The Titanic goes down, the captain sails off
What can we say about the events of the last few days? The AIG buyout, a complete about-face from the laissez-faire policies of the administration, indicate once again the power of being #1 in your field, of being of mammoth proportions, of being Too Big to Fail.
As we have seen again and again, big companies are usually not well managed companies. Many of them are only good at one thing, getting bigger. And the frenzy to bring in ever greater profits from an ever larger company leads to shortcuts and, eventually, fraud. The bets minds of a score of major financial companies staffed with the best MBAs and economists money can hire, all made the same stupid risky bets, even though the fact that the real estate bubble would burst had been obvious for at least two years.
Yes, it looks like the shareholders of AIG have lost a lot of money, but by this point only the Pollyannas (the ones that actually believed the company's lies) were holding the stock. But the captain who drove this Titanic onto the iceberg got away in the first lifeboat, a luxury yacht at that. CEO Martin Sullivan received $47 million this summer to console himself for being drummed out of the company. He will also, reportedly, "provided an office and an assistant until the end of December." I wonder if the Fed will make sure that part of the contract is fulfilled.
AIG, like Citigroup and Merrill Lynch, was a disaster waiting to happen, with lax regulation and absolutely no antitrust enforcement.
How many more companies will this "free market" administration have to rescue with nonexistent taxpayer dollars? GM, Ford, and Chrysler? WaMu and Wachovia? Maybe ExxonMobil and General Electric will be next. How will the Fed be ablke to tell the difference between companies that deserve bailout (Bear Stearns) and those that don't (Lehman Brothers)? Is it the one that has behaved the most recklessly the one that gets the big money rescue?
