For many, many months now, officials in Washington have been telling us that the government must use taxpayer dollars to rescue huge financial institutions - like banks and AIG - because, otherwise, the world's financial system and the global economy will collapse. As a civilian with no expertise in international finance, I can't claim to have any evidence that those assertions are false. But I've also wondered whether they were, in fact, true - or whether anyone really knew whether they were true or not.
Part of my skepticism comes from language. Whenever our financial experts and political leaders (from Paulson to Geithner to Barney Frank to President Obama himself) talk about this issue, they stop using evidence and arguments and resort to metaphors instead. I haven't heard anyone say that "if AIG goes under, then X and Y will happen, which will lead to Z" (Z clearly being unpleasant). Instead they say that if we don't bail out AIG (or Citigroup or Goldman Sachs), then the whole system of global finance will "collapse" or "implode." Or "freeze up" or "disintegrate." Or "grind to a halt."
Now I like metaphors, but metaphors are not arguments - and, as any good writer knows, metaphors can be ingeniously used to conceal a lack of evidence or clarity.
That clarity and evidence may be sorely lacking on this issue was suggested last week when Maurice Greenberg, the founder and long-time chief of AIG, testified to congress that, in fact, allowing AIG to fail would not have produced a major international collapse. "There would have been a ripple, but it wouldn't have been catastrophic," Greenberg said. "I don't think it would have been disastrous."
Now Greenberg, of course, is a man with an unusually large number of axes to grind (he was tossed out as head of the company a few years ago), and most of his testimony to congress was stunningly self-serving.
But maybe he's right. Maybe we could have saved $180 billion on AIG (and billions more on other institutions), and nothing really terrible would have happened. It's a sobering thought.