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AIG and the New Victim Mentality

39 | By Shah Gilani

I’m hurt.

Some of you made harsh comments about last week’s story. I said that AIG should sue the U.S. government and the Fed for saving it when it could have (more likely would have) gone under during the peak of the crisis in 2008.

Insights & Indictments reader Darrell said, “Enough. This is the most vile piece… I have ever read. Those people SHOULD have been allowed to fail. FULL bankruptcy! To borrow from the taxpayers to compensate the “managers” who steered us into this mess with bonuses, and then whine [when] the terms of the loan were too extreme is beyond hypocritical. Capitalism without risk is NOT capitalism. Something you would do well to learn. I am unsubscribing form this service.”

Ouch!

Matt chimed in, “I’m with you. Acting like AIG is a victim of the big, mean Fed is preposterous. Maybe Shah and Alex Jones should take their baloney show on the road.”

I’m shattered. I’ve been put upon. I feel victimized by these comments. Where’s the safe harbor for journalists and bloggers? How can I be criticized so harshly and not feel victimized? Oh, the humanity!

Of course I’m kidding.

I subject myself to any and all comments when I exercise my freedom of speech. I keep a “Comments” section on my website so my readers can exercise their freedom of speech. I’m not a victim. I don’t need any protection from free speech. Free speech is a two-way street.

The point is that I’m sick of the victim mentality. Are you fed up yet?

AIG played the game. It was not a victim of the Fed or the Government.

Banks played the game. They weren’t the victims of regulation, the economy, or anything else.

No, they weren’t victims. And they didn’t create victims, either.

We’d like to see ourselves as their victims. It sure feels like that.

But, like I said, I’m sick of the victim mentality.

We let this happen. Maybe we didn’t see it all coming, so we’re not completely culpable. But, then again…

Darrell is right. “Capitalism without risk is not capitalism.” There are no victims in capitalism. People, businesses, companies all fail. None of them are victims.

The opportunity to try comes with the risk of failure. That’s the price.

You aren’t a victim if you fail in capitalism; you’re just a failed entrepreneur. Most of us get up, dust ourselves off and try again. We should be grateful for the opportunities available in this country.

That brings me back to AIG and the TBTF banks, or any other “protected class” of entrepreneurs. They have to be allowed to fail. A free society with America’s unique brand of capitalism demands failure when and where it is warranted.

I wanted AIG to sue the Government and the Fed to open up the window to the back-room dealings that create protected classes of businesses in the first place. I want Americans to understand how that happens, why, and just who pays who for their protection.

Our American economic quandary is partly the result of less competition, not more competition. There are plenty of examples, but AIG and the big banks are the most obvious.

No company – in any industry, ever – should be allowed to get so big that it dictates prices or that its failure threatens the public good.

We need to stop coddling “victims” of the economy or regulation or their own doing.

And we need to stop being victims ourselves.

WE THE PEOPLE have to demand that all too-big-to-fail entities get broken up, so that the only victims in our economy are those who don’t try to avail themselves of America’s opportunities.

I’m glad we got that straightened out.

Best,

Shah

39 Responses to AIG and the New Victim Mentality

  1. Chris says:

    I got a good laugh at the responses you received on your first article. My thoughts were this is exactly why we are in trouble, people either do not understand what is written or they simply ignore it.

    I felt your points were right on target and found it amazing that they were so clearly misunderstood.

    Unfortunately as you also pointed out the lawsuit is going to go nowhere. The last thing that the powers that be want is to expose their corrupt underbelly. Such is the shame.

    • John Parken says:

      I believe the solution to the “riddle of Washington, DC” is to REMOVE the money flow that that our politicians savor like a bloodthristy vampire. If you remove the money, you remove the favoritism that is rife in DC. How else can our legislators become millionaires on a salary of $185,000 per year (not counting their raise from Obama)? Plus, they make laws for “we, the people”, but not for themselves. And now they have probably more than the 47% that they are handing out money to in order to garner their votes! Redistribution of wealth is happening now! When the hell are we going to wake up to the injustices so rampant in Washington?? I’m now 67 and spent 12 years in the Air Force in SAC, and this is NOT the America I defended some 40-odd years ago.

      • Roman says:

        It is interesting that people sign up for this newsletter because they supposedly wish to recieve frank, open, realistic and uncensored thinking! Then when they see it in print they revile against it! The ability to think open mindedly about all issues and see the fraud being perpertrated upon the public by our so called “government representatives” is key to hopefully correcting the misrepresentations! I agree with John in his assessment of the self serving nature of all Washington miscreants especially those who call themselves “senators and congressmen!” It seems errily reminescient of the halcyon days of the Roman Empire when elaborate robed senators with crowns planned for the death of the emperor! They serve themselves first and foremost! It would be interesting to know the “real” truth behind AIG story!

      • Alan Hunt says:

        …this is NOT the America I defended some 40-odd years ago.

        Replace “America” with Canada and you have the comment made by my WW II vintage father-in-law when the current righter than right government was first elected up here. Somehow they don’t get that they are being duped by their friends in mega business… or maybe they do. That is truly the scarey part.
        Alan

      • Maurice Lalonde says:

        TO: John Parken & all Vets & all Citizens,
        I’m 73, served in the army and agree wholeheartedly. Tell me this- If a man came to your house, flashed a badge and said, “By government decree you must give me all your savings,” what would you think? Would you think you must be in Nazi Germany? Think. That’s exactly what FDR ordered when he confiscated all the privately held gold. Theft is theft ESPECIALLY when Govt. does it and now it is happening again and getting worse.

    • Jim Schwandt says:

      Intersting that they were able to repay so fast, just how much profit is in what they do? How do you make multi billions in such a short time, and who invested what, that they could profit that much, remembering that the cost of doing their business probably equals the profit #

  2. John Holzmann says:

    Well said, Shah! (At least if I understand you correctly.)

    You’re saying: AIG should sue NOT because they were horribly victimized by the government GIVING THEM “BAILOUT” MONEY. But, rather, because the government and/or government-related entities (like the Fed) engaged in reprehensible behavior that put AIG at risk.

    Specifically, “[T]he New York Federal Reserve Bank [took] billions of dollars from AIG to pay 100 cents on the dollar to AIG’s counterparties, monies that they were not entitled to, but that they needed because they were veering into insolvency. . . .[A] few of the counterparties that reaped billions from AIG, courtesy of the New York Fed’s theft, were foreign banks including Deutsche Bank AG and American too-big-to-fail banks including JP Morgan Chase, Bank of America, and the winner in the AIG cash grab-bag, the venerable Goldman Sachs.” And, “the chairman of the New York Fed at the time was a former partner and board member of Goldman Sachs, namely one Stephen Friedman. . . . That’s the same Stephen Friedman who had to step down, from the Fed – not Goldman – because he used inside information on Goldman’s bailout to buy more Goldman stock! [And] the then-Secretary of the Treasury, Hank Paulson, formerly Goldman’s CEO, was in daily touch with the New York Fed and knew exactly who was getting backdoor bailouts against AIG’s backstop.”

    In other words, the Fed consciously and intentionally shook down AIG, then “graciously” offered them a bailout to let them keep their head above water. But that way, the crony banksters at the top could hide their conniving in their own–and their corporations’–interests from the public.

    And you suggested AIG should sue in order to bring all of this sordid conniving into public view.

    Yes?

    If so, I am very grateful for you bringing this “insight and indictment” to my attention.

    • Rich Van Zyl says:

      I think you should broaden the discussion. AIG was supporting loans that the government told the banks to make. Go back and look at some of the hearings where banks were told to make loans affordable. “Every American should have the opportunity to buy a house. So the bar was lowered and look where it took us.
      Also look at the government bankruptcy sham that it forced through with the motor companies. The people that really took a hit were the older folks who invested for income. THey got the shaft while the union workers only took a little hair cut so they would vote for the democrates at the next election and guess what they did. Four more years of destroying American

  3. Jim says:

    TBTF should not occur if the “watchdog” agencies were to shout out to the public, and therefore investors and other creditors, the approaching risk the company is incurring. Suggesting breaking them up rings of overreaching government regulation. But if the company overextends, then let them go through the bankruptcy process and the creditors who failed to take action suffer the loss.

  4. Faith La Riviere says:

    Exactly what you said in this “update” is exactly how I feel about bailing out homeowners with their mortgages owed which are more than what they house is currently assessed at. Whose fault is it that they bought at the top of the housing market curve? The value of anything is determined by when you sell it and if there is a market for it at that time. I am sick of hearing about them. No one is going to rescue me if I buy the wrong stock or the value of that stock drops…no one.

  5. fallingman says:

    Most people struggle to comprehend anything beyond the superficial…the take-way provided by the headline. Your critics clearly couldn’t keep up with you.

    Perhaps it would help if we phrased it like this.

    The AIG bailout was not implemented to help AIG.

    It was implemented to help GOLDMAN SACHS, who were at risk of not getting paid on the credit default swaps they owned. AIG was the outfit that wrote the “insurance. Had they failed to pay, Goldman would have taken a big loss.

    This simply will not do. The white shoe mafia at Goldman taking a loss is too horrible to contemplate. My god, their bonuses might have been reduced!

    So, little Timmy at Treasury, a wholly owned subsidiary of Goldman Sachs, took it upon himself to make Goldman whole at 100 cents on the dollar rather than let someone else take control who would pay Goldman a whole lot less.

    Do you get it now?

    The failing AIG was just inconveniently positioned between Goldman and its loot, so the Goldman-owned Treasury had to step in and provide the money by which GS would get paid. They just switched one counterparty for another…a really BIG counterparty who can extort its subjects to pay up, namely the USSA…vs. a little ole insurance company that has to rely on being solvent.

    Bottom line: Goldman uber alles.

    Yes, AIG should sue, exactly so the story I’ve just told you gets exposed rather than buried.

    Thank you again Shah for your courage and persistence in exposing the myriad frauds and widespread criminality we endure today. Doesn’t make any difference. But better to howl than whimper.

  6. Hid says:

    We have too much government regulation. The proper stand of government should be as a “referee” not a “regulator”. The market place should be in control and if the business fails, so be it! No bail-outs – ever. If a company doesn’t play by the rules, then the “referee” calls the “out”, the same as in any “game”!

  7. Ron says:

    We understand your point, Shah. The fed is just as incompetent as AIG is corrupt. My problem: None of these SOB’s will ever be held accountable for the incredible mismanagement which brought the country to its knees.
    If a revolution ever comes we might, to use a Marxist phrase,”.. hang the capitalists from the trees. They will sell us the rope.”
    Richard Fuld, we know where you live.

  8. Jerry Kim says:

    Too much government for sure. Now they have become the Masters over We the People. They will Do Anything for their own benefit no matter how detrimental that result may be to the People and to the Nation. Bastards!
    Instead of complaining about little of this & little of that, the whole system has to come DOWN; somehow.

  9. cory says:

    shah, it is a breath of fresh air that some of your readers get the point of your essay. the nay sayers should read the comments. this would expose them to better understanding of the issues.

  10. Owen K. says:

    A few years ago, I lost over 20K in the markets. To this day, I do not feel like a victim of anyone. I wasn’t educated and informed enough to make investment decisions back then. The buck stopped with me. I felt that way then and I feel that way today. I have learned a lot since those losses, but I was responsible and I was not a victim. And, today, I am quite a bit wiser and better informed. I agree. This victim mentality is nothing more than avoiding responsibility for ones own actions and ones life.

  11. Eddy Widjaja says:

    Yes, the Government should be sued. But definitely not by AIG. It is the VICTEMS who should sue the Government !

  12. Barry says:

    GS cronies worked hard to break the back of Regulation since Regan was in office.60 to one leverage is criminal and Warren Buffet called credit default swaps “weapons of mass financial destruction”Canadian Banks are only allowed 9 to 1 which is the main reason they did not need help when the Do-Do hit the fan. There is no need to consider another Bail-out if it happens again as there is not enough money in the world to fill the hole that these foolish, greedy people have dug now with renewed credit default swaps.The worlds Annual GDP is less than one tenth of the money that will be needed when it happens again. without changes, it will ,happen again and sticking our collective head in the sand is not the answer. Thanks Shah, your candor is always appreciated and good luck to all in this New year!

  13. Ted says:

    The latest rumor has it that Fed Ex is going to merge with UPS. Their new stock symbol on the NASDAQ will be FEDUP.

  14. Ted says:

    Reportedly AIG paid back the government but did they pay back all the money they got from the Federal Reserve which I think was $700 billion?

  15. douglas says:

    One should be amused at all of the comments posted. The posters never seem to realize that they have been born into a system of slavery regardless of what country they live in. The only thing that changes in a hierarchy is the death of the top dog. And the fact that your able to have a computer to post on, indicates, at least your not at the bottom of the barrel. Wake-up, and get your money out of banks and the stock market.

  16. Edwin C says:

    I am with you Shah. Totally agree with Chris. Fallingman’s precis is a lot easier to read. My own shortcut to understanding the matrix is to peek behind the shoulder of the devil’d advocate.
    There are victims, Shah. Savers like me see my asset value got diluted, with all these QE printing to plug the hole.
    TBTF means everybody in the power game is involved. There won’t be enough Receivers to handle and run the business. No. That was the once in a long time opportunity to recarve the spheres of influence (and profit). It is still a case of fiefdom- the modern dark ages. The Fed is structured to be part of this machinery. Obviously Ben played very well. Like I said before, the first step to improve /avoid a repetition is to separate the 2 functions of this Fed.

  17. michael ellson says:

    We should not forget how George Bush strongly encouraged low income earners to borrow. The banks bundled these subprime mortgages and bribed the credit rating agencies into awarding them triple star ratings before palming them off on unsuspecting banks everywhere.

    Hence the GFC and banking bailouts.

    Repaying sovereign debt will mean this burden will be passed on to our children and grandchildren including the money borrowed to bail out the banks and pay all the bonuses.

    When interest rates inevitably rise it will be game over for us all including the banks.

  18. Tom Hegarty says:

    I’d like to say to the grabbing swine “Die you bastard die.”
    A bit harsh perhaps but when you see the havoc and hardship created in their wake, I’m not so sure it is. Then of course there’s the next time or one, in line?

  19. db says:

    Mr. Gilani:

    “That brings me back to AIG and the TBTF banks, or any other “protected class” of entrepreneurs. They have to be allowed to fail.”

    You do an admirable job of using the proper buzz words.

    Do you think of the ramifications of your suggestions? AIG sells insurance & annuities. Real people, through no fault of their own, bought those products. AIG disappears. Annuities aren’t paid. Peoples retirement finances are destroyed. Property isn’t insured & isn’t covered when destroyed.

    Is your only answer, “Sucks to be you”?

  20. 48ozhalfgallons says:

    “Our American economic quandary is partly the result of less competition, not more competition. There are plenty of examples, but AIG and the big banks are the most obvious.”

    Moreover, Mr. Gilani, the lack of competition extends to each individual. The top preserves its position by increasing the dependency of the bottom. Ergo, the bottom fails to compete because of the energy competition requires vs the energy of excepting a government handout. The expanding bottom preserves its dependency and conserves energy by supporting (voting for) the top’s status quo agenda. The top does not want a competitive bottom which would upset the status quo. The middle fears change and seeks not to compete lest there be change.

    I would like for once see this administration forced to stay under the debt ceiling. Shut down the government. I am poor by today’s income standards, but I would wager that my savings and out-of-debt position would outlast the Government’s will to stop all payments because this administration refuses to live within its means. For once, I want to see the borrowing leaches salted with their debt and a rebirth of real competition for real gains. I want to see Wall Street participate in a real margin call scenario. I want to separate those who would chose to jump from those who would chose to survive and sacrifice to compete. I want smaller government and smaller corporations. I want competition in the absence of a fixed system.

    • 48ozhalfgallons says:

      Correct. Under Clinton, we had 2 Republican parties. Under Obama we have 2 Democratic parties. Get the picture?

  21. Geoff says:

    You do not need to have your brain in gear to work out that if an organisation is too big to fail then it should be broken up in to more managable pieces. What if it fails and you are not in a position to hand it a crutch ? The US was lucky that it was able to click its fingers and create enough money to do so when it had to. Having said that. Aren’t the US, Europe and China sitting right slap bang in the middle of the “Too Big to Fail” camp ?
    Thanks for writing your posts in such a distinctive and readable style. I enjoy them even if some nit pickers don’t.
    Geoff

  22. Dwight says:

    It is ironic that we defeated fascism in WWII and then spent the next 60 years implementing exactly what Mussolini described in his book Fascisti… Big government bureaucracies tightly regulating big businesses, and driving the little ones out of business so they don’t drain the profits that the politicians and bankers bleed out of the system.

    Sadly, nothing will change until the system hits a wall. The politicans love power and the bankers love stolen money. They will never stop until someone with a gun shows up to make them. That may happen this year in Europe or Japan, maybe sometime later here. A wild card, of course, is when the large population of unemployed youth decide to take matters in their own hands, just like the Brown shirts of 1920′s Germany.

  23. Roy says:

    AIG, Fannie Mae and others on WALL Street and GM Ford And Chrysler all should have done like DELTA go CH11 and revamp
    business get rid of SLACK employees and MOVE ON!We as TAXPAYERS would have been better off!That also goes for the MORTGAGE FIASCO all should have gone under !We (usa)
    borrowed money we did not have!Motto: you can not borrow yourself out of debt!

  24. Doris Kelsey says:

    You said, “No company – in any industry, ever – should be allowed to get so big that it dictates prices or that its failure threatens the public good.” That is also VERY true of our food industry, and it is scary. There are only five companies that process our meat, hence the million+ pound recalls. Monsanto controls 90% of the soybeans and 70% of the corn. We have NO processing plants for horses. They have to be shipped to Canada or Mexico. Less than 1% of the population farms and MOST of them are over 60 years old. This industry is on the edge of complete failure. And there is a LAWYER in charge of the department of Agriculture!

  25. Dennis Harford says:

    Shah,
    The Creature From Jekyll Island should be assigned reading. As leader of the class you should do just that.
    Your readers need to understand the capabilities of those who would be, if not already, in control. They are performing a bullet-less coup de etat on the whole western world! The good part is they die every 75 or so years.
    I share your outrage. How sad it is that people refuse to see or don’t want to, the shenanigans going on in the persuit of power.
    This might be a good argument for the 2nd Amendment…but that is a whole ‘nother tangent.

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