AIG blowing up in Obama’s face

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Obama is shifting the spotlight to the AIG executive bonuses, but his own hand-picked Treasury Secretary is responsible for far more of the AIG mess than Obama cares to acknowledge.

Tim Geithner is one of the architects of the fraud-ridden AIG black hole and other bailouts. He’s been wrong for years and still is wrong, and so have all those around him who participated in this travesty.

Washington still has announced no definitive procedures to separate banks from their toxic assets, even though the FDIC procedures are readily available for this purpose and could be reasonably fair in zeroing out the equity and subordinate debtholders. The only Washington plan has been to bail out those crony banks and financial firms that have made loans to banks. These creditors deserve their losses. They brought them on to themselves by making such poor investments and not evaluating the risk of their counterparties.

The entire epsiode is the largest single fraud against taxpayers in history. Multi-billions are being and have been paid to AIG’s creditors (counterparties), including hedge funds and banks. The millions paid as bonus money to executives need not have been paid anymore than the amounts paid to creditors because the company has been de facto bankrupt for months and would have been de jure bankrupt, had it not been for Geithner’s folly, which is also the FED’s and Washington’s folly.

12:48 pm on March 18, 2009