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Wednesday, March 18, 2009

Save Capitalism: Liquidate Bad Banks and AIG...

...or send in the IRS!

I've argued before that "too big to fail" means too big, period. A much smarter man than I, Robert Reich, puts that argument in a good capitalist context:

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government [Robert Reich, "The Real Scandal of AIG," Robert Reich's Blog, 2009.03.14].

In another post, Reich advocates liquidating "irrevocably insolvent banks" and putting AIG out of its (and our) suffering. Representative Stephanie Herseth Sandlin appears to be reading Reich: she calls for liquidating AIG and refunding whatever we can salvage to taxpayers.

If Washington can't find the courage to dish out those just capitalist desserts, might I recommend a more conventional solution? If we want those AIG bonuses back, send in the IRS. Move AIG, Citigroup, Goldman Sachs, Merrill Lynch, and other recipients of federal bailout money to the top of the audit list. I'll bet we could recoup those 165-million-dollar bonuses in no time... and then some.

Capitalism requires accountability to the rules of the market and the rules of the state that makes that market possible. Nationalizing, liquidating, or even auditing the heck out of AIG, Citigroup, et al. wouldn't establish socialism. Such actions would actually re-establish capitalism.

Besides, a nice legal audit or liquidation is eminently preferable to this Greek "solution."


  1. Drudge is reporting that Obama received over $100K in bonuses from AIG in 2008.

  2. ...campaign contributions, not bonuses. And if you look at the original source at the Center for Responsive Politics (you mean anyone reads Drudge anymore?), you'll see AIG also contributed $280K to Senator Dodd, $200K to President Bush, $111K to Sen. Schumer, $99K to Sen. McCain... feel free to do the math on the entire list, but it looks like a pretty even split between Dems and GOP. "All are punished!"

  3. Now, let's fix the problem and audit AIG!

  4. Anon@10:46
    Yeah, and Bush received over $200k from AIG - what's your point?

    The issue is that K Street, the Wall Street banksters, and the Council of Foreign Relations win every election.

    We need public funding of all federal campaigns and a campaign season like those in Europe - measured in weeks. Alternatively, we could invoke this clause from the Declaration of Independence . . .

    ". . . That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

  5. Every senator, representative, cabinet member, and the President ought to be audited by the IRS every year. Such audits ought to be specified as a part of their employment contract. In fact, the IRS ought to serve as their tax preparers. Every bloody year.


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