This wonderful article written by a former chief economist for the IMF does a great job of putting the finger on the problem with our "recovery" plan, and showing just how unbalanced the financial sector has become in its size and influence in our government. One lovely passage was this:
Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities.
That's right: nearly half a trillion dollars of bad debt written by a single company. Does anyone have any idea what we could accomplish with half a trillion dollars? Cure cancer? Put every high school student through college? The magnitude of this failure is difficult to comprehend, and I have yet to hear a) why it happened and b) how we're going to make sure it doesn't happen again.
Still waiting.
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