If you’re anything like me, trying to figure out exactly why the economy tanked is no easy task. That’s why I’ve been listening to Marketplace almost daily for the past few months and, more recently, Planet Money, an NPR podcast where they try to explain the situation to everyday people like you and me. I think they do an excellent job because they, like me, were complete neophytes on these issues when it all started. We’re learning together.

This morning I read an article in The New York Times about the government restructuring the bailout of AIG and it raised a question for me. I sent it in to Planet Money and hopefully they will answer it for me. But I also wanted to share it here, in case they don’t and someone who reads this can help me understad:

I was reading an article in The Times just now about the government restructuring its bailout of AIG so that now we’re buying $40 billion worth of preferred stock. Apparently, the CDOs that AIG owns will be purchased by a separate entity set up by AIG in order to get those toxic assets off the company’s balance sheet. According to The Times:

A.I.G. would contribute $5 billion to the entity, which would buy $70 billion of the securities at 50 cents on the dollar, or $35 billion. The remaining $30 billion of the purchase price would come from the government.
As I read that, it means that We the People will own the vast majority of a company created to hold insurance on bonds that, in this economy are more likely than not not to be paid back. So if I understand everything I’ve learned about CDOs on Planet Money, that means the new entity (ie: the federal government, ie: you and me) is going to be on the hook to pay back all the people/institutions that bought insurance via those CDOs. And, as I understand it, buying those CDOs and providing that insurance is what got us all into this mess in the first place (see: those poor Wisconsin schools and that German/Irish bank).

So, while I understand the need to prop up the economy by bailing out these massive instittuions that purchased all these CDOs and then had to start paying them back, how is it a good idea for the government to own these CDOs and now be on the hook to payback investors if the bonds included in them start to fail? If that risk is realized, doesn’t that just compund the problem, except now it’s the government that needs a bailout?

On top of that, at Planet Money, I read that people don’t want to buy these CDOs for 10 cents on the dollar, but in that Times article, it says the government is paying AIG 50 cents on the dollar for $30 billion worth of the CDOs or toxic assets. I don’t get that either.

This is awesome in so many ways. Via Marketplace (yes, I am obsessed), a tale of an espresso customer in DC who ordered three shots of espresso over ice and was refused because it’s against shop policy to sell that drink.

And, you know it’s coming, the customer and the Murky Coffee shop owner both have blogs where they’ve written about it. The volleys from customer and owner are pretty amusing. I gotta say that I love the tip the guy left and would like to point out that the reason for not serving the drink as a matter of policy (” Pouring espresso over ice creates unpleasantly acrid flavors.”) doesn’t ring entirely true since they also give a second, “more mundane” reason:

More than half of the customers who we gave “iced espresso” to (back before our now infamous policy) would take that cup to the condiment bar and pour 8-14 ounces of milk out of the dairy pitcher…

Uh-huh. So you used to serve espresso this way, but decided that it doesn’t taste right and oh, people also turn it into a “ghetto latte” regularly. Seems like they’re using the taste thing to justify an unpopular policy to me. When I used to drink doppios on ice (two shots over ice) I never noticed “unpleasantly acrid flavors.”

I do appreciate the owner’s feelings about customers being right though. I have a long-standing dream to open my own coffee shop. When I do, I plan to have a sign on the register warning people that if they’re going to act like dicks to us, they’re going to get it right back.
Anyway, the posts are pretty amusing.

Ah greenwashing. Truly impressive when done well. For example, Fiji water is going to be carbon “negative” by 2020.

Cool? Not so fast:

• 5,500 miles per trip from Fiji to Los Angeles (the closest Fiji Water destination point in the US)
• 46 million gallons of fossil fuel
• 1.3 billion gallons of water
• 216,000,000 lbs of greenhouse gases

via Marketplace