Friday, March 27, 2009

Follow the Money

Certainly the fact that AIG paid bonuses with bailout money make us angry and not without good reason. Focusing our attention on this has the benefit of being easy to understand and puts a human target on our anger. However, it fails to take into account the fact that the $165,000,000 spent on bonuses pales in comparison to the $125,000,000,000 in "loans" AIG has taken from us. As Robert Scheer writes:
"But the $165 million in taxpayer funds used to reward them is but a sideshow in a far larger drama of moral decay swirling around the banking bailout. It should not distract from the many billions, not paltry millions, of our dollars being diverted to reward the very folks who brought us such misery. Consider the $12.8 billion of the $170 billion that taxpayers gave AIG in bailout funds that AIG then secretly diverted to Goldman Sachs, a company that evidently has a lock on both the Treasury Department and the Federal Reserve no matter which political party is in power. It was the biggest payoff among those that AIG made to a score of foreign and domestic financial giants."

That doesn't mean we should ignore the bonuses, but it does mean that we should be spending far more time on making sure AIG spends the rest of the money it received in a way that maximizes the benefits to the taxpayers, not the executives or the counterparties who are getting "paid back in full".

And there's something else missing here. Joe Conason writes that we should also be looking into the "quaint islands and mountainous principalities" where:
"the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description."

"According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride."


"When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established."

Populist rage can be used to get something done. Let's hope it's the right thing.

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