The insurance-reinsurance-investment-Fortune-500-Too-Big-to-Fail giant financial lemon AIG was purchased by the government of United States of America in the dark of the night. You own 80 percent of it. Don’t try to kick the tires; you’ll hurt your toes.
This is a regulatory as well as a financial nightmare, since the core company of American International Group is set up as a bunch of insurance companies, and U.S. insurance companies are under state, not federal, regulations. You know all those weird mortgage deals and hedge-derivative-lotto investments going bad all around you? Guess who insured them? New answer: you, the U.S. taxpayer. AIG also took the money from insurance clients and made its own weird investments.
How could such a thing happen? There ought to be a law! Oh, there was? Right: the Glass-Steagall Act (1933) that prohibited financial institutions from making insane risks with the general public’s money. Only those who could afford to lose huge sums could play high-risk games with their own money.
But Glass-Steagall was repealed by the Gramm-Leach-Bliley Act (1999) that knocked down those firewalls. Hmm . . . Gramm. Where have we heard that name before?
Oh, right. Former Republican Senator Phil Gramm, the McCain Co-Chair who said there was no financial crisis, just a bunch of “whiners.” Is Dr. Gramm still working for Union des Banques Suisse (un établissement financier mondial)? We know his wife, Dr. Wendy, isn’t on the Enron board anymore — the government couldn’t buy that one out of trouble.
Was Senator McCain one of the sponsorsof the Gramm-Leach-Bliley Act? Yes, but he has said he doesn’t know anything about the economy. His recent statements confirm it.
So, fellow citizens: we own Fannie, Freddie, and AIG. Let’s go shopping! What else looks very, very big, and very, very bad?
Image by Mike Licht. Download a copy here. Creative Commons license; credit Mike Licht, notionsCapital.com
Logo of AIG used because . . . well, we paid for it, didn’t we?
September 17, 2008 at 10:55 pm
Mike,
You are spot on with your comments concerning Phil Gramm and his responsibility for these banking and financial troubles. But he and his conservative friends believe he was correct because they made alot of money before each failure. And then Uncle George bailed them out.
September 19, 2008 at 1:55 pm
Oddly, it seems to be the investment banks who have suffered in the repeal of Glass-Steagall not the commercial banks it was created to protect.
September 19, 2008 at 1:56 pm
Oh, and I love the graphic on this article. One of the bloggers at ThePanelist via Creative Commons.
September 19, 2008 at 5:43 pm
David Neubert: Gramm-Leach-Bliley did more than repeal Glass-Steagall. It set U.S. financial services corporations loose in a brave new world of derivatives, swaps, and things we haven’t discovered yet. They were kids in a candy store. I just heard that under Bush, SEC allowed many types of outfits to leverage 30 to one. Yikes.
December 31, 2008 at 9:09 am
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