Read world-renowned Harvard economist, Greg Mankiw’s take on the AIG bailout, here.

World-renowned Harvard Economist, Greg Mankiw, had the following to say about US Taxpayers bailing out international banks and insurance companies on Monday: (see his post in its original format by clicking here.)

More Capital for the Financial System

Doug Elmendorf and Paul Krugman seem to agree that the government should be putting capital into banks and other financial institutions, in exchange for a share of bank equity, rather than using taxpayer dollars to buy bank assets that no one else wants at prices no one else will pay.

See also Sebastian Mallaby, who conveys this proposal:

Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. Banks don’t do that on their own because it would signal weakness; if everyone knows the dividend has been canceled because of a government rule, the signaling issue would be removed. Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they don’t want to signal weakness and they don’t want to dilute existing shareholders. A government order could cut through these obstacles.”

U.S. Central Bank commits US taxpayers to foot 100% of $85 billion AIG bailout, despite the company’s INTERNATIONAL existance and importance (read-bailed out at behest of foreign central banks with only US tax payer money!!??)

Click here to read a Great Opinion Piece  (‘The fleecing of America’) concerning America’s new, diminished role as a pauper nation amongst the world’s new “wealth centers” in China, India, Brazil and the Persian Gulf States and about the lack of foreign investment support in helping to save the international conglomerate AIG (billions in U.S. taxpayer dollars spent to save international company????) Written by Roger Cohen, Published in the New York Times on Sunday, the following is an excerpt:

“…But toxic mortgage-backed securities were pedaled by plenty of foreign banks. And the decision to pour $85 billion of U.S. taxpayers’ money into the rescue of American International Group (A.I.G.), the insurance giant, followed appeals from foreign finance ministers to Henry Paulson, the Treasury secretary, to save a global company.

Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, told me: “Paulson said he was getting calls from finance ministers all around the world saying, you have to save A.I.G. Well, they should have been asked to contribute to the pot.”

Frank has a point. (He should coach Barack Obama on how to put economics in plain language.) As Frank said on “The Charlie Rose Show,” “I don’t think the European Central Bank should be free to spend the Federal Reserve’s money and not put any in.”

I know, you reap what you sow. Nobody’s itching to help the Bush administration. World central banks did inject billions in concerted action to help stabilize money markets. But the U.S. has essentially been on its own. Now foreign banks with U.S. affiliates will want a slice of the $700 billion bailout. That doesn’t make sense until the burden of this rescue starts reflecting a globalized world.

I asked Frank why Paulson and Ben Bernanke, the Federal Reserve chairman, did not get more foreign support. “I think it’s a perverse pride thing,” he said. “We don’t ask for help. We’re the big, strong father figure. But let’s be realistic: we’re no longer the dominant world power.”

It’s time for a responsibility shift. Call it the Hirst reality check. If he can sell a formaldehyde-pickled sheep with gold horns for millions while Lehman goes under, perhaps it’s time for everyone to help a little when Americans get fleeced.”  😦