I think that Fed chairman Ben Bernanke spoke for all Americans when he testified yesterday that the one thing that has angered him the most during our current economic crisis is the ongoing bailout of A.I.G. So far, A.I.G. has received approximately $186 billion from the U.S. government in a bailout to protect the insurance giant’s huge losses. But, as Josh Marshall noted over the weekend, the bailout of A.I.G. isn’t really a bailout of A.I.G., but a bailout of the counterparties that had insurance policies to back up their mortgage-backed securities (now known as toxic assets).
Despite the knowledge that the bailout of A.I.G. is, in fact, a bailout of counterparties, A.I.G. and the Federal Reserve refuse to disclose the identities of the counterparties. In a Senate Budget Committee hearing yesterday, Sen. Ron Wyden berated Fed Chairman Ben Bernanke about the failure to release the names of the counterparties, the actual bailout recipients. Bernanke stated that “under normal conditions” the counterparties would “have a presumption of privacy”. As the New York Times’ Joe Nocera put it two days ago,
“Gobs of tax money is going to bail out unnamed companies — and yet we aren’t allowed to know who they are, and are supposed to take it all on faith. You know those awful cases you read about every once in a while where a child dies in a troubled home — and then the state health department won’t divulge any information out of “privacy concerns”? This strikes me as the financial equivalent of those cases. As excuses go, it sure is convenient.”
It truly does not make sense that the taxpayers need to be left in the dark about whom we are bailing out. Representative government requires that our representatives and us little people know what we are spending our money on, particularly if that money is meant to prop up the bad decisions of private enterprise.
In conjunction with this transparency problem comes word that A.I.G. is paying two Washington spin machines, Hill & Knowlton and Burston Marsteller, to do positive PR for the belly-up company.
A.I.G. probably needs a spin army after the way they operated outside of regulations and oversight, essentially running a scam insurance business that could collapse numerous foreign banks. I’m just curious as to how a company that is nearly wholly owned by the U.S. government can pay for expensive PR firms.