Black Monday update: AIG tries to borrow its way out of debt
Yes, the fit is still hitting the shan.
MarketWatch now reports that AIG has won approval to borrow $20 billion in assets from subsidiaries to try and bail itself out.
Just keep my money out of it!
Next in line to beg for a fed handout: Washington Mutual.
Watch your wallets.
***
What I’ve been saying for the past year: It’s all a vicious cycle of their own making.
***
Why worry? Re. Lehman:
Lehman’s collapse will send deep and painful ripple effects across the markets. The firm sat on $33 billion of commercial real-estate assets and $13 billion in residential mortgages at the end of August; a liquidation could mean forced sales of those and other assets, which could knock down the value of other firms’ holdings.
Lehman is also deeply intertwined in many other markets — most notably the vast market for credit-default swaps, in which it is a top-10 player. Even as they were holding the line about being involved in funding a rescue, Fed staff members over the weekend were working with Wall Street credit traders to help sort through their positions with Lehman in this market. Officials also were involved in discussions during the weekend of brinksmanship that brought agreement Sunday night on the sale of Merrill to BofA.
Fed officials have some confidence that they are better prepared to deal with the fallout from a failure than they were when Bear Stearns failed, and the Fed arranged a shotgun wedding to J.P. Morgan Chase & Co. The emergency lending facilities it set up after Bear could help cushion the blow to the market if Lehman now fails. But some areas, like swap trading, are still a huge source of uncertainty.
…Officials worry that the collapse of an investment bank could send problems cascading through the financial system by way of this market. The Fed has been pushing Wall Street to create a new clearinghouse to diminish that risk, but it isn’t in place yet.
Sorting out Lehman’s CDS positions promises to be difficult and time-consuming, because many of the contracts have different terms and maturity dates. In a survey last year by Fitch Ratings, Lehman was listed among the 10 largest CDS counterparties by number of trades and the amount of debt to which the contracts were tied.
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Well since its down less than 4% wouldn’t it be more like a grey monday? or a partly cloudy monday???
Actualy its down 2.5% right now. Why the big panic?
These people make Donald Trump look good.
Obama blames it all on McCain.
Just a mite puzzled here – what approval do you need to borrow money from your own subsidiaries?
Hey, WaMu holds my mortgage. Does that mean I’ll get my house for free?
Well actualy it is Darth Malkins fault. (Insert manaical laughter here)
Looks more like time to buy then time to cry.
OMG the market is down 2.5% like it has been THOUSANDs of times since the dow was started…. panic!!!! aaaarrrgghhhh blame bush!!!!
/liberal freakout mode off.
Oh yeh, I’m watching local housing data like a hawk.
Wow, what a mess!!! What constitutional amendment guarantees Americans a handout?
I got this off the CNN web site. Liberals are so stupid they WANT to be taken care of…
BTW a comparison
Black monday 1987 -29%
Black thrusday 1929 -17%
crash of 1907 -50%
slightly grey monday 2008 -2.5%
To put this in perspective:
$20 billion / 305 million people (population of US) = $65.57 from every man, woman and child.
WTH???
yeah, i just don’t know what all the whinning is about. other than obamitler’s minions trying to make this now about the economy stupid, after his luncheon with BillyBoy a week ago or so, but, i don’t think they can handle this new found campaign strategy as the GDP is still good.
So long as unemployment does not go over 6.5% and the GDP start slipping downward the fundamentals of the economy are basically firm, until these two elements of the economy GDP and Employment start going awry. Stock markets go up and down, isn’t that what has been happening for decades. Oh, yeah, only during Billyboy’s reign did they go up, up and up (fraudlent laddering) until the bubble burst in late 1998 early 1999. Just in time for BillyBoy to leave office.
What goes up, must come down, spinning wheel gotta go round….
No worries, the Saudis got our back…
Obama blames Bush-McCain. McCain says we need more regulation. It still amazes me that our choice for POTUS is between two members of a congress with the lowest approval rating in history…
Michelle I understand the problems, however based on the market results this is not a “black monday” as of 11:07 mdt. I understand that it could be but lets not add to the liberal hyperoverreaction on this. This doesn’t mean that a black tuesday or wensday will not happen.
Duh! Get the government OUT of everyone’s business, and they wouldn’t be able to create the problems in the first place!
Two things that will help the world’s poor more than any others – Ban Socialism and un-ban DDT.
There.
Just corporate Darwinism at work here.
Unless someone can display why congressional policies and practices have forced some unavoidable bad management decisions, I’m inclined to just watch them try digging back out of their own hole.
The whole capitalist upside, socialist downside is annoying. For helping rescue AIG (and Lehman and…) I want shares of stock. And I want the CEO fired with a lead parachute.
How does any of this helps Obama’s brother?
Since Obama has promised to cut taxes on 95% of the population when 40% of the population pays NO tax, what he is in fact doing is promising to increase payments to 40% of the population and add millions more to the list of those who don’t pay taxes. And he is going pay for nationalised medicine HOW???
easy, top hat and a magic cane.
Will there be white rabbits and card tricks as well???
“They call it Stormy Monday”…
BTW Black monday is RACIST!!!!!
I thought is was only racist if you called it “black hole” Monday?
It is only racist if the word black is used in a negative light.
/offended liberal snob mode off.
This is one reason I still can’t bring myself to vote for McCain. This goes right back to LOTE.
Obama will dig the economy into a hole with a steam shovel. But, McCain will do it with a thousand shovels (mostly employed by illegal aliens).
In the end, the hole gets deeper and “conservatives” will get blamed even though McCain is an economic liberal.
80% of the government simply needs to be shut down. Stop digging the hole deeper and you will resolve a lot of problems with the economy.
I want to see the flow of money from Lehman lobbyests to politicians (and back). I want to see who turned the other way and how they benefited. I want to see all the criminality exposed. I am sure glad I believe in karma
Just do what I am going to do. I am going to vote for Palin and hope she gets to be president VERY soon…
BTW: I am convinced we are just seeing the beginning. Soon it will be the cities declaring bancruptcy. We will see pension funds like the Illinois Govt Pension fund just dry up. Those who felt the most secure, will soon lose their life savings and jobs.
A lot of these brokerage firms, like Lehman, need to be held accountable for abuse of power, fraud, and mismanagement. When you cloke your financial statements in mortgage-backed securities, instead of investigating where all the bad debt will end, you’ll have nothing but a faulty house of cards in the end.
The Federal government should have let Bear Stearns go belly up just like Lehman. Both these entities were part of the wink, wink, nudge nudge open secret that there was big time profit off of shady loan deals that deeply enveloped both the financials and the economy as a whole.
On the campaign trail, McCain mistakenly said that Americans weren’t partly responsible for this mess. I disagree. Many Americans, especially shady borrowers, contributed to this mess.
I find it laughable that many Americans decry the “evil rich” yet they put their hands in the till (treasury) for their bailouts (stimulus checks) thinking they “deserve” it. This is what makes me mad the most. There was greed at every level of American society and we, as a society, need to own up to it, not make excuses such as it’s Pres. Bush’s fault when both political parties were to blame.
Down fewer than 300. This could be a lot worse. This decline is not a crash. It’s controlled and absent of panic.
A very real possiablity. Not trying to be mean, but McCain is old and has health issues.
Everybody, puh-leeese don’t worry!
Two weeks after Obama is elected, there will be another government surplus. Just like the Clinton surplus that disappeared 5 minutes after Pres. Bush was elected.
The MSM will tell us all about it.
Bit off topic but need your urgent attention here —-
http://www.numbersusa.com/content/nusablog/beckr/september-15-2008/massive-foreign-worker-increase-back-ali.html
The Fed is considering cutting rates again, so don’t forget that a direct bailout isn’t the only way these crapweasels will have their hand in your wallet. By printing more money they’ll just rob you with inflation instead.
Just looking at the current numbers on the Dow…it is far from the end of the world, and it has fallen FAR lower than this in a single day in the last 10 years. Not gonna start fearing the sky falling down just yet. My stocks are stable and doing just fine.
Mine have fallen 25 percent in less than 1 year. In 10 years the DOW is now just where it was. It has not grown one bit. Meanwhile the value of the dollar has fallen about 50 percent. Therefore the total value of the DOW is down (allowing for inflation) about 50 percent for the decade.
Thanks Bill!
President Clintons National Homeownership Strategy
http://clinton6.nara.gov/1997/10/1997-10-23-vp-announces-record-homeownership-level.html
These bailout are financed through blatant inflation. This hits every American taxpayer much harder as it makes the prices we pay for everything go up.
I would suggest that if you are going to bury your savings in a mason jar, you convert it to precious metals first.
If the world economy collapses, the U.S. dollar (along with any other paper money) will be worthless, but gold and silver will still have commodity value.
And to stock up on ammo, food & water.
something to be said about the Boy Scout motto. . . .Be Prepared.
In the words of John Fogarty . . . there’s a bad moon on the rise.
Just out of curiousity, I wonder how much money AIG, Lehman Bros., Merrill Lynch, et al, have contributed to political campaigns since 2002? Assemble a list, and then let’s compare that list with those members of the House and Senate that vote for, or support any bails out.
Should these contributions to political campaigns be returned by the politicians who have benefitted from them (at the expense of the investors)? I would say “yes” regardless of party affiliation.
It would also be nice to have laws passed making it illegal for businesses to “invest” in political campaigns. In all likelihood, those relied upon to enact a law like this will not butcher this cash cow.
It is curious that the government feigns indignity when they find corporations like Bear Stearns, Lehman Brothers, Enron, Freddie Mac and Fannie Mae cooking their books.
The simple fact is that you cannot even conduct a meaningful audit of most agencies of the US Government. Nobody has any idea of how much money is spent by the US government or how it is actually spent.
http://www.marketoracle.co.uk/Article327.html
There you go again! Injecting color into the conversation, you racist you!
Thank you, especiallly to sonofdy #13 and soap #14. I admit to complete ignorance when it comes to money matters, and I benefit from their having provided some context.
Ohhhh hell. How long in the stocks this time?
No problem, the key advantage of capitalism is that the bad managers fail and go away, which is bad for them but good for us in the end. Rewarding bad performance gets you, tada, more bad performance.
On the subject of AIG and NY allowing the bridge loans – wasn’t it the state of NY suiing AIG recently for all sorts of stuff – probably both real and imagined?
That’s why NY “allows” it – so NY makes sure NY gets it’s piece
WWWAAAYYY off topic but I just have to share. I work in customer support as a programmer, I just closed a call where the clients problem was that they literaly had a screw loose. They had a screw in thier printer and when they banged on the printer enough it came out. Now they print fine.
Problem: Client has a loose screw.
Resolution: Screw removed.
This is one of my best stories ever, right up there with the computer not being pluged in.
“Socialism For the Rich” :
http://www.minyanville.com/articles/lehman-bank-of-america-bac-LEH/index/a/18960
At the expense of the American
suckertaxpayer.How much of this mess is tied to Global Warming and the venture capitalists that tried to force crude up so that we would buy into their carbon schemes?
On September 15th, 2008 at 2:51 pm, sonofdy said:
=))
Big government is the cause of government corruption. If the federal government did not have TRILLIONS OF DOLLARS to spend they couldn’t influence the economy.
Return the federal government to its constitutionally limited roles and these problems would go away.
Allow Bush, McCain, Clinton and Obama to spend TRILLIONS OF DOLLARS and these problems will continue.
BIG Government is the root cause of the problem.
When the federal government just nationalized the mortgage industry, do you think the ‘fundamentals of the economy are basically firm’? Also the GDP numbers are an absolute joke. The government has vested interested in seeing them positive and have cooked their books to make it seem that way. Example: the 3.2% GDP growth reported last quarter assumed that inflation was at 1.2%. If anyone believes inflation is at 1.2% they are retarded.
They nationalized the mortgage industry decades ago – or weren’t you aware that both Fannie Mae and Freddy Mac were originally established by the federal government? The populist in me says that they had a point – it’s had a role in the huge post-WWII expansion in home ownership. The conservative in me says that most of that would have occurred even if the government hadn’t been trying to encourage it.
As a conservative, former plaintiff’s personal injury attorney (yes, I know, we are a very small club), it gives me no end of joy to see AIG take it on the chin. They made lives for some of my clients a living hell with improper delay, denial, obfuscation and distrust.
Very much aware – also aware that LBJ privatized them so that the government didn’t have to keep them on the books. Granted they’ve always had a government backstop, but it has never been used (as they acted like private companies should – responsibly). Now, during an absolute financial mess, we nationalize the industry, but unlike during LBJ’s time, we’re going to keep Fannie and Freddie off the books.
The conservative in you is right – American people make the American dream real, not the American government.
#57..i guess you read the market watch article today. you’re better off reading the WSJ as it was a little more balanced. gross domestic product is still higher than anywhere else in the world. other global economies do not have even half of our GDP. sooo.. you’re point? the sky is falling cause?? gdp is not has high as say… what or inflation is really what? we are out producing all other economies. i guess my point is that our economy is still stable. at least far more stable than every other economy.
I’ll have to start reading market watch – the WSJ has really become a cheerleading publication. This statement is the crux of our disagreement:
We are out-consuming all other economies. We lost our production base long ago – our GDP is based mainly on consumption and our service sector. We can look at China as the production powerhouse, and their GDP has been growing at a staggering rate. They are also the main holder of our government’s debt. Which brings us to another point – our government has been spending extravagantly and financing it with debt and inflation, which will destroy our currency. This banking crisis is just bringing us closer to the edge with our foreign creditors. Why anyone trusts the US government to be a steward of the dollar is laughable.
All the government can do right now is hold off the deleveraging. They are failing at that as well – soon all the Fannie and Freddie toxic waste will have to be liquidated with newly printed dollars. Soon our foreign creditors will balk at the notion of the dollar peg or buying more treasuries. This will sink the country into hyper-inflation.
The sky is falling my friend – best to be prepared.
It’s THE WAY IT HAS TO BE Monday
stupid politicians
How come Alan greenspan hates America?
“Greenspan: Country Can’t Afford McCain’s Tax Cuts
Alan Greenspan says the country can’t afford tax cuts of the magnitude proposed by Republican presidential contender John McCain — at least not without a corresponding reduction in government spending.”
Here start the job cuts. HP just announced layoffs. Obviously just about everyone at Lehman is out of a job.
I use to study chaos theory. We are seeing a set of vortexes, like tornados. Eventually some vortexes turn into black holes, sucking up all capital. One never knows how the system will reorganize. But don’t be surprised to see changes in society we could never have anticipated. Some may be for the good.
First Wall Street, then Main Street, then the Capital.
The US has 10 trillion in funded debt, 52 trillion in unfunded obligations? Greenspan is right on this front and McCain will have to raise taxes – I promise you that. The funny part of this is that Greenspan really is the cause of the subprime meltdown – blame him for that, not for an intelligent and realistic statement regarding fanciful campaign promises.
Greenspan, wasn’t he involved with the Keating 5? Anyway his policies lead to cheap loans and runaway housing prices. Add the black holes created by Congress (Fannie Mae, Freddie Mac, FHA Loans) and you have a mess.
GDP is gross domestic product, which includes not just manufacturing or actual products produced but is the output of goods and services. if it were only the production of goods, you might be right. GDP is not based upon just the manufacturing of goods. if that were it, then yes, China is fast approaching at our heels.
GDP is not based on consumption but on the output of..
and,
This is from the bureau of economic analysis. Your comments do not relate to your cry of inflation. Nor do the facts back up your entire argument of consumption. Consumption refers to the Gross Domestic Purchases and not Gross Domestic Product. What does factor into GDP is personal consumption expenditures and PCE is a factor in GDP. The actual upturn in GDP was due to the increase in exports. To state that the entire GDP is based on consumption is blatantly false. It is a factor in GDP but not the entire baseis of GDP. At face value your argument appears to sound good, however, after close scrutiny of the facts your argument not so much.
I know everyone cries about the value of the dollar, however when other currency values are closer related to the dollar other countries tend to buy our products, because they can afford them. It is a catch 22 for manufacuterers. Having been in the manufacturing industry and having relatives still in the manufacturing industry, this is their main concern. Business is booming with the low value of the dollar and able to sell their product all around the world.
You can cry about the value of the dollar, but most manufacturing business owners are not they are exporting their goods.
For the record, I am lodging an official complaint over the use of the term, Black Monday. It has racial overtones. I propose to protest this insensitivity by waterboarding lgm, nyk, sausage, and a couple of other liberal members of this board (who no doubt will be more than willing to participate in such a worthy expression of protest) until such time as our hostess makes a public act of contrition.
Borrowing to escape debt is, sadly, the new American way for many. And those few of us who instead save and spend pay the bill, as MM has often and fully observed.
Can someone please explain this to me? Cavuto said only 2-3% of mortgages were in default, meaning 97-98% of us pay our mortgages. How on earth does 2-3% of defaulting mortgages cause all these financial behemoths to go belly-up?
We need FAIR TAX. Stop penalizing individuals and companies for making money and go to a consumption tax. All the businesses that moved to China and India and other parts of the world will come back. Perhaps they’ll bring other companies along with them. Why this isn’t proposed is beyond me.
Unfortunately the Fair Tax is not fair. It is double taxation. Those of us who have saved after paying income tax will get taxed once again (28 percent) when we spend it.
Of course, but my retirement savings is taking the hit as I must have more to pay for more expensive goods.
My wife’s retirement is through an AIG retirement subsidiary called VALIC. They wasted no time in sending out emails, stating that their investments are not at risk, because they are “a separate entity from AIG.” Right!!!
I am unable to log on the the website now…
Curious…another retirement fund, CALPers is also separate from the State of California, but that hasn’t stopped the California Legislature from raiding it to balance the state budget in the past. Worried? Yes. Believe VALIC? No.