Directed Distraction?

From the “Broken Clock” Department: Glenn Beck is, quite surprisingly, entirely correct in pointing out that all the ecumenical outrage directed at AIG over their planned disbursement of $165 million in “bonuses” is nothing but a piffling distraction in the greater scheme of things.

Somewhat ironically, this is much akin to all of the partisan histrionics over Congressional earmarks that made up less than 2% of the federal budget. In the case of the AIG bonuses however, the debt to equity ratio of grotesque stupidity is amplified by several orders of magnitude when the relatively trifling sum involved is regarded in the context of the $170 billion in taxpayer money that’s been lent so far to the troubled insurer.

Ah, but we can’t let Beck get off this easily… For while he may be on the right track when suggesting that the real scandal here is that AIG has used “bail out” money from the Fed to reimburse counterparties to all the convoluted financial instruments of its trading partners (e.g., Goldman-Sachs, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, et. al) that have gone bust, he’s still compelled to frame the scam within the parameters of a simplistic political structure — taking cheap shots at Barney Frank, for example, and heavily suggesting that successive government dictats to the secondary mortgage market to expand the scope of their lending to low-income borrowers was the root cause of the problem.

Sadly, no. A better explanation might be that such well-intended initiatives (aka “shameless pandering to the voters”) were deliberately misconstrued and then exploited with methodical ruthlessness by bankers as a lucrative short-term revenue opportunity, then compounded by Wall Street speculators who coined sophisticated derivative instruments incorporating them as ballast, that were subsequently backed by phantom credit default swaps. All well and good of course in the wacky world of high finance, until this elaborate house of cards abruptly collapsed in the wake of the first passing breeze.

7 Replies to “Directed Distraction?”

  1. I’m not much in agreement with the idea that the earmarks or the bonuses, representing trivial proportions of larger sums, are all that innocuous. What price can you put on the influence both can purchase?

  2. I agree Ti-Guy – when you get down to it, special interests, from both sides of the spectrum, are greatly responsible for this mess, so the continued practice of buying favors is about played out by now… and as per usual, Mr. Guy-in-the-Middle gets to pick up the tab..

    But, I agree that the blaming of the “other” guys has become tedious – the combination of greedy mortgage brokers + galactically stupid borrowers = financial mess. And there is plenty of blame to be shared between Bush and Clinton governments for anyone to get too comfy in their ideology.. not to mention Mr. Obama who seems happy to continue doing Washington business as usual..

  3. from both sides of the spectrum

    Word of advice: My eyes tend to glaze over when I read that expression.

  4. ..ok, how about – attacking the problem, not the ideology. What I hate is the “but it’s ok if my teams does it” mentality.

  5. I too am completely in the distraction camp (I eluded to it in a previous comment) . I put it this way to someone I was talking to about the whole bonuses issue: “it’s like giving someone $175,000 and then complaining about how they spent $165 of it.”

    Go figure that Beck and the right would attempt to lay this at the feet of lower-income folk (which, btw, is basically their code for scary minorities). Fairly typical of their ilk; blame the people with the absolute least amount of power and influence. ACORN anyone?

  6. ..ok, how about – attacking the problem, not the ideology.

    Sure. I can only do that, however, within the context of Canadian governance, since the issue is fundamentally different in the US, with the separation of powers, millionaire legislators, constant campaigning, and where even progressives believe more money is needed to address the corrupting influences of too much money in politics.

  7. Interesting, the government can’t cancel the contracts. It can’t make them be nice people. But it can make a law saying accepting bonuses after taking bailout money, is a crime, and put those people in jail if they take the money?

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