A Proposal You Can't Refuse

The Wall Street Journal reports that the Federal Reserve Bank of New York pressured AIG in late 2008 to amend its filings with the Securities and Exchange Commission (SEC). Such filings are made public, and the New York Fed wanted to avoid disclosing which firms benefited from the government's bailout of AIG.

But there is a revealing comment about the nature of how government power is wielded in the brave new world we live in.

Thomas Baxter, the general counsel of the New York Fed, said "there was no effort to mislead the public," adding that "the final decision rested with AIG and its external securities counsel."

Let's analyze this. AIG's initial draft of its SEC filing included language naming its counterparties. Then the New York Fed pressured it to change that language, and AIG complied. AIG presumably thought it should disclose the information, hence why it drafted the initial document as it did. Moreover, AIG eventually had to disclose the information anyway since the SEC pressed it to amend its filings.

So to say that AIG had the "final decision" ignores the enormous power the Fed had over AIG through the funds it invested in the company under the bailout and its regulatory authority.

If a man is being tortured and confesses to something he didn't do, would you say "the final decision to confess rested with him so he must be guilty"?

If a gangster demands "protection money" from a local business, would you say "the final decision to pay rested with the owner so he must have entered into a normal business transaction"?

The economic system where the government controls and regulates businesses, without government ownership, is fascism. With government ownership, it is socialism.

Welcome to our part fascist, part socialist, part capitalist economy.