NationRight

I suppose I was a bit hasty when I praised our government for having sense enough to stay out of the free market by declining to bail out Lehman Brothers.  Now, they have decided to take over the world’s largest insurer, AIG, with an $85 billion loan from me and you in exchange for an 80% stake in the company.  That’s right, the United States government now owns 80% of the world’s largest insurer.  Let’s see… nationalized banking, nationalized insurance… sounds like good old-fashioned Socialism to me!

The Fed has structured the AIG deal such that they will have to liquidate assets in the next two years in order to pay back the extremely high interest loan (LIBOR + 8.5%, which is basically a credit card-type rate).  In essence, the Federal Government is playing loan shark to AIG.  The Fed’s spin is that AIG will now be able to take a little more time liquidating their assets, which will minimize the turmoil created in the marketplace, but, ultimately, they will be liquidated and the Fed will be paid back.  First of all, that’s hogwash; if all goes well, they won’t get anywhere close $85 billion for the various parts of the company, which will leave me and you on the hook for the rest.  Secondly, what happens if the market turmoil get so bad that no one will buy any significant parts of the company?  You guessed it, that $85 billion vaporizes.

So, let’s add it all up:

• $29 billion for Bear Stearns
• $100 billion for Fannie Mae for Freddie Mac
• $85 billion for AIG

That’s $214 billion of our money… not the government’s money… our money!  That amounts to $2,029 per household in this country, $39 per week, about $1 per hour on a 40-hour work week.  That is absurd!  Of course, this is just the beginning.  Precedent has been established now; as more companies suffer, more will be bailed out.  Do you think that the Feds will let Ford or GM go under?  No way!  What will that cost us?

Since we have already have a budget deficit, the get this money by just printing more.  That will do nothing but lower the value of the dollar even further, which will drive the cost of oil and other commodities even higher.  The sinking dollar and high commodity pricing has as much to do with the poor health of the economy as the housing/banking/insurance crisis, so, in the grand scheme of things, we are just trading one problem for another!

Again, the free market only works when people get punished for making mistakes.  The people involved in this crisis made, insured, or bought bad loans made to people that didn’t have the ability to repay them.  It is the fault of the ones who took out the loans, the ones who made the loans, the ones who bought the loans, and the ones who insured the securities made up of these loans.  I, and the vast majority of Americans, are not one of those people or associated with them in any way, so why do I have to pay $2,029 for their mistakes?