I've been in Washington for 16 years now, coming as many did with President Clinton back in 1993. I have seen a lot of changes in my time here, but the rate of change we are witnessing today is breathtaking. Just take a look at a few of the headlines today from a vastly changed political and societal landscape:
Economy Shrinks at Staggering Pace
Obama Announces Iraq Withdrawal Plan
AIG Faces Possible Breakup
Part of Denver's Past, the Rocky Says Goodbye
Broadcast TV Struggles to Stay Viable
Obama's Greenhouse Gamble
Top Officials Expand Dialogue on Race
Playing With Fire In Pakistan
'Great Society' Plans for the Middle Class
The Bill That Could Break Up Europe
There are large and systemic changes underway here in the US and around the world. 20th century challenges, institutions, ideologies, economics, media and even racial understanding are being swept away. A new global political era is surely emerging now, unfolding in front of us, one that our new President is both responding to and attempting to shape. The President's ambitious budget this week was itself the most powerful examples of how much our politics is in the process of changing.
I end my quick morning post with an excerpt from Joe Nocera's column from the New York Times today. Nocera has been writing as intelligently as anyone about the financial and economic crisis, and this column, Propping Up A House of Cards, is an absolute required read:
Next week, perhaps as early as Monday, the American International Group is going to report the largest quarterly loss in history. Rumors suggest it will be around $60 billion, which will affirm, yet again, A.I.G.'s sorry status as the most crippled of all the nation's wounded financial institutions. The recent quarterly losses suffered by Merrill Lynch and Citigroup - "only" $15.4 billion and $8.3 billion, respectively - pale by comparison.
At the same time A.I.G. reveals its loss, the federal government is also likely to announce - yet again! - a new plan to save A.I.G., the third since September. So far the government has thrown $150 billion at the company, in loans, investments and equity injections, to keep it afloat. It has softened the terms it set for the original $85 billion loan it made back in September. To ease the pressure even more, the Federal Reserve actually runs a facility that buys toxic assets that A.I.G. had insured. A.I.G. effectively has been nationalized, with the government owning a hair under 80 percent of the stock. Not that it's worth very much; A.I.G. shares closed Friday at 42 cents.
Donn Vickrey, who runs the independent research firm Gradient Analytics, predicts that A.I.G. is going to cost taxpayers at least $100 billion more before it finally stabilizes, by which time the company will almost surely have been broken into pieces, with the government owning large chunks of it. A quarter of a trillion dollars, if it comes to that, is an astounding amount of money to hand over to one company to prevent it from going bust. Yet the government feels it has no choice: because of A.I.G.'s dubious business practices during the housing bubble it pretty much has the world's financial system by the throat.
If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks "will face their own capital and liquidity crisis, and we could have a domino effect." A bailout of A.I.G. is really a bailout of its trading partners - which essentially constitutes the entire Western banking system.
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