Bailed Out AIG Forces Poor to Choose Between Running Water and Food

Via Alternet

So this is what our tax dollars cum bailout paid for? Rewarding a company that ran itself into the ground with risky derivative trading who took up a side job fleecing the rural poor.

Middlesboro and Clinton are two tiny, impoverished towns in southern Kentucky with a combined population of 12,000. In 2008, Middlesboro’s per capita income was $13,189 a year, only a few hundred dollars more than the average worker earned in third-world Mexico. That is if they were lucky to even get a job. Real unemployment hovers somewhere around 30%, and the state is so broke that half the people eligible for unemployment benefits can’t receive them. Life may be tough and most people live in poverty, but that doesn’t mean they can’t be made a little poorer. That’s the lesson locals learned after bailed-out insurance villain AIG took over their water utility and instantly raised rates to squeeze an extra $1 million in profits out of its new customers, forcing some to consider choosing between running water and food.

They bought the largest privately held utility in the country. Meaning they were not subject to the same stringent standards as a public utility.

AIG had reason to be pleased with its purchase. Water utilities are one hell of a profitable business, with international corporations easily making a 20 to 30% profit margin, according to a 2007 report by Food and Water Watch. In the US, federal regulations limit profits to 10%, a pesky rule that companies easily subvert by shuffling their income around and “investing” it in side businesses. These kinds of returns would be the envy of the pharmaceutical and oil industries. How do water companies do it? According to Food and Water Watch, they charge 50% more for services than public utilities and pocket the difference, thereby unleashing the potential of the free market.

What is, for all practical purposes, a monopoly can charge 50% more than a public utility.  What were people going to do, dig wells? Wells can cost a lot of money. As can any other practical alternative. So AIG could not lose. And when the credit crunch started and they were desperate for cash, they simply instituted a new “billing system” which was designed, in essence, to create revenues through late fees.

They never once offered to bail out the people of Middlesboro and Clinton.

If I believed in vengeance rather than justice, I would suggest a public caning for all involved in the creation of this disgusting travesty.


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