Geithner's proving to be a much smarter man than Paulson. Paulson, say what you will, went to Congress for his 700 billion dollar daylight robbery. Don't like it? It was at least voted on. What Geithner is doing right now is similar to how a magician works. First he gets your attention on one thing "look, outrageous bonuses at AIG", then he does his trick while you're watching what he wants you to watch.
The whole AIG kerfuffle is little more than a red herring. The government could stop the bonuses if it chose:
a) They could ask Congress to pass a bill forbidding the bonuses from being passed and then give immunity to AIG and everyone else from any lawsuits.
b) They could just nationalize the company.
c) They could say to AIG "sure, you can do that. But we're going to have auditors crawl over your books and then publish every single detail, since taxpayers have a right to know. When the shareholders go over those books, they will have all the ammunition they need to take you to court. You'll spend the next 30 years losing every cent you have trying to defend yourself from shareholder lawsuits".
And I'm sure a clever financial lawyer could come up with many other ways. If the government didn't want those bonuses paid, they wouldn't get paid. Period.
But all this outrage serves a very useful purpose. At the same time as everyone is running around screaming about a few hundred million dollars, Tim Geithner has announced his TALF plan, in which he will loan up to 2 trillion dollars to private investors to buy up assets, allowing 19/1 leverage. If the assets lose value, the government will absorb the losses. If they gain value, private investors will get the profits. Heads private investors win, tails taxpayers lose. A 2 trillion dollar giveaway and a new leveraged bubble which will certainly cost taxpayers more than a few hundred million dollars.
Don't watch Geithner's right hand and a few hundred million bonuses at AIG, while his left hand robs you blind.
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