The whole point of the AIG bailout was to keep AIG solvent. Solvent corporations, by definition, pay their valid debts to their creditors at 100%-- whether the individual creditor "needs" the money or not. So what exactly is "fishy" about AIG paying its debts to Goldman?

P.S. By Spitzer's logic, can I stop paying my student loan bills? I'm pretty sure the bank isn't relying on my monthly payments to stay afloat, and I certainly have more need of the money than it does.

"So what exactly is "fishy" about AIG paying its debts to Goldman?

P.S. By Spitzer's logic, can I stop paying my student loan bills? I'm pretty sure the bank isn't relying on my monthly payments to stay afloat, and I certainly have more need of the money than it does."

What you're "missing" here, I think, is this:

1. What's "fishy" about it is that AIG is paying its debts to Goldman with taxpayer money . . . your money, my money, not AIG money, and that Goldman had already hedged against default on those debts and was thus immunized from losses on them; and

2. If you stop paying your student loan bills, your bank will come after you to get the money, and may have the right to attach your assets or garnishee your wages to get it; I doubt very much if the Treasury Dep't. is going to pay your bills for you, as they are for AIG and all of the other "corporate welfare bums". The corporatist "logic" here is that if the government directly helps individuals like you or me, that's socialism and America as we know it will shortly collapse as a result, but if the government directly helps large corporations like AIG or Citibank, it's not socialism because if they don't do it America as we know it will shortly collapse. So, apparently, "free market capitalism" is a very good thing for individuals (who must shoulder by themselves the burden of their economic decisions), but not so much for corporations and capitalists (who are relieved of the burden of their economic decisions by the government, which in effect transfers that burden from corporations to individuals). Isn't capitalism wonderful?

Free market guys are and were against the bailouts - while the populist liberals were for them. I guess the free market guys were consistent, while hte libs simply thought AIG would put some of the federal money in the coffers of ACORN and other liberal groups. And I suspect this is what will happen.

"Free market guys are and were against the bailouts - while the populist liberals were for them"

I guess the "populist liberals" in favor of bailouts would include Hank Paulson (and his former bosses, Bush/Cheney), the Directors and senior management of every major financial institution in America (i.e., the guys holding out their hands for the the bailouts), Ben Bernanke (a lifelong Republican), and all their supporting cadre of supply-side economists?

While the "free market guys" opposed to the bailouts include Paul Krugman and Joseph Stiglitz?

I'm a left-wing loonie and I'm opposed to the bailouts . . . which group am I in?

was against all the bailouts. Obama, the heart and soul of the DNC was for them and voted for them.

BTW, 2/3 of GOP in the House voted against the bailouts. 2/3 of the DNC voted for it.

Facts are stubborn things - for some reason they fail to fit the liberal ideology.

We left-wing liberals take great comfort in knowing that Rush Limbaugh is now "the heart and soul of the GOP"!! Because as long as Republichristians are rallying around that blustering, drug-addled moron, we can look forward to many more years of increasingly progressive Democratic Congresses and Presidents. Thank you, Rush, and thank you, Ann Coulter.

I didn't realize that so many liberal Democrats were running major corporations, you know, the ones demanding bailouts? I thought most titans of capitalism were Republicans?

You're right about those stubborn facts getting in the way of ideology.

that the titans from AIG gave a lot of money to Obama and other democrats?

Anyway, you guys voted for a drug addict, and now he is screwing the economy. Good luck with 2010 elections.

that Obama's not a drug addict, he's a Muslim terrorist, everyone knows that . . ., and after we're through screwing the economy (because the Republicans left it in SUCH good shape), we're going to come after the guns, and we're going to ban pickup trucks and country music while we're at it, and then legalize gay marriage.

And we're really looking forward to the 2010 elections, because we know the GOP will unite around Rush and Ann and they're SUCH a credible alternative. See you at the polling station.

Yes, Goldman was hedged against AIG losses-- so? That's standard practice on Wall Street. My bank is no doubt hedged to some degree against losses on its portfolio of student loans. I honestly just do not understand the source of outrage-- agree or disagree with the AIG bailout, the fact of the matter is that the federal government provided AIG with funds to keep it solvent, and the way corporations stay solvent is by paying their debts. Had AIG not paid Goldman, Goldman would have had a valid legal claim against AIG for its losses-- notwithstanding the fact that Goldman was hedged, and notwithstanding the fact that it didn't need the money to stay in business. So AIG would have ended up having to pay Goldman anyway, in addition to incurring legal fees. How is that better?

Your point 2 seems to simply argue that the federal bailout was a bad idea. Maybe it was. But taking the bailout as a given, I just don't see what's problematic about the fact that AIG used the money for its intended purpose-- payment of its debts to other entities.

"Your point 2 seems to simply argue that the federal bailout was a bad idea. Maybe it was. But taking the bailout as a given, I just don't see what's problematic about the fact that AIG used the money for its intended purpose-- payment of its debts to other entities"

What is "problematic" is the fact that large corporations (and the wealthy individuals who ultimately control them) can exert economic and political power so as to direct government policy to their own benefit, a benefit not available to us as individuals because we lack that power. The fact that AIG used that benefit to meet its obligations under contract to other powerful corporations is laudable but somewhat beside the point. It's somewhat like claiming that having successfully stolen from you and me, AIG has now repaid its creditors with our money, and everyone (including you and I) should be quite happy about how well the "system" has worked!

Ok, fine; but again, this seems more like a criticism of the AIG bailout itself than a criticism of the fact that AIG used the money to pay Goldman. Spitzer takes issue with the latter, not the former, so I don't see how my confusion about what's so objectionable about AIG's using the money provided by the government to pay off its legitimate debts is "beside the point"-- it is the point. Your reference to "powerful corporations" goes to the heart of it; there's a really disconcerting strain in the populist outrage of late which seems to assume that anything a large corporation-- particularly a large financial corporation-- does is automatically deleterious to the public interest. An argument along those lines can be made in connection with the AIG bonuses, but I really just don't see it for the Goldman payments.

You're quite right in suggesting that my ire is directed more at the fact of the bailout itself than at whatever AIG used it for, and that this somewhat subverts Spitzer's argument (though I think he might assert that the legitimacy of the bailout program itself is compromised by what he characterizes as the allegedly questionable nature of AIG's payments to Goldman's). If the bailout program itself is illegitimate - because it is bad economic policy, or is undemocratic, or smacks of crony capitalism (all of which I happen to think are true) - then whatever AIG does with its ill-gotten gains is irrelevant: as I implied, the fact that they apparently used the funds to meet their obligations to Goldman's is laudable within the discourse of financial capitalism, but within other discourses they might just as well have pissed it down a rathole. But if the bailout program is legitimate public policy (though in the circumstances I don't see how it could possibly be regarded as such), then Spitzer's argument is weak indeed, and speaks more to populist pandering than to policy analysis.

As for the "disconcerting strain" of "populist outrage", I don't think I'd want to try to advance the argument whereby the public interest is conflated with that of Goldman Sachs, or any other financial institution. Such entities exist solely to further the interests of their owners (who are often also their managers). The "outrage" derives from the conspicuous inequities of wealth and power demonstrated by such owners/managers relative to those of us whose taxes are now being used to save their ample and well-dressed asses. It's enough to induce a man to grab his pitchfork and mount a barricade.

dj macdonald:

"So what exactly is "fishy" about AIG paying its debts to Goldman?

P.S. By Spitzer's logic, can I stop paying my student loan bills? I'm pretty sure the bank isn't relying on my monthly payments to stay afloat, and I certainly have more need of the money than it does."

What you're "missing" here, I think, is this:

1. What's "fishy" about it is that AIG is paying its debts to Goldman with taxpayer money . . . your money, my money, not AIG money, and that Goldman had already hedged against default on those debts and was thus immunized from losses on them; and

I have auto insurance as a hedge against loss/damage due to theft or an accident. Is it suspicious that I choose not to steer into oncoming traffic just because I'm protected?

The "taxpayer money" that AIG is using to pay on these contracts was given to them for the express purpose of enabling them to pay on those same contracts (as well as their other obligations as a business). The fact that they proceeded to do so after recieving the money is not so much suspicious as the intended result of the bailout. Can we next expect outrage by Spitzer that the auto companies are using taxpayer money to pay for steel and cover the electric bills at their factories?

If we (the taxpayers/government) were to give a cash bailout to the airlines, would it then be "suspicious" for them to use some of that money to pay their vendors for jet fuel? The oil companies, after all are doing just fine financially, and could continue their operations without that payment....

Every time I see/hear Spitzer use the word "suspicious", I can't help but think "You keep using this word. I do not think it means what you think it means."

(that might actually go a long way toward explaining why a former prosecutor didn't realize that his bank would report multiple withdrawals of just under $10k within a certain amount of time, or that the phones of an "escort" service couldn't possibly be tapped)

dj macdonald:

We left-wing liberals take great comfort in knowing that Rush Limbaugh is now "the heart and soul of the GOP"!! Because as long as Republichristians are rallying around that blustering, drug-addled moron, we can look forward to many more years of increasingly progressive Democratic Congresses and Presidents. Thank you, Rush, and thank you, Ann Coulter.

I didn't realize that so many liberal Democrats were running major corporations, you know, the ones demanding bailouts? I thought most titans of capitalism were Republicans?

You're right about those stubborn facts getting in the way of ideology.

Just don't complain that nobody warned you when the increasingly "progressive" Democratic governments steer into the skid of paying ever greater "corporate welfare" then put the gas pedal to the floor. Lots of fiscal conservatives were pretty blindsided when GWB exploded social/entitlement spending by more than any President since at least LBJ (if not FDR), but then the notion that Bush was ever much of a conservative (in the real sense of the word) has been believed more by those on the left who seem to think everyone to the right of Joe Lieberman consitute some sort of homoginized monolithic bloc who all bow down at the temple of empty suits like Hannity/Limbaugh/Coulter (who pretty much seem to mirror that appraisal of everyone to the left of the 2000 version of John McCain).

The "titans of capitalism" are probably spread over a significant range in their personal beliefs, although most would likely prefer that their own taxes were lower (the same could probably be said of almost anyone...). When it comes time to pony up campaign money, the corporate donors will generally give to both sides, but give more to whichever side they figure will win the current elections (the other donation being essentially a "hedge" against betting wrong).

IMO, second biggest biggest myth in american politics these days are that "progressive" policies will truly help the poor to get out of difficult situations (public assistance programs like food stamps, EITC and housing subsidies, while well intended, have created a situation in which the "working poor" face an effective marginal tax rate near or even over 100% in many cases which even nullifies the benefits of things like increases to the minimum wage). The biggest myth is that the politicians who run on "progressive" agendas actually care about this fact, or about the future of their poor constitutents (who might start to vote differently if they were to actually escape poverty, after all), although in their defense, they might just be too myopic to understand that there might be a downside or unintended consequence to a handout.

The so-called titans of free market economy in the financial industry heavily supported and subsidized Obama. How do you explain that, comrade?