Editorial: Will Uncle Sam to the rescue ever end?
In continuing to bail out insurance giant AIG, is Uncle Sam effectively trying to breathe life into a corpse?
On Monday, American International Group announced the largest quarterly loss in U.S. corporate history, nearly $62 billion. This after three previous public rescue attempts totaling some $150 billion in loans and TARP money (though there is so much money flying around, and so little of it accounted for, that it can be difficult to know the precise amount). In any case, now the feds want to give AIG a fourth whack at failure with another $30 billion, while conceding that still might not get the job done.
Suffice it to say, Uncle Sam and AIG are not building trust in their abilities here. About the only thing they've accomplished is to beg questions like the one in this editorial's opening paragraph, plus the following:
If AIG is too big to fail, when does it become too incompetent to make success possible? If Washington is intent on stress-testing the nation's biggest banks to determine just how terminal they are, why isn't that analysis being done of AIG? At what point do American taxpayers cut their losses? If the reason for this latest rescue is the risk to which AIG's demise would expose its unnamed creditors, don't taxpayers have a right to know whom else they're bailing out?
If Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner didn't know what they were doing when they crafted the first AIG bailout last September, what confidence should Americans have that they do now? If it's true, as Bernanke told a Senate committee Tuesday, that AIG executives "exploited a huge gap in the regulatory system," then why reward them? By the way, isn't this the same company whose leaders thumbed their noses at taxpayers who'd just come to their aid by treating themselves to a luxury vacation and other perks?
In a perverse way, isn't the federal government incentivizing even more irresponsible behavior? OK, you screwed up, so here's another $30 billion? Isn't doing the same thing repeatedly while expecting a different result the very definition of insanity?
Bernanke got a lot of heat from senators on all the above counts on Tuesday, and deservedly so. They're just passing on the grief they're getting from their constituents, who are frustrated and have a right to be.
The Federal Reserve chief continues to insist that Uncle Sam is between a rock and a hard place, that doing nothing "would have sent shock waves through the entire insurance industry," with disastrous implications for the broader economy. Well, perhaps. Letting Lehman Brothers die certainly looks unwise in retrospect. We appreciate that AIG has 30 million policyholders in the U.S. alone, while protecting many a retirement savings plan.
But is it a sign of weakness to admit you don't quite grasp everything that's going on here? Well, we don't. Problem is, we're not convinced the guys making these decisions do, either.
Yet there was Bernanke, again pressuring Congress to act this very second or suffer the consequences of "a prolonged episode of economic stagnation." Call it a credibility gap. Indeed, we heard that last fall when President Bush asked for a $700 billion bank bailout. We heard it again last month when President Obama asked for a nearly $800 billion stimulus package. Now we're getting the same old panic-stricken song and dance on the president's $3.6 trillion budget.
Sorry, but this is not an episode of "24."
Back-to-back White Houses have acted as if it is, yet the stock market still hit its lowest level in a dozen years, trading at less than half its high set just 17 months ago. Wait 'til Wall Street sees the February unemployment count. Taxpayers do not have bottomless pockets. They deserve a better idea of what they're getting into before being pushed to sign on the dotted line. They need assurances they're not just pouring money into a black hole.
And if America's leaders are underestimating the size of the red ink they're running up, so are they the public's anger, while overestimating the nation's patience with them. They must do better.
Peoria Journal Star