Until two years ago, the crown jewel in Warren Buffet’s Berkshire Hathaway empire was American International Group, better known as AIG – allegedly the most profitable insurance company in the world. Of course, what we know now is that AIG made most of their money by selling Credit Default Swaps on such Triple-A Rated firms as Lehman Brothers, Bear Stearns, General Motors and Fannie Mae.
For those of you who have forgotten, a Credit Default Swap is an insurance policy against corporate bankruptcy. AIG sold insurance policies worth several trillion dollars because they believed – wrongly – that there was no way those companies would go bust.
Then September 2008 happened and the fecal matter impacted the ventilator for AIG. Uncle Warren “asked” Uncle Sam to “help a little” so that AIG wouldn’t go BK, and Uncle Sam, benevolent as he is with our money, was eager to help out.
That’s when you, gentle taxpayer, bought AIG bonds. I’ll bet you didn’t know you were a bondholder, did you? The American Taxpayer bailed out Uncle Warren and AIG to the tune of more than a hundred billion dollars.
How much is $100 billion? It is one million times dollars multiplied one hundred thousand times. That is a lot of chalupas.
Yesterday, AIG agreed with the government on a plan to “repay” the bailout.
Hooray, we get our money back!
Not so fast there, Grasshopper. You have not yet learned the ways of the world if you believe that “paying back” means actual money changes hands.
AIG is going to pay their DEBTS to the US Taxpayer with AIG STOCK. In other words, AIG isn’t parting with a dime. The government – and by extension – you & me – just gets to change hats from “AIG’s Biggest Creditor” to “AIG’s Biggest Stockholder”. They say this is “good for the taxpayer”. They lie.
The only reason AIG’s stock price is not $0.00 is because the government gave them our money, not because they have changed how they do business. Furthermore, the Federal Reserve created scads of money in the last 18 months which the Primary Dealers have used to ramp the stock market. This is not retail investors putting their money in the market; this is The Usual Suspects using no-risk money to ramp the price of everything, including AIG stock. (Retail investors have withdrawn more money than they have deposited into the market every week for the last 21 consecutive weeks.)
This is what it looks like when the government conspires with failed giant businesses to do something “good for the taxpayer”. Imagine what they might do if they decided to intentionally harm us.
