Who is really at fault in the recent AIG fraud? The people of this country and the Congress are being convinced the Government had to step in because the ramifications were global and the image of the U.S. would suffer.
When a U.S. corporation sells internationally, who is responsible for the purchases? Does the buyer not have to do their due diligence because they can assume a U.S. corporation is legitimate? Even domestically can we really rely on the government to protect us in every purchase? And if that was the goal of government (which it isn’t), shouldn’t we or other countries be able to demand retribution from the government when we are wronged?
This is exactly the path we are going down with AIG and it is a very scary precedent to be setting. To what end do we expect and hold the government accountable?
At the start of the 19th century there was no government ensuring protection from bad deals. We learn from Thomas Jefferson’s purchase of insurance that it was his due diligence and free markets that forced insurance agencies to meet the needs of consumers. Not government assurances.
On 17 August 1800, Thomas Jefferson wrote in his memorandum books, “Insured my houses with Mr. Ast as follows,” including the estimated value, insured value, and premium for Monticello and four different outbuildings.[1] “Mr. Ast” was William Frederick Ast of the Mutual Assurance Society of Virginia. Jefferson had first considered purchasing insurance for Monticello in 1795, and even went so far as to begin filling out the insurance declaration form,[2] but he had significant reservations because of the way the company had been set up under a 1794 act.[3] The Mutual Assurance Society’s constitution was later amended,[4] and Jefferson purchased insurance in August 1800 for the “Dwelling house” (Monticello), “Outchamber” (South Pavilion), “Stone house” (the structure now known as Weaver’s Cottage), the joiner’s shop, and stable. The total premium was $91.30. At that time, premiums were intended to be paid only once; after 1809, Jefferson began paying an annual premium of $12.84. Jefferson maintained the policies until at least 1823, with only a short gap in coverage in 1820.[5]
The emphasis is mine but the point is that we can’t rely soley on government to protect us from bad deals. Those who bought credit default swaps from AIG need to pay the price if they didn’t do their due diligence. And if they did and AIG was fraudulent, AIG needs to bear the consequences. Not the Federal Government and the people of the U.S.