Talented in rip-off, that is. But former New York governor and supposed scourge of Wall Street, Elliot Spitzer, is reporting over at Slate that the outrage in the media over the bonuses is a diversion. (H/T Inky99 at Daily Kos.) Not that they aren't an outrage, the scandal misses the larger crime: the siphoning off of billions of taxpayer dollars to a handful of companies, who insured their highly risky investments with AIG. These companies have received hundreds of billions of dollars in bailout money. Now they are to receive 100% on the dollar reimbursement for their losses from AIG. Spitzer comments:
The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.No reason? No explanation? But there is always a reason. Always an explanation, though Spitzer may not want to go there.
But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash?....
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
Private ownership of the wealth and capital, freed of most regulatory restraints, is the distal cause, while the proprietors of this capital have gone on an orgy of thievery that may have never been seen in the history of civilization, outside of a world war.
Consider the new TALP plan ("Term Asset-Backed Securities Loan Facility"), which bobswern has dissected so well over at Daily Kos (bold in original).
1.) $2 trillion in taxpayer funds with no salary restrictions to recipients....Congress has responded to constituent anger, and hearings are being held even today (see liveblogging of those hearings by Emptywheel over at FDL). But while more details will leak out, it's unlikely we will see much more than the spectacle of what Chris Floyd describes as "faux shock in the Beltway over Wall Street fat cats paying themselves big bonuses with the free money that Washington knowingly gave them."
2.) Shadow Bankers get almost all of their investment money for free, from you. [Shadow bankers consist of "non-bank financial institutions that, like banks, borrow short, and in liquid forms, and lend or invest long in less liquid assets... via the use of credit derivative instruments which allow them to evade normal banking regulations," e.g., hedge funds, investment banks, "structured investment vehicles," etc.]
3.) Shadow bankers will skim administrative fees off the top of $2 trillion, first.
4.) Government has virtually no say in terms of regulating what these entities must do with the money once they give it to them. [And on and on...]
The following points will never be mentioned:
... the capitalist class is a definite concrete group composed of those who own and have a monopoly over the means of production (including loanable capital). The capitalist class is bound together by innumerable personal, familial and organizational filiations; the atomized non-capitalist entrepreneur -—the central figure of bourgeois economic theory -— is a fiction. The capacity to borrow is strictly limited by one’s ownership of the capital assets required for security against loans. In reality, credit under capitalism is always rationed, on the basis of specific monopoly complexes involving financial, industrial and commercial capitalists.The ingrown nature of the capitalist class, who has united to unleash a frenzy of greed and stealing, is no better illustrated than by the biography of Obama's Treasury Secretary Geithner. Born to a scion of the capitalist class -- his father was a prominent leader of the Ford Foundation -- Geithner's early career (after attending the best Ivy League schools) was working for Kissinger and Associates in Washington, D.C. He began working for various divisions of the Treasury Department as early as 1988, when he was 27 years old. He was close to two former Treasury secretaries, Robert Rubin and Lawrence Summers. During the George W years he worked at the Council of Foreign Relations and the International Monetary Fund. In October 2003, he became president of the Federal Reserve Bank of New York, and a few years later joined the elite, Rockefeller Foundation organized "Group of Thirty."
In March 2008, he arranged the rescue and sale of Bear Stearns... in the same year, he is believed to have played a pivotal role in both the decision to bail out AIG as well as the government decision not to save Lehman Brothers from bankruptcy.Hmmm... the same guy who organized the AIG bailout, with its non-regulation of monies, including millions for "bonuses" to the same execs who helped manufacture the crisis... naw, that can't be true, can it? (It is.)
Oh, and he "forgot" to pay $35,000 in self-employment taxes over several years.
AIG and the CIA
Another strange aspect of the AIG affair, and one with which to end this post, concerns AIG's links to the CIA, another aspect of the entire scandal that seems to have escaped the mainstream press, if not the bulk of the blogosphere.
From CorpWatch:
Though it is an American company listed on the New York Stock Exchange, AIG makes extensive use of offshore jurisdictions such as Barbados, Bermuda and Luxembourg that are immune from U.S. regulatory and tax scrutiny. They help the company launder profits to evade U.S. taxes and hide insider connections in supposedly "arms-length" deals. This is especially important as the company has moved into financial services and asset management, handling the wealth of “high net-worth” clients -- the mega-rich.Some of the links between AIG and the CIA can take us to some pretty heady conspiracy territory, as in this link from a Ron Paul website:
[Board Chairman Maurice] Greenberg has enviable political clout, never so much in evidence as when, with the help of Henry Kissinger -- chair of AIG's international advisory committee and a paid consultant via Kissinger Associates – AIG became in 1995, the first company licensed to sell insurance in China. AIG was the only foreign firm that owned 100 percent of its license there.
The American International Group at its origins was linked to the OSS (Office of Strategic Services) the forerunner of the CIA. It grew from the Asia Life/C. V. Starr companies founded by Cornelius Starr who started his insurance empire in Shanghai in 1919, the first westerner to market insurance in China.
Since 1997, Frank G. Wisner, Jr., has been a board member of Kroll , and is currently Greenberg's Deputy Chairman for External Affairs. Wisner's father was a founder of the U.S. Central Intelligence Agency, who killed himself over the scandal from his being duped by British-Soviet masterspy Kim Philby. Frank Wisner, Jr., is a director of the George Bush-linked energy giant Enron (a client for whom AIG negotiated payments from Peru over nationalization of Enron operations).Of course, nothing in this quote above is wrong, but whether these dots connect or not is another matter. Still, the connections between AIG and U.S. government operations is a shadowy land that is worth investigating. Wisner, by the way, stepped left AIG late last year.
Michael Ruppert made an impressive case regarding the intelligence connections of AIG in an article back in 2001. He quotes a September 22, 2000 L.A. Times article by Mark Fritz, the text of which is worth considering as the AIG scandal unfolds.
Newly declassified U.S. intelligence files tell the remarkable story of the ultra-secret Insurance Intelligence Unit, a component of the Office of Strategic Services, a forerunner of the CIA, and its elite counterintelligence branch X-2.Ruppert, seven years prior to the current economic meltdown, highlighted the uses of reinsurance for national security purposes. From Fritz's article (emphases added):
Though rarely numbering more than a half dozen agents, the unit gathered intelligence on the enemy's insurance industry, Nazi insurance titans and suspected collaborators in the insurance business. But, more significantly, the unit mined standard insurance records for blueprints of bomb plants, timetables of tide changes and thousands of other details about targets, from a brewery in Bangkok to a candy company in Bergedorf.
"They used insurance information as a weapon of war," said Greg Bradsher, a historian and National Archives expert on the declassified records....
The men behind the insurance unit were OSS head William "Wild Bill" Donovan and California-born insurance magnate Cornelius V. Starr.
Starr had started out selling insurance to Chinese in Shanghai in 1919 and, over the next 50 years, would build what is now American International Group, one of the biggest insurance companies in the world.
"Stiefel mapped the entire system," said Naftali, a historian at the University of Virginia's Miller Center of Public Affairs. "Each time I take a piece of your risk, you've got to give me information. I am not going to reinsure your company unless you give me all the documents. That's great intelligence information"....It's no secret that the CIA needs to launder vast amounts of money to fund its secret wars around the world. That's a good deal of what the Iran-Contra affair was about. Alfred McCoy also plumbed these depths in his classic work, The Politics of Heroin: CIA Complicity in the Global Drug Trade. According to the Wikipedia article on McCoy, in his work just cited:
With the Axis defeat imminent, U.S. intelligence officials focused greater attention on ways the Nazis would try to use insurance to hide and launder their assets so they could be used to rebuild the war machine. It's a task that continues today.
He also uncovered money laundering activities by banks controlled by the CIA, first the Castle Bank which was then replaced by the Nugan Hand Bank, who had as legal council William Colby, retired head of the CIA [3]. He also alludes to the BCCI, which seems to have played the same role as the Nugan Hand Bank after its collapse in the early 1980s, claiming that "the boom in the Pakistan drug trade was financed by BCCI." [3].There's a lot that is horrifically dirty in the entrails of American capitalism. Why is this huge outflow of capital happening at this time? Where is money going, exactly? Why are the same people who engineered the bailout now in charge of policing it?
Standing outside the intricacies of this scandal, whatever they may be, as uncovered, stand two unassailable facts. One, this breakdown of the capitalist system is causing untold suffering for billions of people around the world. Two, the causes of the economic collapse are complex, and rooted first of all in the inadequacies of the capitalist system -- a system that argues it needs an influx of public monies in the trillions of dollars every fifty to seventy years or so or it will implode. Great system!
But further questions remain: how was this collapse handled? Who benefited? What was the role of secretive government agencies that use sophisticated schemes of investment and money laundering in all this? I don't trust the U.S. government to reveal this to us. The failure of public oversight and the need to preserve a crooked system at all costs led to the downfall of the Stalinist Soviet empire. It seems likely to do the same to the American empire as well, if not now, then someday soon.
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