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Congress

Ways of a Banana Republic?

Everybody in politics, including the president, is outraged. Anger is encouraged, even by the president. People are picking up pitchforks and are threatening. What does this remind us of? Is this deliberation and choice, or accident and force? Congress, instead of being outraged at itself for not deliberating about or even reading bills in front of them--for Congress could have prevented all this--has now voted a confiscatory tax, and it feels like it has accomplished something significant. I heard Barney Frank demagogue his CNN interlocutor a few minutes ago. Impressive. John Hinderaker also thinks that the Pelosi bill has accomplished something, none of it any good. He is rightly outraged and sends a warning.
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Discussions - 6 Comments

The folks with all the money can hire all the lawyers, voice all/most of the considered opinions and win all/most of the arguments. Just because OJ Simpsons lawyers were clever at working racial and other sociological angles doesn't mean he wasn't a murderer...and in fact they ended up hanging him on a considerably more dubious charge. Strange justice...At the end of the day no one wants to adopt an argument that simply ends up carrying water for a firm or executives that don't deserve it. It sounds like Pelosi and Barney Frank are certainly going overboard...and so I appreaciate Hinderaker being a sort of attack dog...This isn't a bannana republic this is a courtroom full of pandering advocates...it is times like these when I really fall back on my respect for the wisdom of the supreme court and judges in general...because sadly I still trust the supreme court more than I trust congress or the white house.

I agree with Hinderaker in the case of AIG, once you already make a commitment to bail them out...which might have been a primary mistake. Actually I think it makes sense to pay out the insurance policies that folks purchased from AIG, even if a large part of it went overseas....but really part of the reason these folks are paid so much is to deal with RISK...you can never eliminate RISK and still justify the high earnings...There is always the RISK that the insurance company will go broke...but all the folks/institutions who bought from AIG...assembled a team of lawyers and economists to argue that AIG was too big to fail, and thus too big to not constitute an elimination of RISK. This team of economists and lawyers brought shock and awe down on congress and president Bush, and congress moved to bail out AIG. This was the equivalent of finding OJ not guilty...now folks are crying bloody murder and looking for ways to put OJ in jail... and really this will culminate in some sort of lynching...

But really I think falling back on the rule of law in the case of AIG is close to argueing that one must keep ones word with a murderer...I swear I will testify that I didn't see a thing if you let me live...now the murderer who in good faith lets you live...is quite dependent on you keeping your word...If you don't keep your word then future murderers knowing this about human nature will have less incentive to let witnesses live. Those who stayed on at AIG to break up assets were in a similar relationship to the promised retention bonuses....it was promised, but there was considerable ambiguity as to how likely it was to transpire.(perfect conditions for a derivative market)

Ironically AIG is most usefull precisely for insureing such gaps between contractural promises and residual ambiguity(risk).

I mean it would be possible for a dupe firm of AIG to write contracts on the likelyhood of AIG paying out what it legally promised.

If you say John, be realistic here you are talking about core principles and values not statistics and cold calculation...

Well fine, in that case give each man who stayed on at AIG a National Service Medal, and recognition that he served his country by helping to wind down AIG...please these folks are post-moral sentiment beings...it is all probability and cold hard cash, some of the smart guys who stayed on at AIG probably made contracts on whether or not and how much of the bonus they would end up getting...in fact it may even be the case that some of them stand to earn more money if the bonus is not payed out...just as everyone bought up AIG contracts knowing(gambling?) they would go under and be bailed out by the government.

I don't mean to take any side or moral position on this topic, it is simply too muddled and strange, broadly speaking I have a sort of confidence that justice will end up looking something like the OJ Simpson mess.

It is a positively insane situation when The Firm/Institution responsible for eliminating Risk and ensureing contracts The World over implodes...in some sense the stability provided by AIG is more important than the stability of the rule of law, because if you are unsure about the rule of law you can insure it with a derivative from AIG, also the rule of law doesn't make the sun shine or rain fall, but if you are unsure about those you can also insure them with derivatives from AIG.

"There is no legal principle that would justify not paying these bonuses. If you make an offer to someone along the lines of, if you do X I will pay you Y dollars, and he does X, it's too late to change your mind. You're on the hook for Y dollars, and you should be."

This is true but a derivative contract is if X happens I will pay you Y dollars, if X happens, it's too late to change your mind. You're on the hook for Y dollars, and you should be.

Therefore the legal principle that justifies not paying these derivative contracts is bankrupcy.

But if you are saying that once the government takes over a firm the legal principle(bankrupcy) no longer applies...because the united states government cannot declare bankrupcy...well, one could say that the United States declares a bankrupcy of moral capital/popular support...in other words the United States government declares political capital bankrupcy...in this sense the US government is no longer on the hook for backing AIG's contracts between employees....just as AIG would not have been able to pay up on its derivative contracts.

I am not saying that courts should make up new or refined bankrupcy law...but I might be saying that congress and strange conditions on the ground are forcing them in that direction.

It is not a banana republic, but, as John Lewis should know in his reading of Marx, America is a land striated by capital. American just 'is' capital. It has embraced capitalist ethics and metaphysics, and tolerates only those religions compatible with capitalist consumption. Of course the stability of AIG is more important than the stability of law, because the stability of capital is our metaphysics, and it employs cliches from founding fathers and elects its legislators to do its bidding. Presently the US is being mercilessly squeezed by the very mechanisms of trans-national capitalist circulation that America itself championed. While all the conservatives on this site can do is coin catchy phrases like bobo's and bromances. Interesting to see how for those of the Cheney world-view terrorist-fear has migrated into economy-fear without missing a beat.

ren: Doesn't free labor have something to do with the creation of capital?

"What does this remind us of?"

The French Revolution.

Civil Rights consist of more than some judge letting urine-soaked hobos squat in public libraries until they become unusable for decent citizens. Or in college administrators making campus Vagina Day celebrations mandatory...while even jokingly suggesting a corresponding 'Penis Day' earns that student an expulsion.

The Constitution's prohibitions on ex post facto laws and bills of attainder ARE Civil Rights. They protect ordinary citizens from runaway mobs of criminal politicians.

Every lawmaker in Congress fancies themself a Civil Rights champion. But they are trampling true civil rights with this self-serving diktat--this law is about the pr needs of lawmakers and nothing else. Not only are they violating the ex post facto and attainder bans, and discarding the proper amendment process, they are bumping up against Due Process, Impartial Juries and the Takings Clauses, too.

If we really believe those contracts were ill-gotten, the answer is not these Patriot Games--the last refuge of a scoundrel and all that, remember? The answer is to take them to court. That's what courts are for--not for freeing terrorists, paying them reparations and giving them lifetime jobs at Homeland Security.

I associate myself most firmly with Noel's comments in 4 -- although not so sure about the last one, taking them to court.

This reminds me once again of Orwell and what he called a sort of primitive patriotism. It is not hard to view the denouncing of AIG executives every day on the news as a form of two minutes hate. In reality, its a great deflection away from the even greater crimes. Let the people burn executives. As for the creation of capital from free labor, I really think in this instance ren has it put pretty well. You are talking about theory not practice. Show how this works in the real world with free labor creating capital. I have come to believe that capital is often created by the CIA using terrorism in nations with natural resources to cause a regime change then the very same opperatives who are also of the bussiness elite come in and get favorable contracts with the new leadership. Government vs. captial is a stupid way of viewing the times. Capital loves the government, were would corporations like general dynamics be without them.

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