The AIG Bailout

In relation to the collapse of AIG, and the beneficiaries of close to $200 billion in U.S. taxpayer money, I suspect Jim Hoagland is right about all of this:

The best guess I hear is that the banks were not buying insurance at all - they seem never to have diligently asked if AIG could pay off, which it manifestly could not. They were in effect buying a piece of the firm's AAA rating, which enabled the Europeans to inflate artificially their required credit reserves and lend out ever more of their capital for bigger profits - until the crash came. Or as financial blogger John Carney has put it, the customers were in on the scam.

Hoagland continues,

If that is not the case, the administration needs to make public the facts that refute it. If these reports and suspicions are founded, the administration needs to explain what happened and get in front of what could become destabilizing public anger.

I suspect that the Obama Administration, in continuation of Bush Administration policy, is trying to undo as much of AIG's damage as possible before "destabilizing public anger" prevents further action - and I suspect that would be the very moment the President confirmed Hoagland's suspicions. Sad though it may be, the concern appears to be that telling AIG's customers, "Sorry, you knew what you were doing, AIG's bankrupt, and you're not getting more money," could put the world financial system back into a tailspin.

And The Solution Is....

The insolubility (at least from the U.S./Georgian perspective) of the situation in Georgia has led to a lot of editorials that vary in emotion and tone, but say pretty much nothing. Today's entry by Jim Hoagland calmly fits the mold.

The question: Should the United States re-arm Georgia, and if so, at what level? That is, does Washington simply replace the U.S. weapons that Russian forces systematically destroyed in Georgia as a humiliating message for Americans? Or does the collapse of the Georgians this month mean that they need greater quantities and more sophisticated weapons to deter Russia in the future?

That may not present an agonizing choice for John McCain, given his muscular worldview and his sustained championing of Georgian links to the West and NATO. He will advocate riding to the rescue, although he is unlikely to call for an arms resupply while tensions stay at their current explosive level.

So we can expect lots of chest-thumping, but no real action, by McCain?

But seriously, how would McCain do more than chest-thump? How could we meaningfully rearm Georgia such that it could repel Russian forces or, as it had hoped, expel them from South Ossetia and Abkhazia, without creating a twenty-first century version of the Cuban Missile Crisis? Speaking geopolitically, why would it be wise, or even sensible to do that?

It makes little sense for Obama to try to out-hawk McCain on Georgia. He cannot do so convincingly. Instead, he must show how his sustained advocacy of diplomatic power can work in shoring up the fragile and imperfect democracy in Georgia.

What does Hoagland suggest, to achieve that? Oops. That's where the editorial ends.

Absurd Hypotheticals

Jim Hoagland presents a hypothetical scenario worthy of William Kristol or Michael Gerson.

Would Iran welcome a newly elected President Obama with a nuclear enrichment freeze or - more likely - by testing him by moving identifiable Iranian militia units into Basra province on a large scale, as some Persian Gulf Arab states may fear?

Not only is the scenario hypothetical, but it's premised upon the hypothetical fears of unnamed Arab states?

If you have an IQ above room temperature, you already know that any U.S. President faced with the movement of "identifiable Iranian militia units" into Iraq will respond with swift, decisive military action. Hoagland's IQ is above room temperature, so what's his agenda? Is it perhaps highlighted by this obsequious hypothetical about McCain?

Or if it is President McCain, will the ayatollahs show something like the Reagan reflex? After all, they greeted the election of a conservative hard-liner in 1980 by releasing U.S. hostages.

Sure. They think G.W. Bush is a real softy, and they're terrified that once elected McCain will... invade Iraq, or something.