First, let me say that I consider myself a conservative Republican -- though I'm sure the Wall Street crowd will be calling for my skin soon enough:
AIG wrote credit-default-swap "insurance" for people who didn't even OWN a mortgage. And I believe that THOSE people should NOT be paid with taxpayer funds. I bet they already have been paid, and I think Congress should consider retroactively taxing those benefits at 100%
For the average person out there who didn't understand it all when it was happening and is now left holding the bag -- i.e. the taxpayer -- here is the problem in a nutshell:
AIG wrote insurance policies for banks in case the person who owned the house didn't pay their mortgage. No problem so far. But THEN they started writing insurance policies for others -- who had no "skin in the game", so to speak. It turns out that a majority (4 out of 5?) dollars of bailout money to AIG went to pay these "bettors".
Consider this: Would we allow an insurance company to write fire insurance policies an any particular house to anyone else? No, because an arsonist could come along and insure twenty houses on his block -- he doesn't own any of them, but he's betting they burn down -- and then get rich when they mysteriously turn up charred.
I know this will be an unpopular idea with those people who UNDERSTOOD that bailing out AIG without stipulations that the money only go to those who actually OWNED a mortgage and who also realized that even though the average Joe KNEW defaults were going to increase, they didn't know HOW to make a bet on the market going south -- much less have the power to ensure that when the "house" couldn't cover their bets they could vote or make policy to have the US treasury step in to cover the bet. I'm sure there are PLENTY of those B*ST*RDS in Congress (the old and new), the last administration, and YOURS, quite frankly.
And if you want to go one better, find out the hedge funds who bought these things -- and DID NOT own a mortgage or a mortgage portfolio for the insured value, and see if the lawmakers voting for this had a substantial stake in them. If they did, put them up for ethics investigations. If it was an administrative official, NAME THEM.
We HAVE to put a stop to this legalized, taxpayer-supported theft -- or there will blood in the streets when the people find out how they've been ripped off!
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45. Repeal S. 900 [106th]: Gramm-Leach-Bliley Act of 1999: Amends the Banking Act of 1933 (Glass-Steagall Act) to repeal prohibitions: (1) against affiliation of any Federal Reserve member bank with an entity engaged principally in securities activities (securities affiliate); and (2) against simultaneous service by any officer, director, or employee of a securities firm as an officer, director, or employee of any member bank (interlocking directorates). (Gramm, 1999) This bill legalized bank fraud. This was not the intent of this legislation but was the result. This made collateralized-debt-obligation (CDO) and credit-default-swaps (CDS) legal. The creation of CDO’s spurred a massive explosion of irresponsible and predatory lending. The really astonishing aspect of these securities was that they were able to get AAA bond ratings. “Rolling Stone” writer, Matt Taibbi, wrote “The Big Takeover” spells out the history of this financial mess very well. The question that you the citizens must ask now is who passed this bill and why are they still in power. One senate and one house representatives from my district of Iowa signed this bill in the affirmative. I am promoting the idea of recalling them both. They are Sen. Charles Grassley (R-IA) and Rep. Leonard Boswell (D-IA).
• One idea proposed to deal with the bank securities problem was to institute a bad bank program where the United States pools all of these securities together. This is a good idea. Once all of these securities are pooled, they then can be pulled apart. The asset pool created can then be better assessed as to value. Large holders of these securities can wait out the valuation or take hard assets as repayment. Valuations must be based on fair value coupled with future valuation estimates.
46. Repeal H.R. 4541: Commodity Futures Modernization Act of 2000. Commodity Futures Modernization Act was passed along with twenty-five other bills in H.R. 4577: Consolidated Appropriations Act of 2001. This bill was pitched as an increase in regulation but in fact it was a deregulation bill. This bill legalized credit-default swaps (CDS). This bill also made legal derivatives, which is a form of gambling upon assets that are not owned by the better. Derivatives can be hedged, which is likened to placing a side bet on your bet.
• This practice of packaging large numbers of bills should not be allowed to happen. Each bill must be considered on its own merits. Should congress continue with the practice of packaging bills, then the President of the United States must have line item veto powers as part of the constitution. Congress must have a system to overrule the line item veto power, should a super majority exist. This implies that congressmen actually read every bill that is passed; I doubt this is true. The reality is that most party politicians seek advice from their party leaders and vote party line. Another indication that a two party system is a less efficient system.