...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."
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