I’m willing to bet AIG CEO Edward Liddy has been doing a bit of soul searching this week. Perhaps he’s asking himself what he could have been thinking when, at the age of 63, he came out of a very comfortable, well-deserved retirement to be of service to his country. Or so he thought. Fast forward six months to a crowded Senate chamber where protestors want to string him up in the town square. Not exactly the situation for which he volunteered.
Liddy, the former head of Allstate, agreed last fall to try to unwind and turn around the disastrously overleveraged American International Group, after the company’s former managers went on what can only be likened to a booze-fueled gambling spree with money it had no hope of repaying. So far the job has been both thankless and penniless.
Without question, Liddy is not the personification of greed, as the weak-minded would have you believe. Rather, he is the perfect symbol of the unintended consequences of government “assistance.”
When the government forked over $165 billion of taxpayer money to AIG last year, it figured, correctly, that it now owned the company. The problem, however, is that the people we’ve elected to run the government can barely manage the books of their own over-leveraged and under-performing organization.
Politicians have a flair for flare, but not for finance. So their first managerial instinct is to lock Liddy’s head and wrists in a revolutionary-era stockade and lash his backside for bonuses he didn’t initiate.
The price of all this theater is TALF. Quietly across town, while Liddy was taking his public lashings, the Fed’s Term Asset-Backed Securities Loan Facility was trying to get off the ground. The aim of TALF is to use government financing to encourage private hedge funds to buy toxic assets from banks and, oh yes, jolt our financial system out of its coma. It’s a program that has elicited hope from even the most cynical and pessimistic.
But as high-financed, low-profile investors went to set up their TALF accounts, they strolled past Mr. Liddy nailed to his cross, and paused. In Washington, no good deed goes unpunished. Not to mention a good profit. And it doesn’t take a genius to see that doing a deal with the government could land even the most well-intentioned in a humiliating and painful fight for their life.
So when you read this week that the very promising TALF is off to weak start, blame the vilification of Edward Liddy. And then ask if all the government’s good intentions will come to the same disastrous end.
We live in a country that has grown strong and dominant on the rule of free markets, and we cannot depend on the government to solve our problems, no matter how dire they might seem. The government is good at building roads and armies, but not so good at running a lean and profitable business. We should not allow it to try.
In fact, we should keep it far, far away.
– Melissa Francis is the host of CNBC’s The Call and MSNBC’s It’s the Economy.