Sometimes a reply to a comment grows so far beyond the boundaries of the thread in which it was born that it needs to leave home and make a life for itself over in the user blog.  This is one of them. 

The story was this one:

 [Excerpt:]

Looks like we may soon be learning more about the preferential treatment major banks may have enjoyed in the wake of the AIG bailout.

Last week, we noted Rep. Spencer Bachus's efforts to bring to light the issue of smaller U.S. banks that are allegedly being stiffed on their loans to an AIG subsidiary even as major CDS counterparties (some of them foreign banks) were paid off in full. Bachus is the ranking member on the House Financial Services committee, and he aired his concerns at a hearing and in letters he sent to both Geithner and Barney Frank, the committee chairman.

After we reported this, the Wall Street Journal dug up a couple examples of just this issue, one of which occurred in Bachus' district.

My comment was as follows:

What a bunch of demogogic ka-ka.

The nationality of the counter-parties has absolutely nothing to do with anything other than trying to attach a nice jingoistic stench to a story that's about whether parties to entirely different classes of contracts are being treated differently.

The guys in the story are real estate developers who entered into partnership agreements with an AIG affiliate to develop shopping centers. Contractual disputes over payments and capital contributions in those kinds of deals, especially when the economy goes south, are a dime a dozen. Whether AIG has a valid basis for witholding payment under those agreements--e.g. occurance of an event of default or failure of a condition specified in the agreement--is unknown and there's nothing in anything I've seen that precludes the possibility.

Apples and oranges.

Show me an American credit default swap counterparty who's getting the shaft while a foreign company in the exact same kind of contract is getting paid, and I may work up some jingoistic outrage. Otherwise, its just cheap Lou Dobbs hackery.

The reply that made me reailze I had failed miserably in conveying my point said:

I'm sure glad that "formerly known as NC Steve" knows the details of these issues when no one else in the country, except perhaps the perpetrators, do.

Perhaps I'm just a conspiracy nutcase. But it certainly seems to me, taking everything into consideration, that the Wall Street types, both in and out of the Administration, are far far more concerned with the financial well-being of the people they go skiing with than they are with the well-being of the people who grow and process our food, make whatever we still make in this country, take care of ourselves, our children, our parents, etc.

I am a solid Obama supporter, but this policy of rewarding the greedsters who have torn down our economy while paying little regard to the needs of the 320 million other Americans is NOT a lack-of-change I want to believe in.

And here's what I apparently failed to cogently convey the first time.

Without getting into whether I agree or disagree with the viewpoint of the reply, my point, and my only point, was that the issue of nationality was a typical politician red herring.

I don't know much about these transactions.  I said that.  No one else does either, however and I tried to point that out too. 

What I did do, however, was read the links.  And based upon both the TPM and WSJ stories in the links, it appears that the guys doing the complaining are commercial real estate developers who partnered--not borrowed from, partnered with--with AIG and are upset because, for unspecified reasons, AIG stopped pouring more cash into their projects. 

If AIG was treating companies it parterned with in foreign real development projects, or foreigners with whom it partnered for American real estate development deals, differently from the way it treats Americans with whom it partnered in American real estate deals, I'd concede cause for nationalistic outrage.  If AIG treated foreign-counter parties to credit default swaps differently from the way it treats American counter-parties to credit default swaps, I'd concede cause for nationalistic outrage. 

However, the only real question in this matter is whether it is fair for very differently situated creditors to be treated very differently by AIG.  Period.  One can fairly debate that question, though fair debate would require a lot more detail than has been released.  Based on what has been disclosed, however, nationality has absolutely nothing to do with this story.  

Personally, I don't feel like my financial or emotional stake in the financial well-being of commerial real estate developers is any greater, or any smaller, than my emotional and financial stake in the well-being of the counter parties to AIG's credit default swap agreements.  To the extent that the banks who lent to these developments are getting less than 100% of what they are owed in cash, I would want to know whether they are also getting title to collateral--e.g. the property being developed--to know whether they were really getting a raw deal.  But all three classes of investors played a big part in creating the mess we're in now.  The developers, the banks that generated the loans that were being sold and packaged in collateralized debt obligations and the insurers like AIG who, for a price, created the illusion that risk could be properly asessed without knowing anything about the quality of the underlying loans.  So even though AIG was apparently involved in both ends of the mess, I have a hard time working up a lot of outrage over differential treatment between the other two classes. 

And Baucus knows that if the matter were framed in those terms, the media and public indifference would be more general.  That's why he, being a Republican, injected the word "foreign" into the debate.  Of course he did.  it's what he knows and It's all they got.  It's all they've had for years, now.  And for his part, Barney Frank knows that standing in front of the jingoism train at a time of great public fear and anger is the job allotted by the Constitution to senators and the president, not representatives. 

So yeah, I admit I don't give a hoot in hell whether an LLC set up to replace trees with strip malls fails or whether the banks that funded them--and who at least had every opportunity to properly evaluate the risk--get stiffed.  However, it bothers me a lot when politicians, knowing it to be completely irrelevant, drag nationality into a dispute in order to drum up outrage among people who are already angry and scared.  It is the worst, most dangerous, most destructive kind of demogoguery, the only kind of demogoguery that can bring down the Republic. 

We are afraid, and with good reason.  And we are angry because anger and fear are opposite sides of the same marred coin.  However, we all have very recent experience of what can happen when politicians are allowed to cynically exploit fear and anger.  This isn't ancient history, it's not tales of Father Coughlin and Huey Long or stories of campfire mutterings about dictatorship among the Army of the Potomac's officer corp.  It's history we all lived through.   

We watched it unfold over the course of five years.  We saw the Republic taken to the very brink of tyranny before the people began clawing the country back from the fearmongers in what I truly believe may have been a last-chance election for democracy. 

As I've indicated a time or ten, I am not a fan of either fear or anger as decision-making tools.  But if we can't stop ourselves from being scared or afraid, and evolution has ensured that we usually cannot, we at least need to hang on to enough presence of mind to remember that those emotions make us vulnerable to illogical arguments.  And, in particular, I would hope that what happened in this country from 2001 to 2006 has at least taught us that times when we are scared and afraid are when we have to be most careful about letting politicians exploit our emotions for their own ends.  Just as in 2001, the Republicans, and perhaps even a few Democrats, have agendas of their own that do not necessarily coincide with remedying our real problems.  It is foolish and dangerous to let them harness our very real fear and anger to  their ends by mouthing jingoistic semantic nullities calculated to provoke knee-jerk reflexive responses.