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It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care
And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...
Had the problem been limited to NINA loans going down, this problem would NOT exist.
It was a whole lot more complex than just the mortgage crises, folks.
That was the snowball that started the avelanche but the snow that is flling is from DEREIVATIVE DEBT FINACIANG.
This according to how I understand the problem which is, I'lll readily admit the rather sketchy understanding I get from the media.
Yes it was from more than just mortgage... but it does play a big part as it reaches far across the market impact
This mess is the TRUE DEFINITION of Murphy's Law, what can go wrong, will go wrong.
It is a multitude of mistakes and bad business practices due to greed.... all not even closely related, but where if just one of them was not done, the whole ponzi scheme would not have flourished.
Had the problem been limited to NINA loans going down, this problem would NOT exist.
It was a whole lot more complex than just the mortgage crises, folks.
That was the snowball that started the avelanche but the snow that is flling is from DEREIVATIVE DEBT FINACIANG.
This according to how I understand the problem which is, I'lll readily admit the rather sketchy understanding I get from the media.
Yes it was from more than just mortgage... but it does play a big part as it reaches far across the market impact
All those NINA morgages combined don't amount to a fart in this economic hurricane, is what I'm being told, DD.
They might have started this disaster down the road to ruin, but they're hardly the cause of it.
$9 TILLION in guantees we're giving to banks is more than all those NINA morgages combined.
That's idiotic, no offense. The sub prime loans were capable of creating a small recession but they are not responsible for the crap AIG was pulling. That can be tied directly to deregulation...letting an insurance company have the ability to get into the gambling business, basically. I can't believe people still think the sub prime mortgages are the cause of all this mess.It goes in line care.. AiG is in a lot of it's trouble with credit protection.. that credit stemming from many things including mortgage.. and that is because of government adding pressure to have companies provide loans to ones who would not normally qualify.... not just that, but they were also tied up in market risk, and not knowing as to the true impact a lot of government policy would eventually have on the market... a LOT of this is hand in hand, care
And yes.. THEY should have researched better... not just went on default risk.. not just basking in the glory of increased income at one point...
insurance is nothing other than the gambling business. all an actuary does essentially is calculate risks and assign them certain values. that AIG's actuaries didn't perform well is why AIG is in the shitter. they defaulted to picking the proverbial fastest horse and not only did the horse not win, they had to shoot it coming around the far turn.
there's no single causative agent for the current mess; it's cumulative and has had lots of help from all kinds of businesses, politicians and plain old ordinary people.
arlen spector just said, let the employees sue for it. that is their legal recourse...
the gvt should stop them from happening, they are not binding under these circumstances...
if the gvt loses their case, they will get paid.
he said the proper procedures out there can handle this within the law...
what’s good, what’s bad about the aig bailout
march 17, 2009 12:15 pm et | rick newman | permanent link | print
"there are times when one would like to hang the whole human race, and finish the farce.”
the latest surreal twists in the aig bailout bring to mind mark twain, who could spot folly as if he were hunting for it with a spyglass. Had twain had aig to work with as raw material, we’d probably have another couple dozen enduring epigrams skewering the greedy and the foolish.
Many americans would like to finish the farce and simply cut aig off, especially now that the company has paid $165 million in bonuses to executives at the very unit that nearly caused the firm’s downfall and triggered an unprecedented taxpayer bailout that now totals $170 billion. To almost everybody, it seems self-evident that traders shouldn’t be rewarded for wrecking their company and then burning through vast amounts of public funds. Yet aig insists it is legally obligated to pay the bonuses, because of contracts signed before the damage occurred and taxpayers got involved. There have also been suggestions that the rascals who devised these complex derivatives deals may be the only ones who know how to unwind them, so aig has no choice but to keep them around - and pay for the privilege of their company. In other words, the bonuses amount to extortion.
[see the real harm caused by the aig bonuses.]
okay. Breathe deep. Think calming thoughts. Find your center. Amidst this outrage, it’s worth keeping in mind that the aig bailout is actually doing some good. It’s also a kind of learn-as-you-go experiment that’s never really been done before. Here’s a rough scorecard of what’s working and what’s not:
What’s working
the aig bailout has helped stabilize the financial markets. Take a moment to revisit september 2008. That’s when lehman brothers failed, merrill lynch almost did, and aig would have been forced into a chaotic bankruptcy if the feds didn’t arrange an emergency $85 billion loan. With a bit of hindsight, it’s starting to seem that aig, which brokered more than $2.5 trillion worth of derivatives known as credit-default swaps held by many of the world’s biggest banks, was the death star of that troubled troika.
We’ve survived the lehman bankruptcy, after all, and merrill found a buyer. "the real surprise wasn't lehman brothers, it was aig," frederic mishkin, a columbia business school professor and former member of the federal reserve board, said in a recent speech. "who would have thought that an insurance company would have been affected by all this? When that happened, all bets were off."
[see why the merrill lynch bonuses are a watershed moment.]
all that federal money has helped aig redeem some of those derivatives contracts, getting them off its books and out of the system. The financial markets still aren’t back to normal, but they’re heading in that direction. Forestalling another industrial-strength financial failure, and the chain reaction it would have triggered if aig had collapsed, has certainly helped.
It’s also helping aig unwind itself. Aig’s problems snowballed in september when suddenly it had to produce billions of dollars worth of collateral to back up those credit-default swaps. The collateral call was triggered by an unexpected drop in aig’s credit rating, along with the plunge in value of mortage-backed securities around the world. Aig didn’t have the cash, and to come up with it, the only option would have been to sell off illiquid assets like its highly profitable insurance divisions or its aircraft leasing company. Try doing that in a week.
[see what’s coming next with the merrill lynch bonuses.]
had aig been forced to liquidate those assets, it would have had to accept fire-sale prices, which would have led to a sudden collapse in the prices of other similar assets and companies throughout the world. Aig would have gotten pennies on the dollar for valuable assets and many other businesses would suddenly have been devalued, too.
Aig is still in the process of selling off assets, to pay off the government loans that effectively served as its collateral. But it’s doing that in a more orderly way, seeking the highest bidders and the best terms. That’s generally good for everybody, and it’s also the best way for taxpayers to get most or all of their money back.
It’s keeping aig’s insurance businesses stable. Here’s something that’s really startling: The entire problem at aig was caused by one unit, the financial products division, whose employees constituted less than one percent of aig’s overall workforce. Aig’s insurance units – the core of its business – essentially had nothing to do with the fiasco. But if aig had been forced to liquidate, it could have affected the insurance units and millions of policyholders. With a more orderly process underway, the policyholders are now completely protected.
What’s not working
revolting bonuses. It simply goes without saying that giving bonuses to the people who brought down aig is a perversion of justice. Officials at the federal reserve and the treasury dept. Should have put terms into the original bailout agreement that prevented this. They didn’t. It was a chaotic time, and legitimate worries about a global financial collapse obviously clouded thoughts about rules to prevent rapacious traders from holding the government hostage. If it’s any consolation, the $165 million bonus pool is relatively small. Still, it grates.
[see 5 wall street fallacies.]
counterparty payouts. Aig has used much of the $170 billion in government aid to basically refund money to big banks and other “counterparties,” to cash out some of those credit-default swaps and reduce aig’s massive liabilities. That’s sensible, and it’s basically the original idea behind the “troubled assets relief program,” which was intended to get the worst derivatives and other securities off the market.
The problem is that the government has apparently agreed to $105 billion worth of payouts – at the full face value of the securities. That means that banks like goldman sachs, merrill lynch, societe general and deutsche bank – among the world’s most sophisticated investors – are taking no loss at all on securities that had a market value of half their face value or less when aig redeemed them in full. It’s like house prices falling in your neighborhood by 50 percent, and somebody coming in and buying one house for what it was worth at the market peak a couple years ago. And using a government loan to finance it.
Regulators at the fed, treasury, and other departments still haven’t explained why the counterparties got all their money back. They’re certainly going to be asked at upcoming congressional hearings. But in a situation where just about everybody is taking a loss – taxpayers and consumers especially – it will be tough to make a case that the world’s richest banks deserve full redemption.
Secrecy. We keep learning the terms of the aig bailout well after the fact. Obviously there are times when the feds need to move quickly and can’t have a 60-day comment period. But it’s not the same crisis atmosphere as last fall. In general, we should learn the details of the bailout as they occur.
Aig strongly resisted releasing the list of counterparties that have been paid back with bailout money, for instance. As recently as march 5, federal reserve vice chairman donald kohn defended that secrecy, saying that firms might be reluctant to deal with aig in the future if they knew their dealings could become public.
Then a week later, under mounting pressure, aig released a list of counterparties. The world didn’t end. Aig is also refusing to release the names of individuals in the financial products division who are getting bonuses. They may lose that battle too, since new york attorney general andrew cuomo has asked for the names and started an investigation, much as he has with merrill lynch. Information is going to come out one way or the other, and aig and its regulators should stop trying to protect the failing company any more than they already are. When aig pays back that $170 billion in taxpayer money, they can keep all the secrets they want. In fact, once we’ve got our money back, the less we hear about aig the better.
Feds Up AIG Bailout: 5 Things You Need to Know - The Home Front (usnews.com)
BY the left?
you people are fucking insane
Obama, Frank and lefties almost turned me into part of the raging mob on this one. But a little perspective people.
AIG was bailed by the left to the tune of about $170 billion. AIG is reported to owe apprixmately $165 Million in contracutal bonuses. Now, Obama is really pulling the wool over people's eyes when he says he is outraged that AIG is spending tax payer money on bonuses. Anyone care to do the math on the above and tell us what percentage of the bailout money is being spent on bonuses?
The other laugher is the implied contention that the taxpayers should be outraged at AIG for this infintecimal expenditure of the bailout money. WRONG Mr. President. The taxpayers should be outraged at YOU. Because it was YOU that decided to spend taxpayer money on them in the first place. We all know the bailout was never popular with the taxpayers.
I have posted this before, but it bares repeating as this a striking example. Milton Friedman said from most to least effective, there are 3 ways to spend money.
Spend your money on you.
Spend other people's money on you.
Spend other people's money on other people.
The bailout is obviously the last. Bailing out these companies is the equivalent if giving an allowance to a kid that didn't do his chores. Doing so simply reinforces bad behavior. Considering AIG needed to be bailed out in the first place, why is everyone so stunned that they are being irresponsible with what is essentially an incentive package to continue irresponsible behavior?
The next is that now are President apparently wants to set a precedent that the government can null legal contracts. The bonuses are money that AIG gaurunteed to there employees. Most of us agree it may not be the wisest in hind sight, but the fact is it is money they have a legal obligation to pay.
Obama, Frank and lefties almost turned me into part of the raging mob on this one. But a little perspective people.
AIG was bailed by the left to the tune of about $170 billion. AIG is reported to owe apprixmately $165 Million in contracutal bonuses. Now, Obama is really pulling the wool over people's eyes when he says he is outraged that AIG is spending tax payer money on bonuses. Anyone care to do the math on the above and tell us what percentage of the bailout money is being spent on bonuses?
The other laugher is the implied contention that the taxpayers should be outraged at AIG for this infintecimal expenditure of the bailout money. WRONG Mr. President. The taxpayers should be outraged at YOU. Because it was YOU that decided to spend taxpayer money on them in the first place. We all know the bailout was never popular with the taxpayers.
I have posted this before, but it bares repeating as this a striking example. Milton Friedman said from most to least effective, there are 3 ways to spend money.
Spend your money on you.
Spend other people's money on you.
Spend other people's money on other people.
The bailout is obviously the last. Bailing out these companies is the equivalent if giving an allowance to a kid that didn't do his chores. Doing so simply reinforces bad behavior. Considering AIG needed to be bailed out in the first place, why is everyone so stunned that they are being irresponsible with what is essentially an incentive package to continue irresponsible behavior?
The next is that now are President apparently wants to set a precedent that the government can null legal contracts. The bonuses are money that AIG gaurunteed to there employees. Most of us agree it may not be the wisest in hind sight, but the fact is it is money they have a legal obligation to pay.
YOU HAVE LOST YOUR MIND
the bush administration, secretary paulsen and the FED bailed Aig out...in sept and november of LAST YEAR bern???? do some reading....on it, i have posted several articles today... care
You remember wrong. There was no vote on the AIG bailout.i seem to recall the dem controled congress.....voted overwhelmingly for this plan......
You remember wrong. There was no vote on the AIG bailout.i seem to recall the dem controled congress.....voted overwhelmingly for this plan......
No, you're confused. The $750 billion one was the one McCain suspended his campaign for to fly back to Washington to vote for. The Federal Reserve bailed out AIG. Wiki it.You remember wrong. There was no vote on the AIG bailout.i seem to recall the dem controled congress.....voted overwhelmingly for this plan......
the 750 billion bank bailout had no vote......
You remember wrong. There was no vote on the AIG bailout.i seem to recall the dem controled congress.....voted overwhelmingly for this plan......
No, you're confused. The $750 billion one was the one McCain suspended his campaign for to fly back to Washington to vote for. The Federal Reserve bailed out AIG. Wiki it.You remember wrong. There was no vote on the AIG bailout.
the 750 billion bank bailout had no vote......
