Archimedean Theorem III – Obscurity’s Reign is Ending

AIG reassured its shareholders – the taxpayers of the United States – that, given more time, the probability of repaying bail-out funds increased. When AIG CEO Robert Benmosche informed the markets that it would take at least “two years” to sell enough company assets to repay taxpayers, I was struck with the incongruity intrinsic to the logic that sees that the strategy to “repay” the shareholders one should off-load value from the company to monetize a repayment. Did anyone stop to realize that, between now and then, to “repay” us, they have to devalue our stock by selling assets? What seems to be missing is that the American taxpayer continues to be swindled out of much more than the $182.3 billion provided to AIG to keep if from “failing”.

Just so we keep some semblance of accountability, I hope you all saw that the Federal Reserve Bank of New York (a private shareholder with no reportable financials) exchanged $25 billion in debt for preferred equity. The blatant nature of the lies that the public are being told is beyond the pale when AIG’s CEO characterized this transaction as a, “clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back.” This, in any other country’s use, would be held as a case study in public corruption. Former New York Attorney General Eliot Spitzer, University of San Diego’s Frank Partnoy, and University of Missouri’s William Black had the decency to call for a release of information about the true beneficiaries of the bail-out in their New York Times op-ed this Sunday (December 20, 2009) – a call that goes part way. Their request for transparency MUST include a full disclosure of the nature (including fees paid but not reported) of the Federal Reserve Bank of New York’s debt conversion program.

When one considers the recent rush to repay bailout funds (or convert them into nonsense preferred equity), a clear question rises to the fore. With the approximately 750 institutions bailed out to the tune of approximately $450 billion in TARP alone, why are so many firms attempting to accelerate an exit before year-end? Regrettably, the answer is found in one word – accountability.

The public has been hypnotized by those who seek to continue to steal as much as possible from the public treasury before the music stops. However, those who believe that they control the illusion now face a certain, uncomfortable future. That future is comprised of a growing number of people who are seeing that to sit idly by and watch a bank being robbed is no longer acceptable. When Time Magazine picks Ben Bernanke as their Person of the Year, when the Nobel Peace Prize is awarded to a President who is expanding conflict in Afghanistan (and soon Pakistan and Iran), and when “repayment of taxpayers” involves converting public debt to private equity, the insanity is deafening.

"This is tyranny, which through stealth or force appropriates the property of others, whether sacred or profane, public or private, not little by little but all at once. If someone commits only one part of injustice and is caught, he’s punished and greatly reproached – such partly unjust people are called temple-robbers, kidnappers, housebreakers, robbers and thieves when they commit these crimes. But, when someone, in addition to appropriating their possessions, kidnaps and enslaves the citizens as well, instead of these shameful names he is called happy and blessed, not only by the citizens themselves, but by all who learn that he has done the whole of injustice."
Socrates in Plato’s Republic.

Just for the record, our collective, greatest example of the above didn’t receive much press but one day will come back to haunt our collective conscience. When Standard & Poor’s added SAIC to the S&P 500 Index officially on December 18, 2009, they rounded out the week of moral carnage. Those familiar with SAIC should recall that the company had difficulty going public in 2006 due to “accounting irregularities”. Among the most tedious and opaque were the mysterious missing funds surrounding the Greek Olympic security contracts – a matter that in its most recent 10-Q filing is still unresolved. Are you listening? A public company, now a component of the S&P 500, is still failing to have accountability for a contract entered in 2003 for work for the Greek Olympic security. Six years later and they’re protecting WHAT??? Where is the “missing” $120 million? What security did it purchase?

And what do AIG, the recent awards, SAIC’s entry onto the S&P 500, and Greece’s impending bankruptcy all have in common? Let’s just say that bankruptcy has a remarkable and negative impact on intentional obscurity – particularly those associated with missing money. The government couldn’t let AIG fail, not because it was vital to the economy. Rather, it was vital to preserving secrecy of transactions that the government and its shareholders never wanted in the light of day. SAIC, in their most recent financial statement (page 16 and following) has conveniently shared the spotlight of corrupt practices with Siemens building the case for the fact that they are potentially the victims (clearly not the perpetrators) of corrupt transactions associated with Olympic security contracts. And, when the EU has to review the financial transactions of the Greek government per euro policies, won’t it be interesting to see where SAIC’s $120 million showed up on the books?

I wonder if one of this weekend’s editorial writers has more knowledge of the contents of e-mails then first meets the eye. After all, Eliot Spitzer was New York State’s Attorney General on October 20, 2005 when Bulf Oil, that mysterious oil-for-food company was convicted of grand larceny. For those of you not familiar with it, the “Romanian Company” Bulf Oil – is one of the most fascinating untold stories of the run-up to the Iraq war. Even more fascinating is the Reston, Virginia trading company, Midway Oil Trading Inc., which wired funds through one or more New York banks to subsidize the oil-for-food scam. Midway Oil Trading Inc. reportedly had offices in Virginia, Switzerland and Greece. Wouldn’t it be interesting to find out whether any of the folks implicated in the web of obscurity actually were outed by bankruptcy?

Let me be blunt. The real story of the bailout is not one of “too-big-to-fail”. Rather it is one of “too-many-skeletons-in-the-closet”. So we arrive at Archimedean Theorem III – Accountability and Transparency are the ultimate arbiters of public good. As we have seen with carbon credit indulgences, Olympic security for games 5 years over, oil-for-food, peace through war, and Copenhagen’s absurd conclusion, when subterfuge and obscurity are utilities of choice, no public good will follow. Yes, we need the AIG bailout records. Yes, we need the Federal Reserve audit. Yes we need genuine accountability for the propagation of a war that has NOTHING to do with freedom. Obscurity’s days are numbered as long as you, the reader, decide to wake up. If not, this blog, and my efforts serve as an epitaph on us all. WAKE UP!