AIG Saves Wall Street...

Tuesday, November 17, 2009 5:03 AM

What this report and article overlooks is the probability that U.S. Treasury Secretary Tim Geithner et al. stepped in to prop up AIG primarily to guarantee that all the counterparties, ie. Wall Street, got paid off 100 cents on the Dollar, especially “Goldmine” Sachs, which had placed the biggest bet or bets with AIG.

This was not a mistake or accident. The thinking must have been, it seems to me, that if these high-rolling speculators did not get paid in full to the last dime, then they would have had a cow, and Wall Street would crash and burn in the manner of 1929. Never mind that insurance can only be as good as the entity from which the insurance is bought. The Banksters must be made whole, especially when they miscalculate or act recklessly. So the US Treasury stepped in to utilize AIG as a convenient empty vessel and transfer station to funnel public money into the coffers of the biggest and brightest Wall Street bet-makers who had blown it.

Presto, the Great Depression II (in theory) is averted. Too big to fail in this instance translates into never having to make a bad bet. The bigger the bet, the more secure it is, because Uncle Sam is there at the payoff window, no matter what. And Wall Street is up and running the next bubble. In the meantime, what is left of "Main Street" and the next generation of luckless Americans gets stuck with the bill. It was your country.

Update link: Henry Blodget calls for Geithner’s resignation. January 8th, 2010.