The fact is that neither the banks nor the investment groups which
ended up holding their deficient mortgages knew very much about the
people whom they'd glided into debt. Well, the same phenomenon of
ignorance about the debtor seems to obtain with the Federal Reserve
loan of $123 billion to AIG.
A detailed and crystal clear article in today's New York Times,
Mary Williams Walsh reports that the Fed's own figures tell us that AIG
has drawn down $90 billion of the $123 billion loan available humungous
insurance company. The problem is that no one seems to know where the
money went or, for that matter, how long the remaining $33 billion will
last. You might as well forget where that will go.
A major screw-up here is quite plausible. It will intensify the suspicions that the populace had when the bail-out was made.
One thing is for sure: nobody will be rescued from their lapsed
mortgages or from their over due credit card debt, about which the
Times also has a very depressing narrative in the same edition,
with the ease that the Fed salvaged AID.
Some people don't understand why. Well, here is the bad news. If an
individual family is laid low by its unrealistic mortgage or by
overspending for a bedroom set on Mastercard it's just tough luck. But
when captains of finance blow it it's a national crisis. They will
come back to the public trough again and again, and they will want huge
bonuses for having fixed the system they trashed.