Tim Geithner personifies a new phenomenon that is sweeping the financial world: intellectual retardation. This is a condition in which an individual’s thinking becomes so sophisticated and so immersed in detail that it becomes incapable of functioning in a sensible manner.
Geithner gave a dazzling display of his brilliant dumbness when he justified paying AIG one-hundred cents on the dollar when the Treasury Department bailed them out after the firm found itself drowning in the credit default swaps (CDS) it couldn’t honor.
Geithner’s justification for this largess?
The government could not unilaterally impose haircuts on creditors, and it would not have been appropriate for the government to pressure counterparties to accept haircuts by threatening to retaliate in some way through its regulatory power.
Now, if a company is “too big to fail,” and if it gets its pecker in a wringer and if my tax dollars go to bailout a bunch of financial retards, then I want some oversight. It’s a simple proposition—if a firm accepts public money then the public sets the terms and conditions.
Another government official spoke of “sophisticated financial institutions.”
It now appears that sophisticated is just another word for stupid.
The only question, now, is who is more sophisticated, finance corporatism or the government. Or, are they so joined at the hip that they are indistinguishable.