January 27, 2010: Financial Crisis in Review
January 27th, 2010
As Treasury Secretary Tim Geithner testified (again) before a House Oversight Committee this morning regarding AIG, the anger from the committee was clearly fierce. It’s great political theatre but, unfortunately, this is not a theatre…this is the US Economy and the US Financial system. One committee member asked how bailing out AIG’s counter-parties is helping “Main Street”. That’s a great question; regardless of one’s political persuasion. While today’s proceedings are focused on AIG, it underscores the terrifying involvement of government forces into business.
Wall Street has certainly recovered as evidenced by the 72.5% rally in the S&P 500 during March 2009 to January 2010 as well as the 2009 bonus allocations of $145 Billion; up 18% from 2008’s allocation and up 6% from 2007’s allocation, according to the Wall Street Journal.
Alarmist phrases like “on the brink” and “edge of the abyss” and “potentially catastrophic consequences” were and continue to be thrown around to justify government-blessed bailouts of Wall Street’s elite firms. It is difficult to think that the entire economy was at risk. Were the markets in panic mode during late 2008-early 2009? Yes. Absent government involvement, would the US Economy imploded during that time? We’ll never know but it defies logic to think that the fallout of inaction towards AIG (in other words, allowing capitalism to work) would be worse than the multiple Trillions of dollars in government bailouts and guarantees that were put into place to supposedly protect us from “the abyss”.
Mr. Paulson is now testifying.
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