vehicles
  created by the Federal Reserve Bank of New York to take shitty
  mortgage bonds and other loan-backed securities off of AIG’s balance sheet
  and the balance sheets of its “Too Big To Fail” bank clients. If we are
  going to get this money back, the Fed will have to wait until these
  questionable securities mature, if they don’t default in the interim, or,
  sell them whenever we can in the markets. Since we know that the Fed tried
  to sell some earlier this year and it didn’t
  go well,
  it’s very difficult to say if or when this money will ever be recovered.
• What did U.S. taxpayers get for
  the risking the rest of the money given to AIG? Common and preferred stock.
  We now own about 77% (down from
  80%) of the company via preferred and common shares. This means
  that should AIG go bankrupt and by the way, their
  latest quarter was bad,
  US taxpayers will be among the last to be
  repaid. We’ll stand at the back of the line and watch as
  bondholders and other secured creditors get their money back first.
• Experts say that we need to sell
  the AIG shares for an average of $28.72 in order to break even. Today’s
  price is $20.93.
  And this is before we know the outcome of the European train wreck. Even
  if things don’t collapse, we can’t just dump 77% of the company on the
  market; we’d need to sell in small lots over time. It is doubtful that we
  will get all of our money back.
• Isn’t this the position Mr.
  Greenberg would be in IF we hadn’t bailed out AIG? And he wants another $25
  billion!

For Mr.
Greenberg:
The Wrongologist does not defend the bailout; He was against it at the time and
remains against it today. We should never have paid 100 cents on the dollar to
all of AIG’s trading partners. He has no idea about the merits of your law
suit. Perhaps the Fed and Treasury were inconsistent in how they treated AIG
vs. others (Citigroup). However, you
sir, are overreaching. We put up $182 billion and bought your shares so
that you would not buckle the economy with bad investments by your people, many
of whom still have their jobs three years later.

For Mr.
Miller:
Your argument is that
the bailout was structured to protect the taxpayer? Sorry, it was structured
to
keep AIG’s employees and partners from
feeling any ill effects from AIG’s bungled attempts to make money on
nothing.

BTW, it’s
not that we don’t “understand how
this country works”; we
understand it all too well–it works for you and your buddies on the AIG board
and Wall Street.

But it’s
not working out so well for the rest of us.

And it
remains as WRONG today as it was when Paulson and Geithner convinced the
government to do it.