Bankruptcy, Not Bailout
by Newt Gingrich

"Outrage" is the word on everyone's lips to describe the fat bonuses being paid with taxpayer funds to the failed executives at AIG - and it is an outrage.

It's an outrage that the American people are being asked to pay for the bad behavior of people who should have known better, be they reckless traders on Wall Street or reckless borrowers on Main Street.

But the cure for our outrage is not merely, as President Obama is demanding, that AIG be prevented from paying its executives. The $165 million in planned bonuses - as manifestly undeserved as it is - is chicken feed compared to the $170 billion in taxpayer funds AIG has received so far.

Nor is it acceptable to ask Americans to keep throwing their tax dollars at failed companies and their leaders.

The answer is an old fashioned one: AIG should choose between receivership or bankruptcy. It should not be allowed to choose more bailouts from the taxpayer.

Restore the Rule of Law: Allow Failing Corporations to go Bankrupt

Under U.S. law, Chapter 11 bankruptcy allows a company to reorganize. Chapter 7 allows a company to dissolve itself.

The choices for AIG, as both an insurance and non-insurance company, are more complicated, but ultimately boil down to the same options. And for other companies either receiving or looking to receive a bailout from the taxpayers, the option should instead be bankruptcy.

Bankruptcy would send a needed message to U.S. investors: Don't assume the government will bail you out when you do something stupid.

And most importantly, bankruptcy would replace the rule of politicians over U.S. financial institutions with the rule of law.

Geithner Didn't Inherit the Policy of Throwing Billions at Failing Companies - He Helped Create It

Because when it comes to Washington's handling of the financial crisis, so far we've had the rule of politicians, not the rule of law.

Most prominent among the politicians in question is Treasury Secretary Timothy Geithner.

As Americans' level of outraged has risen, so has the level of finger pointing by Geithner and others for the mess we're in.

But Treasury Secretary Geithner is disingenuous at best and untruthful at worst when he says that he "inherited the worst fiscal situation in American history."

The truth is that Secretary Geithner didn't inherit the policy of throwing billions of taxpayer dollars at failing companies - he helped create it.

Even before he was Treasury Secretary - when he was still head of the New York Federal Reserve - Geithner was so deeply involved in the government's bail out of Bear Stearns, its take over of Fannie Mae and Freddie Mac, and its bailout of AIG that this was the Washington Post's headline from September 19, 2008:

"In the Crucible of Crisis, Paulson, Bernanke and Geithner Forge a Committee of Three".

The first meeting of the first bailout - of Bear Stearns - was held in Geithner's office. And the first meeting of what has become a $170 billion bailout of AIG was held - where else? In Geithner's New York Fed office.

Why Not Bankruptcy for AIG? Because Wall Street Wouldn't Have Done As Well

From the outset, Geithner was central to the developing policy of having the taxpayers bail out ailing financial institutions like AIG rather then allow them to go bankrupt. And for months now, we've been told that these bailouts were necessary to avoid a wider, cataclysmic, financial meltdown.

But now it's clear that other, less noble, considerations were at play.

As the Wall Street Journal editorialized yesterday, the real outrage over the AIG bailout isn't executive bonuses, it's that billions in taxpayer funds intended for AIG have been passed through to benefit foreign banks and Wall Street behemoths like Goldman Sachs.

And as former AIG CEO Hank Greenburg testified last October, these financial institutions wouldn't have faired as well if AIG had filed for bankruptcy protection rather than do what it did, which was to negotiate a bailout with Timothy Geithner's New York Federal Reserve.

Here's how Greenburg put it:

"Although AIG stockholders could have fared better if the company had filed for bankruptcy protection, other stakeholders - like AIG's Wall Street counterparties in swaps and other transactions - would have fared worse."

For the Cost of Bailing Out AIG, Every American Household Could Have Free Electricity For a Year

Sponsored ContentSo now everyone is outraged, and rightly so. But the lavish executive bonuses being paid with taxpayer funds are just the beginning of the story.

So far, the American taxpayers are on the hook for $170 billion to AIG - that's an astounding $1,224 per taxpayer.

What else could we have done with all this money?

$170 billion would pay for more than doubling the Navy's fleet of aircraft carriers.

$170 billion would pay for a four-year education at a public university for more then two million Americans.

$170 billion would cover the electricity bill of every household in America for an entire year.

When You Reward Failure, All You Get is More Failure

What Washington should learn from all this outrage is to return to the common sense that should have guided it all along: When you reward failure, all you get it more failure.

A company that needs a $170 billion taxpayer bailout is a failed company. The executives that led that company are failed executives. But instead of having to face the consequences of their failure responsibly through bankruptcy or receivership, AIG and its Wall Street "counterparties" are being rewarded for their recklessness - with our money.

Thanks to the Bush-Obama-Geithner policy of bailing out failing companies, we now have the worst of all possible scenarios: A taxpayer subsidized, government supervised private company; an unsustainable public/private hybrid that is too public to make its own decisions and too private to be responsible to the taxpayers that are keeping it alive.

Outrages like the fat cat bonuses currently dominating the headlines will only continue as long as the rule of politicians supplants the rule of law on Wall Street.

Congress should rethink this entire process. The dangers of a domino-like financial meltdown are real. But so, too, is the danger that the outrage of the American people will reach the point that we no longer trust the dire warnings - or the righteous indignation - coming from Washington.

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Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

Uhhhh, what about the Bush/Paulson plan, or no plan at all, just hand over the money and run for the border.

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

Med o Mao will you put your left right blinders on the shelf for a while.

I don't give a damn if it was Fascist Bush or Socialist Obama who was giving these corporations trillions of the tax payers money. It was a stupid fucking decision.

A decision that no true conservative (and not many liberals) support.

The only people supporting it appear to be

1. Politicians
2. Hard Core Socialists (or as they fancy themselves, "Economists")
3. and the Politically Connected Businessmen.

Though it's not even all politicians.

There's Politicians that are opposing it, because they have banks in their areas that do not need bail out money, because they didn't make stupid decisions.

Socialism - Fascism - Monarchy - Democracy - Republic - Anarchy
From left to right there is an increase in the amount of say that people have in their government.

Under either Socialism or Fascism (both of which are left wing ideologies) people have next to no say.

I don't even know why I bother responding to your posts. You're blinded by the fact that your sucking on the government's c*ck for your daily milk...

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Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

What a nice person you must be, sucking on the governments cock, it's called my lowly retirement that I contributed to for 50 years, actually my money + interest. I guess when you reach 65, you'll be sending your SS back, Oh wait, just like the hypocrite VI, you'll suck the governments cock along with the rest of us, have a wonderful day.

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

And yet, in spite of the evidence unfolding right before your eyes that government creates unrefutable damage when it interferes with the markets, you STILL espouse more government control, while supporting the corresponding growth of the federal tentacles that are gradually enslaving us all.

How much private wealth has been destroyed to date by the misplaced interests of the politicians of both parties in Washington over the past several years, Med?

And you still ask for more?

Vi

PS: And as far as me sucking the cock of government ... fuck you. Social Security is one thing ... as you pointed out. You and I paid into this Ponzi scheme for years under duress at the point of government's gun.

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Liberals are people that will believe anything twice.

Hold on to your asses folks, Fannie Mae wants to hand out fat bonus checks too.

Let's roll.....








http://www.cnn.com/2009/POLITICS/03/...ses/index.html

No, I plan on being able to tell the government to take that money and shove it.

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Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis

I'd like to be able to tell the government to shove it, get your filty hands of my money. Theiving bastards......

Off with their heads, lol...

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Libertas inaestimabilis res est - Liberty is a thing beyond all price. | Sic Semper Tyrannis