Saturday, February 28, 2009

the dreadful murk

In Merezhosky’s essay on Gogol and the Devil, he quotes a wonderful fragment from Gogol:

“Life’s dreadful murk passes by, Gogol writes in one of his scattered notes, “and there is still a profound secret hidden here. Is this not a horrible thing. Life, raging and empty – is it not a dreadfully great phenomenon? … life.”

Which gets us to the perhaps less extensive but equally dreadful murk of AIG.

AIG is set to sink the market to another low this week. It is about to declare the greatest loss any company has ever suffered in one quarter: 60 billion dollars. AIG is determined to prove that Gogol is a very 21st century writer, since it was making money hand over fist on the 21st century equivalent of dead souls – credit default swaps. Conveniently unregulated, a legacy of Phil Gramm and Bill Clinton, AIG gouged on an instrument that was premised on … well, on simple insanity. In any book on non-linearity, they will explain linearity by a population example. Say you have two rabbits and every year they have little rabbit babies, that mature in a year and have more rabbit babies. It is easy to show that, theoretically, in a thousand or so years the universe will be full of rabbits. This is a mathematical truth, but the universe is full of things like death and predators, and so we are not, at the moment, being choked to death by copulating rabbits. Missing the entire point of this exercise, AIG staked everything on the idea that the universe would soon be filled with infinite prices on houses. It is to laugh, except of course for the nonfunny part, which is this unbelievable belief enriched a couple hundred AIG employees, and of course is being paid for by the U.S. government. The estimate is that the government will eventually fork out 100 billion dollars to save this innovator in financing, this titan:

‘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.”

“In this dreadful murk those who have been blinded go wandering about, appearing as phantoms to one another. “I can’t see a thing,” moans the mayor, his mind befogged. “I can see what looks like a pig’s snout instead of faces and nothing else.” In The fears and Terrors of Russia, Gogol explains the Devil’s mirage as follows: Remember the Egyptian darkness. … Pitch-black night suddenly enveloped them amidst broad daylight: dreadful figures glared at them from all sides; hideous decaying specters with melancholy faces rose up before them… they were fettered not by chains of iron but by fear, and robbed of everything…”

At one point – was it only last year? – the chains of iron looked like the Goldilocks economy. But it turns out that Goldilocks ate from the poisoned plate, and before she even got to take her rest, she slumped over and died. Sadly enough, it is my generation – which the newspapers insist on calling Boomers – the people who came of age in the seventies, who are now standing patiently in line, trying to fix the hole that AIG cut from under their feet.

“Very humbling,” said Pat Gericke, 61, of Manhattan who has had a successful interior design business for 20 years that suddenly went dead last fall. “I never thought I’d be at one of these.”
“First job fair,” said Joe Palmieri, 54, of East Hanover, N.J., an I.T. supervisor for Novartis pharmaceuticals for 29 years before being laid off recently. “This is all new for me and my family. I have to keep a positive attitude, stand on my own two feet, otherwise you fall to the bottom.”

Greg Kramer, 53, a buyer for Video USA for 15 years before being laid off Nov. 12, woke at 3 a.m. in suburban Massapequa, was on a 5 a.m. train, and at 7:25 was one of the first of the 650 who had paid $20 (the main job fair is free) to attend the early bird seminar, “Coffee With Tory.” “I don’t mind being here so early,” he said from his fourth-row seat. “I’m going through my notes to see who I want to meet with.”

Which reminded me of this:

“The roads to Syria and Jordan, the two most common destinations for Iraqis fleeing the war, are fraught with dangers. Monkath Abdul Razzaq, a middle-class Sunni Arab headed to Syria, watched dolefully as thieves plucked $11,000 from a hiding place in his car. Assad Bahjat, a Christian, also reported being held up on the road to Syria, after waiting for a gun battle to cease near the volatile city of Ramadi.
''Wherever we are, we thank God for every day,'' Mr. Bahjat said in an e-mail message after reaching the heavily Christian town of Sednaia, ''because we are alive and not dead.''

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