IS BLACKMAIL BEHIND (IRON) MAIDEN LANE III?

Back in December I tried to outline one of the more complex components of our bailout effort: The Maiden Lane programs. I'm glad I did it, especially now since it appears that the Federal Reserve doesn't seem to want to share information about (1) how one of the programs functions, (2) who it serves, and (3) who's getting the money.

Shedding a little light on the Maiden Lane programs seems more important today given that Super Fed Bailout Recipient, American International Group (AIG),  raised eyebrows by working with the Fed to keep certain aspects of the program quiet. Worse, AIG somehow found it "necessary" to pay out  $100 million in bonuses which would, ironically enough, catch the media's attention.

Because the Fed appears to be trying to conceal what it's doing, I'll briefly try to explain the Fed's Maiden Lane program (again) here.

As I noted back in November, I find it amusing that the Federal Reserve is using the flowery sounding term "Maiden Lane" to classify the three bailout programs: Maiden Lane I (for Bear Stearns), Maiden Lane II (for the general AIG bailout), and Maiden Lane III (for AIG default swaps).

If we cut through the fog, in real simple terms, these Maiden Lane programs forcefully extract money from the American taxpayer and transfer it to America's failed - and incredibly parasitic - financial institutions. Because authorities during the medieval period used torture devices called Iron Maidens to extract goods (i.e. confessions) from unwilling participants (heretics and other "trouble makers") I suggested in November that it would be more appropriate to call the Federal Reserves's Maiden Lane programs Iron Maiden Lanes. Why? Because America's Iron Maiden Lanes also forcefully extract goods (taxes) from unwilling participants (U.S. taxpayers fed up with parasitic sociopaths on Wall Street).

In many ways, the only difference between forcefully extracting confessions and forcefully extracting taxpayer dollars - both used to support crippled systems - is that the U.S. taxpayer is not physically tortured, and is kept alive. The Federal Reserve, after all, requires living taxpayers so that our Iron Maiden Lanes have a continuous source from which it can extract and transfer taxpayer dollars in the future.

If we look at the recipients of Iron Maiden Lane III - bailout money for AIG credit defaults - it seems clear that money is being funneled from AIG to the biggest banks in the United States and across Europe.

If I'm reading my tea leaves correctly, as I suggested here back in December, it seems that AIG may be little more than a slush fund for appeasing European governments and their markets, who once held the U.S. economy and it's regulatory regime in high esteem. Why? Because the Europeans may have made it clear to the U.S. government "this is your mess, you caused it, you clean it up ... or else we're not supporting the dollar." 

Is this plausible? I'm not sure, but until we get some answers from the Fed about the payout and distribution of AIG funds I'm inclined to think so. Think about it. Why would anyone allow, or encourage, AIG to muddy the bailout waters, and then allow them to pay 100 cents on the dollar for collapsed insurance contracts that were little more than failed bets among thieves? Massive payouts on an unpopular bailout program, which makes undeserving incompetents rich(er), is indeed something to hide. But why risk looking naive and incompetent? No one wants that kind of stupid following them around for life.

In fact, I think these guys are pretty smart. This is what leads me to believe that AIG could be a slush fund program designed to help keep the dollar, and European banks, out of trouble. While the background for these kind of financial arrangements differ from agreement to agreement, bargains like this have been struck in the past.

For example, according to political economist Benjamin Cohen, the U.S. struck an "implicit bargain" with it's allies in the 1970s when it ran into balance of payment problems. The United States could act unilaterally abroad, but only as long as it bore the brunt of defense expenditures during the cold war. In return America's allies would continue to tolerate U.S. budget deficits. To be sure, the rationale for this kind of monetary cooperation was much more noble because of the cold war. Still, the intended outcome remains the same. Keep the dollar afloat.

This would help explain why the Federal Reserve isn't so keen about revealing the details about AIG's Iron Maiden Lane III program. It effectively makes AIG's unfunded insurance program credit default swap program less of a bailout to save the banking system and more of a slush fund to save European banks, which will ultimately help maintain the position of the dollar around the world.

The American taxpayer already isn't happy about bailing out our parasitic banksters. Can you imagine how they would feel if they learned that we're also funneling money into Europe to save governments, and their banksters, who are effectively blackmailing America?

Then again, it is possible that the innocent version of the AIG bailout is behind all of this: The Fed was really trying to save America's banking system. But here's my question. If this is the case, why all the secrecy over Iron Maiden Lane III? No one's that stupid, I think.

Just something to think about.

- Mark