Welcome to New Venezuela

If the New York Sun closes shop soon, as has been rumored for the past month, we will be worse off without its no-bull headlines such as the one atop this morning’s edition. Although I vehemently disagree with the Sun’s warmongering, neocon editorial tendencies, more often than not they’re the only paper to get it right on economic matters. Take, for example, today’s headlines with respect to AIG.

The New York Times: “Fed in an $85 Billion Rescue of an Insurer Near Failure”

Daily News: “Fed grants ailing AIG $85 Billion Loan”

You would think the Fed is just lending the firm a big pile of money, not taking it over.

The Post comes a bit closer to the truth: “Rich Uncle: Feds ‘Buy’ Insurance Giant AIG in $85 Billion Rescue”

But only the Sun calls it as it is: “America Nationalizes AIG Group

Which is, after all, exactly what happened. The “loan” is poppycock. The Federal Reserve — the frigging central bank, for goodness sake, which should have nothing to do with the insurance industry — took an 80% equity stake in AIG, turning a formerly private insurance company into a government entity. We may as well be a banana republic nationalizing the oil companies. This follows the nationalization of mortgage lenders (which were never all that private in the first place) Fannie Mae and Freddie Mac. Watch for the nationalization of airlines and auto manufacturers coming soon.

On the editorial page, the Sun also astutely points out that Eliot Spitzer may have helped to precipitate AIG’s downfall, by forcing out legendary CEO Hank Greenberg – despite never finding any wrongdoing on Greenberg’s part – and installing incompetent management of his choosing.

4 comments for “Welcome to New Venezuela

  1. September 19, 2008 at 6:27 pm

    ChuckV is just bitter becuase he blew his chance to learn Essbase

  2. chuckv
    September 17, 2008 at 4:57 pm

    It’s crony capitalism at it’s finest.

  3. September 17, 2008 at 4:14 pm

    Thanks, Jamie. That was a surprisingly interesting article. I am by no means an expert on the Fed or the monetary system, but after reading the article and similar material, I am still undecided on whether the Fed is a governmental entity. As the authors concede, the issue is ambiguous. On the one hand, we have private member bank shareholders and the Fed’s “independent” status. On the other hand, we have its creation by Congress and the FRB’s appointment by the President with the consent of the Senate. It’s really not clear-cut. I’d say quasi-governmental probably best describes it.

  4. September 17, 2008 at 1:36 pm

    Note to Jim Lesczynski:

    The Federal Reserve System is not a U.S. government entity, it is a private consortium of the member (shareholding) banks of the 12 regional Federal Reserve Banks.

    This is comprehensively explained in the article “Is the Federal Reserve System a Governmental or a Privately controlled organization?” on the American Monetary Institute’s website; here is the link to the article: http://www.monetary.org/federalreserveprivate.htm

    The main involvement of the U.S. government is to collect the taxes from the economy to service the ‘national’ debt created by the ‘Federal’ ‘Reserve’ when it creates money.

    Of course there is no need for the U.S. government to delegate this money-creating power to a private monopoly – if the U.S. government exercised it’s sovereign right to create the nation’s money, then there would be no national debt and little need for national taxes on the economy.

    The debt-servicing requirement will soon approach the total income in the economy; then the road to serfdom will have arrived at its destination: the enclosure of the planet by international ‘finance’ through the banking system.

Comments are closed.