AIG Shareholders: Thank You, America, We’ll See You in Court (Society’s Slideshow)

By Dave Palmer

The 2008 mortgage bubble burst resulted in many banks failing. However, some of the banks, including AIG, were deemed “too big to fail”, and were therefore given part of a massive $800 billion bailout from the government. AIG received a $182 billion share of the bailout. Promptly thereafter, AIG paid six and seven figure bonuses to its corporate bigwigs and held junkets for top salespeople at the taxpayer’s expense.

However, as the old adage goes, “No good deed goes unpunished.” No sooner than the U.S. Treasury cashed out its stock holdings to yield a $22.7 billion profit, AIG stockholders decided that it would be a good idea to sue the government for $25 billion. The AIG shareholders claim that the government somehow cheated them, that the government failed to provide them just compensation when the Treasury bought 80% of the company’s total holdings.

Former inspector general for the financial industry bailout Neil Barofsky said AIG joining the suit would be a “giant middle finger” to the American taxpayer. For once, I agree with someone involved in the financial industry bailout.

Virtually every economics class teaches that the stock market is a risky investment. If the company profits, the shareholders profit, and if the company loses money, the shareholders lose as well. Essentially, the stock market is the world’s largest casino, and all of its “investors” are really gamblers betting on the success or sometimes failure of a company.

For AIG shareholders to pretend that they weren’t taking a risk in a company that was deemed “too big to fail” on the brink of its actual failure are either too blind to see reality, or too stupid to accept it. The company accepted the terms of the agreement with the government and accepted the money. If the shareholders were not brought into the loop, that is the fault of the executive board, not the fault of the government.

Therefore, it is the AIG board of directors who should be held in civil liability. They failed to inform their shareholders of the potential consequences of the bailout, and decided to take the bailout money over the shareholder’s vote. They were the ones that failed to take their fiduciary duty into account as the check cleared and bonuses were paid.

The AIG shareholders should also take into account what might have happened if AIG was allowed to go through the standard bankruptcy procedure. Their shares could be worth far less than they are today, or be completely worthless if the company folded.

Instead, AIG shareholders are choosing to bite the hand that saved their investment from almost certain ruin. They are attempting to take the governments profits from what turned out to be a wise investment for the government as ill-gotten gains for themselves.

Any judge worth their salt should immediately dismiss this case on the grounds of gross frivolity and plain idiocy. Suing the government for saving your investment from complete failure is akin to suing a fire department for water damage caused by putting out as fire in your home. However, it seems that AIG shareholders of that particular mind frame.

Hopefully, this nation will never face a crisis as large as the mortgage bubble of 2008 again through smart regulation and breaking up the banking oligopolies. But if it does, I call on the government to be wise enough to remember this lesson and allow smaller banks to buy out any who are “too big to fail” piecemeal to make them more manageable sizes.

 

Bail out the homeless, not the banks. (Society’s Slideshow)

I believe that banking institutions
are more dangerous to our liberties than standing armies. If the American
people ever allow private banks to control the issue of their currency, first
by inflation, then by deflation, the banks and corporations that will grow up
around [the banks] will deprive the people of all property until their children
wake-up homeless on the continent their fathers conquered. The issuing power
should be taken from the banks and restored to the people, to whom it properly
belongs.

Thomas Jefferson

31,000 school children in the metro Detroit area would agree with Jefferson’s sentiment. Homelessness has moved beyond the lower middle class, and has moved up the scale to the middle class and upper middle class. People who have never been homeless before now find themselves in shelters, in a friend’s house hoping not to wear out their welcome, or living in a hotel sleeping on the floor.

According to the Detroit Free Press, this is a 37% increase over the previous school year. In the past four years, homelessness has increased by an astounding 300%. Much of this homelessness is attributed to the faltering economy and  lack of available jobs for even qualified candidates.

Homeless students often have to move with their parents from place to place frequently, which can be stressful. This almost inexorably leads to poor performance in school. I would imagine that it also leads to a bit of a cynical attitude when the teacher assigns homework. How can it be homework if you don’t have a home to go to?

This is the realty for these students, and of course, school districts are required by law to help them out. In fact, each school district has a homeless liaison who is charged with the task of hunting these students down. However, many parents are embarrassed to be homeless, and so some slip through the cracks.

Parents also risk having their parental rights revoked by Child Protective Services if they admit to being homeless. That’s right, if you lost your job, are having a hard time finding a new one, and lost your home in the process, you are considered a bad parent.

Schools are also required to provide free transportation to homeless students in their district regardless of how far away the student is temporarily living. They must also provide free school supplies, all necessary athletic clothes for physical education, and free school lunches.

This is a great way to make sure that students in bad situations at least have the materials necessary to succeed in school. The main problem with this policy is that many school districts are on the brink of insolvency, and have little resources to educate students who have homes, much less provide any and all necessities to homeless students.

This news arrives on the heels of news from Lansing that teachers must now be able to demonstrate they are improving student performance by administering a pretest and a post-test for all classes they teach in a school. I wonder if teachers will get a handicap based on the percentage of students who are homeless or become homeless in their class. My guess is that it will play no factor, and teachers will be expected not only to help these students succeed in school but will also be expected to deliver time-consuming curriculum on how to deal with homelessness.

The problems of a poor economy of course are not limited to homelessness. 50% of families who were once middle class in 2008 are now living in poverty. Parents who were once able to meet the needs of their children AND  pay all the bills are now being forced to choose between providing for their child’s success OR paying the bills. They are being forced to seek free or reduced lunches or seek, government assistance today as compared to five years ago when they never would have entertained such a thought.

It is obvious that politicians in Lansing are out of touch with the real needs of their students. They are spending more time dreaming up ways to evaluate teachers and fire bad ones (possibly creating more homeless people) than they are trying to solve Michigan’s economic and now homeless crisis. Having high quality educators is very essential to a good education, but is it more essential than a student having a home at which to do homework?

Resolving Michigan’s current crises will not be easy. It may require a cash infusion from the federal level to create low-income housing or subsidize higher rent properties to keep students in their home school districts for the sake of continuity of education. It may also require Michigan legislature to repeal the new business tax law, impose a flat 2% tax on all Michigan businesses, and give half of that money to school districts to help them deal with the problem of homeless students until a more permanent solution can be hatched.

A better solution to this conundrum would be to require all the banks who took part in the $800 billion bailout to start paying that money back. Congress can start collecting from the bonuses of CEO’s that were paid out almost immediately after the bailout was granted. All that money could be funneled into the lowest-performing, lowest budget schools to bring them up to the level of the schools the CEO’s paid to have their children sent to.

Michigan and America need to demand their money back. Big banking led us to believe that the economy was doing well while using blurred ledger sheets to hide toxic debt, sold that debt as viable investments, bet those investments would fail, and then got paid twice when the house of cards collapsed. There should be no more beating around the bush, only a clear resolution that we as the 99% are no longer going to take it from the 1%.