Wednesday, September 17, 2008

'An order for Sec. Paulson'

I’ve gotta be quick here because a call from the federal bail-out specialists could come at any second. I alerted them yesterday that an institution crucial to the financial health of New York-area restaurants, a venerable borrower called Romeo Enterprises, was teetering on the brink of insolvency. If they were willing to lend AIG $85 billion, they can certainly toss a few grand my way.

Then again, the government’s rescue efforts have been decidedly selective. Freddie Mac and Fannie Mae got a bailout, as did the insurance giant whose past CEO, Hank Greenberg, still prompts Wall Street insiders to cross themselves and mutter a protective spell at the mention of his name (he was forced out in 2005 because of fraud allegations leveled by New York’s attack-dog attorney general at the time, Elliot Spitzer, who subsequently dropped the charges). Curiously, AIG got into trouble by insuring very complex financial securities, in effect assuring the backers they wouldn’t lose everything. Investors always say you get rewarded for risk, but the insurer’s role was to provide a safety net so some really big paybacks would be protected. Speculation, indeed.

When it looked as if gazillions would indeed be lost because of AIG’s problems, the government stepped in, arguing that it had to avert economic disaster. And, indeed, the company’s failure might’ve emptied plenty of portfolios and pockets. Just ask the foodservice establishments that counted Lehman Brothers among their major sources of business. Delis and restaurants that served the banker are already feeling the loss, according to news reports, when Lehman filed for bankruptcy only a few days ago.

They and other small businesses are getting walloped because the feds decided Lehman had to sink or swim on its own strengths, whereas AIG is too big of a fish to let flounder.

In other words, if you’re wearing a suit, “Here’s a life preserver.” But if those are foodservice whites on your back, “We prefer to let the market regulate itself.” Size clearly does matter when it comes to portfolios and paychecks.

Maybe those strained delis and restaurants can reach out to AIG’s business associates. Perhaps with a promotional Fat Cat sandwich, made with pork, of course.

And they should be sure to come up with something higher end for the big-portfolio'd sort who’s expected by many in the blogosphere to be brought in as AIG's savior. His name is Hank Greenberg.

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1 Comments:

Anonymous steakman said...

"In other words, if you’re wearing a suit, “Here’s a life preserver.” But if those are foodservice whites on your back, “We prefer to let the market regulate itself.” Size clearly does matter when it comes to portfolios and paychecks."

Don't get me wrong, it is sad but anytime a business puts all its eggs in one basket they are taking a risk. What is the difference between the delis and businesses that depend on a closing obselete military base. Should we shake our fists at the defense department. How about when steel mills closed in Pittsburg? Were the evil steel barons to blame? When baseball went on strike and all the restaurants close to the stadium suffered. Who was at fault? MLB or the restauranteurs who knew going in they depended on the stadium.
The guys who caused this crisis should be prosecuted, but the class warfare bull has got to stop. Every restauranteur in America knows that if you depend to much on one market you are taking a calculated business risk.
When congress changed the rules on what pharmaceutical reps could do, it destroyed that market niche, I didnt hear people screaming about those bastards in congress. Same when the business lunch deduction occured.
Whatever doesnt kill you, makes you stronger. This too shall pass.

Sincerely, Steakman

September 18, 2008 at 8:36 AM  

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