Fed Chairman Ben Bernanke is attending the Senate Hearings on whether he gets appointed to a second term. Kentucky Senator Jum Bunning had a few choice words to say on the matter.
Before I show the video, a little set up is needed…
Here’s the low down on bailed out company AIG. When a company is in serious financial trouble, one of the first things they do is try to renegotiate the debt obligations to their lenders….as in pay them 60 or 70 cents on the dollar rather than the full value amount, known as “par value”. The lenders may not like to take a loss, but they are motivated to negotiate because the losses could be far greater if the company goes bankrupt. Anyway, that’s what normally happens- but it didn’t with AIG. The Fed bailed out AIG and paid 100% of their debt (par value) to the lenders…..all with US taxpayer money and more debt. So basically AIG allowed other banks to engage in risky counter-party investments that went bust- and US citizens get stuck with the bill. So AIG and their lenders get the benefit of only gains and NO RISK of any losses. This, my friends, SUCKS and is NOT what capitalism is about.
This video starts in where Bunning is talking about the AIG bailout having no negotiated cuts to lenders:
Notice how Bernanke tries to weasel out by saying he was “powerless” to do anything and that the lenders had the upper hand. This is hogwash. If AIG went belly up, the lenders would have got squat, and had NO leverage. This is yet another example of Bernanke making excuses instead of taking accountability for his mistakes….that is, if you want to call this a “mistake”. I think this was a deliberate move in favor of Wall Street cronies.
Here’s the longer version of the video to see the full verbal smack down given to Bernanke:
Sen. Bunning (R-KY) to Fed Chair Bernanke: ‘You Are the Definition of Moral Hazard’