On Sunday, Larry Summers explained to America why the administration had to let AIG give bonuses to bankers who blew the firm to smithereens: Because contracts are sacred.
Perhaps Larry will return this week to explain why the same sanctity does not apply to mortgage cramdowns.
Joan McCullough of East Shore Partners puts it this way:
"But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system."
The above was spoken by Lawrence Summers on Face The Nation on Sunday morning.
Oh sorry, Sherlock. Are you a tad confused because you know that Lawrence Summers is enamored with the idea of a "cramdown" which is mortgage industry jargon for the breaking of a contract? Are you wondering why all of a sudden he wants to defend 200 years of US contract law instead of hissing on it? Maybe his objective in performing this shameless flip-flop is with a view towards inciting a distancing headline like this in the NY Post:
TEAM O RIPS AIG BONUS BONANZA
What Summers is ignoring here is that, if not for the taxpayer, AIG would be bankrupt, and the folks holding those contracts would be standing at the end of the creditor line. Thankfully, Larry Summers' boss has since intervened.
See Also: Eliot Spitzer on the REAL AIG Outrage