What’s that Chinese proverb that’s not really a Chinese proverb, but sounds like it could be a Chinese proverb? You know, “May you live in interesting times.” Well, that’s certainly the case for the past few weeks when it feels like the economy is like that train collision in L.A. And it’s happening at the very moment when the presidential race reaches new levels of strangeness.
I think we’re in full panic mode, but there are a lot of wannabe George Bailey types who are saying “Let’s stay calm, people.” A few of them were on NPR today reassuring us plebs that our checking and savings are safe because of FDIC insurance. But when our government (already saddled with enormous debt, two wars, and trying to bailout failing financial and insurance institutions) is taking on even more debt to smooth over what is a pretty big crisis, it’s tough to know what would happen if there wasn’t any government action versus the bailouts that have occurred.
The financial markets have reacted like rats scurrying away from a sinking ship to the bailouts (meaning, they have very little confidence that this will do much), but Joe and Jane “Regular Checking” are told to keep their money in the bank ’cause, you know, it’s insured. As we all know now, that word, when applied to big financial institutions, hardly connotes security.
Like I said, it’s tough to say what “doing nothing” would have wrought. Mr. Doom and Gloom (i.e., Nouriel Roubini) has some thoughts on the bailout, but they are mostly about why nationalizing a private insurance company is not a good thing. He hasn’t fully explained why the government shouldn’t have bothered with AIG, but he says he’ll be posting an update soon.
In the meantime, we get this from Tina Fey Sarah Palin about the government bailout of AIG:
“Disappointed that taxpayers are called upon to bail out another one. Certainly AIG though with the construction bonds that they’re holding and with the insurance that they are holding very, very impactful for Americans, so you know the shot that has been called by the Feds — it’s understandable but very, very disappointing that taxpayers are called upon for another one.”
First off, as Kevin Drum noted, he’s not sure what’s she talking about when it comes to “construction bonds.” He thinks she’s talking about performance bonds or maybe it could be a subdivision bond, but AIG has so many types of insurance policies that it’s not clear why she pulled “construction bonds” out of her ass. Perhaps she trying to say that the “very impactful” things these construction bonds will have on ordinary Americans will be, um, very impactful when it comes to housing. Gee, one would think all the foreclosures and decreasing real estate prices are the bigger factors in the current housing bust.
Man, I thought I had a tough time figuring out what George W. Bush is saying half the time.