1. It really is a loan, not a purchase. 2. It’s a purchase but it’s called a loan and words like “interest rate” are used, so therefore the Fed can do it under the terms of the statute. 3. Even if it’s a purchase, the statute does not literally say that the Fed can’t purchase things and therefore (presumably under Chevron), the Fed has the authority to purchase (see Marty’s comment on my earlier post). 4. It’s an emergency, and a Schmittian state of exception is in play. No one really cares whether the transaction is lawful or not, just do something! Cite something in the Constitution – Article II, somewhere. I mean go to #3 and cite the canon of avoidance just to be sure! (Indeed, this post suggests that the executive branch is really pulling the strings.)
#2 is silly; #3 is a respectable type of legal argument, according to which every grant of authority to an agency for limited purposes turns into a grant of vast discretionary authority unless Congress very very busily lists all the things the agency can’t do; #1 remains possible but unlikely; #4 is most plausibly the truth. We might call #3 the polite version of #4, but to find out for sure I agree we’d need a test case where the Fed actually broke a clear rule – arrested AIG shareholders and put them in Guantanamo Bay or something like that. Maybe tomorrow.
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The judiciary
At the end of the day it will either remain as a diminished but completely private company, or it will sell all its assets and close its doors.
More like this, please.
At the end of the day the Fed will own 79.9% of AIG. When the government owns four fifths of a company I don't think it's "completely private" any more.
Slaves in honest traditional societies were paid only the honesty of being told that they were caddies. For you and me, this present discomforture of the elites -- which surely manifests only some kind of minor internal dispute -- is the only recognition of our status that we are likely to get. This is the highest human moment of our servile existence.
If you and I fail, we get the lash. If they fail, they get the bailout.
The only existentially honest reform is fire.
If only we were truly free like in days of yore. I can't think of the specific date, but I'm sure at one point normal people could do whatever they wanted, and the rich often got totally screwed when they were dumb.
No taxpayer has standing under Article III to challenge this, and, athough perhaps a member of Congress could file suit complaining the executive has usurped congressional power, I doubt anyone of them (except maybe Ron Paul) would do that in an election year.
Change that to "directors &officers," and I'll start editing the Yoo memos accordingly.
Gramm is an unofficial adviser to McCain, but then the American people can never have too much misery because they have a high tolerance for the stupid.
Which regulation(s) was removed that caused this, and who removed that regulation(s)?
This is the new frontier and I think the Fed and the Bush Admin are making new law and precedent as we go along. Some of the old laws just do not apply or they do not cover all bases of instance. I think the governing elites feel the more secrecy the better.
My car is covered by AIG and when I called the state about AIG before the bail out their spokesman just blew hot air - he said that I need not worry but be happy because the AIG failure has nothing to do with my car insurance and I can file a claim with the state if AIG fails.
Right now my state is broke, they fired all temps/contract workers and it has not had a budget for over 70 days. The Terminator has made a threat to lock down the state if he does not get his way with a Veto. Filing any claim with my state is a horrible exercise.
I will accept your challenge, Nathan_M. If at the end of the loan period ( 24 months ), AIG still has equity out as collateral to the Fed for this loan, then I will concede that you were correct.
Kevin Philips and David Cay Johnston state in their books that we have Democrats and the GOP to thank for re-regulation.
Because fear and influence trumps the Constitution on any given day.
I'll bite (though it's certainly not a unicausal explanation nor does it guarantee that in the presence of regulation some bad outcome would have been avoided):
It's decades of failure to regulate the over the counter derivatives industry, which failure has been encouraged by corporate lobbyists and pressure on Congress, the CFTC and SEC. Since no one can fully evaluate the depths of AIG's (and Bear Stearns', and like institutions') counterparty risk in credit default swaps and bond insurance (including instruments written for hedging subprime MBS) because of the lack of any disclosure requirements, the lack of an exchange with its own rules for these instruments, lack of regulatory capital requirements, evasion of such requirements through formal (and perfectly legal) accounting tricks, etc., the result is a massive shadow economy of very high leverage and systemic, interdependent risk. When the music stops, and the credit of even well-run insurance companies and investment banks temporarily evaporates because of this veiled risk that lenders cannot assess, the result is simply a high tech run on a bank. It's possible that one could have all the capital and disclosure requirements in the world, and still have outsize risk taking and complicated instruments impossible to evaluate--but it does seem that some sensible regulation, i.e. not the current Wild West, could have at least smoothed out the impact or let people see it coming a lot earlier.
Is anyone saying the Feds did something unconstitutional? I thought the claim was that the transaction was not authorized by statute. I think Congress would have the power under the Constitution to authorize the Fed to carry out the loan (or purchase) of AIG.
I think the claim by Prof. Posner and others is that the Fed's exercise of power in this case is extra-constitutional, and that Congress did not in fact authorize it in the statute (though if Congress had, you are quite correct). It's a separate question whether we nonetheless permit such acts in emergencies (that's the reference to the Nazi jurisprude Carl Schmitt's state of exception).
The Glass Steagell Act was repealed in 1999 due to the urging of Phil Gramm as a lobbyist for the banking industry so that they wouldn't have to worry about the feds looking over them.
Additionally, we have seen anti-trust regulation either gutted or not enforced since the Reagan years.
And of course, McCain was a part of all that:
"Back in 1989, McCain, along with four other Senators, was accused of improperly aiding Charles Keating, chairman of the failed Lincoln Savings and Loan Association, in efforts to hamper regulators from intruding on the industry's risky investment practices. McCain, who had received over $100,000 in campaign contributions from Keating, was ultimately rebuked for "poor judgment" but not for violating the law. He has claimed an ethical revival since then, pushing campaign finance reform as an example of a mistake learned."
Good thing *that* never happened, and we dodged that bullet. I'm wondering though if any of those supporters have the guts to admit that if they succeded, it would have been a bigger disaster for people.
Probably similar to the millions of Americans with money in 401(k) accounts. How well they've done would just depend on when they bought, and what they bought.
If you are near 50 you might put off getting old until you are 72 and maybe getting a 2nd job. If under 50 how about telling Junior he should think about a bottom floor job at WalMart and not State U.
My sister in-law the school teacher said that Arnold can rant and get away with it because the budget problem does not as of yet impact parents until later this year, but if or when it does parents will sign on to recall him. He can act and play like Conan the King until then
No taxpayer has standing under Article III to challenge this...
I'm really ignorant on these matters, but I gather the shareholders' shares are heavily diluted by this deal. Wouldn't they have standing?
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