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There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) an

There's a bit of a difference between offering a higher interest rate to someone who just ran their business into the ground (and needs a bailout to survive) and racism. Lenders take creditworthiness into account all the time. I'd have to image destroying your company, with your only other alternative being bankruptcy, as being a valid reason for having a higher than normal interest rate. There's certainly some risk there, and there isn't anyone who was going to come along and bail out the government if their bailout money was lost by AIG. There was a greater than 0% chance that the government would end up with 0$ (losing everything they "invested"). In order for them to agree to take on that risk, they needed a suitable interest rate in return. At the time the deal was made, comparable "junk" bonds were at or above that interest rate. It's just the return that investors want for such a risky investment. It's not at all like racism.

smsm42 14y ago
There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accept that some voluntary deals can be unfair. >>>> In order for them to agree to take on that risk, they needed a suitable interest rate in return. Of course. Nobody doubts that and nobody claims the money should have been provided for free. What is argued is the conditions were unfairly onerous. This may be pure bullshit and conditions might have been just fine, but voluntarity does not prove or disprove it, it is irrelevant once you accept, as US law does, that voluntary deals can be not OK. You can not have one without the other.
- viscanti 14y ago
  The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class. Even given that, a 14% interest rate and being asked to pay back contractually obligated debt don't seem to be onerous. Companies (and individuals) with poor creditworthiness are asked to do that all the time. It's certainly not a historically onerous agreement, and it's in-line with the returns investors were seeking for similarly risky investments at that time.
  - smsm42 14y ago
    So what you are saying some people are better than others and have preference before the law because they are "protected class" and since AIG shareholders do not belong to this class the law and fairness works differently for them. I see.

smsm42 14y ago

There is a difference, of course. However, if you accept the voluntary deal can be unfair, then only consistent way to treat it would be that any voluntary deal could be unfair. Otherwise you are basically saying "it's unfair only if I don't like the guy who's benefitting, but if I don't like the guy who's getting the short end of it, that's fine". You can not bring voluntarity as objection and at the same time accept that some voluntary deals can be unfair. >>>> In order for them to agree to take on that risk, they needed a suitable interest rate in return. Of course. Nobody doubts that and nobody claims the money should have been provided for free. What is argued is the conditions were unfairly onerous. This may be pure bullshit and conditions might have been just fine, but voluntarity does not prove or disprove it, it is irrelevant once you accept, as US law does, that voluntary deals can be not OK. You can not have one without the other.

viscanti 14y ago
The examples you've given for voluntary deals not being OK were for protected classes. There's no such protections for companies who have run their company into the ground and need a bailout. Agreeing to a deal, no matter how onerous the contractual requirements is perfectly legal if you're not a protected class, and AIG was not a protected class. Even given that, a 14% interest rate and being asked to pay back contractually obligated debt don't seem to be onerous. Companies (and individuals) with poor creditworthiness are asked to do that all the time. It's certainly not a historically onerous agreement, and it's in-line with the returns investors were seeking for similarly risky investments at that time.
- smsm42 14y ago
  So what you are saying some people are better than others and have preference before the law because they are "protected class" and since AIG shareholders do not belong to this class the law and fairness works differently for them. I see.