I’m not an economist. I have trouble keeping my checkbook balanced, and I struggle mightily with the notion of a budget, so I tend to lose interest in stories that focus on stocks, bonds, and other bits of economic arcana. My philosophy is, leave that stuff to the experts to discuss amongst themselves. If I have any questions I’ll ask my brother-in-law, the financial advisor.
I guess I’m among that vast majority of Americans who believe that, as long as the employment rate in my household is 100 percent and there are groceries in the fridge, the outlook is good. But when the news is dominated by economics, and everyone seems to believe we’re teetering on the brink of a new Great Depression, I start to pay a little more attention.
This week has been one of those times.
Financial services industry giants Lehman Brothers, Merrill Lynch, and AIG found themselves in dire straits. Lehman declared bankruptcy, Merrill Lynch got snapped up by Bank of America at bargain basement prices, and I woke up Wednesday morning to learn that, by my reckoning, I now own a .03 percent stake in AIG thanks to a generous investment by my rich Uncle Sam (you do too, by the way).
All this on the heels of the government’s takeover of Fannie Mae and Freddie Mac, and if you don’t understand the quasi-public structure of those two mortgage giants, join the club.
As I said, I’m not an economist, so if you are reading this hoping to gain a better understanding of high finance, stop now and get a subscription to the Wall Street Journal. But if you have questions, as I have questions about the country’s economic policy, let’s ask a few and see what kind of response we get from our public servants who were sent to Washington to manage our affairs and who, apparently, were asleep at the switch while the nation’s economic train was rolling down the wrong track.
1. The federal government now owns a 79.9% stake in AIG and reserves the right to remove senior management, and it looks like CEO Robert Willumstad will get the heave-ho. But will he be rewarded with a typical Wall Street severance package the likes of which would allow a slob like me to retire – and support a Central American nation as well?
2. Will other executives be similarly ousted? Will the board of directors, which apparently approved (or, at the very least, didn’t object to) the moves that allowed this debacle to take shape, also get the axe?
3. Will anyone be paraded before Congress, à la Enron, and go to jail for what is almost certainly a case of criminal mismanagement and violation of stockholder trust?
4. Will Congress or federal regulators admit any responsibility for setting – or failing to enforce – rules that allowed these companies to put themselves, their shareholders, and the American taxpayer in this situation?
5. Would a Congressional hearing and criminal proceeding risk exposing the federal government’s role in this situation, thus ensuring that such an event never takes place?
6. AIG has said it will pay off the loan by selling assets, but who is left with the resources to acquire any remaining assets? And are potential buyers U.S.-based companies, or overseas entities? And what does that mean for the U.S. ability to lead the worldwide economy?
7. Will AIG repay the American taxpayer? With interest? How long do they have to repay the loan?
8. How many more shoes are there left on Wall Street, and which will be the next to drop?
9. If my business takes a hit as a result of the foundering economy, can I expect that the federal government will rush in to help keep me from economic ruin?
10. Whatever happened to the free market notion of accepting risk and reaping the requisite reward?
If you have more questions, comments, or answers to any of the above, write me and maybe we can figure this thing out together.