Mother of all bailouts: $85 billion to AIG
There’s really only one thing to say about tonight’s announcement that the weasel feds have changed their minds and will fork over $85 billion to rescue troubled insurer AIG:
(*$&^(&)%(&)*(^&*%&@!!!@#^@!!!!!!!
I listened to a lot of foolish people praising the government earlier today for not giving in to bailout pressure.
I was not one of them.
Why? Because anyone who has watched the natural progression of stimulus-palooza/Fannie Mae & Freddie Mac-mania/Bear Stearns knew that the shoe would drop.
And drop it has. Like an A-bomb:
In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan.
The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.
Without the help, AIG was expected to be forced to file for bankruptcy protection.
The need for the loans became necessary after the major credit ratings agencies downgraded AIG late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.
Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and AIG’s request for help from the Fed of just a few days ago was rebuffed.
“Unthinkable?” Hardly. All too predictable, actually.
They can’t say no.
***
Watch out: Here comes Washington Mutual looking for its handout.
As usual, Barney Frank has it bass-ackwards:
Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said Mr. Paulson and Mr. Bernanke had not requested any new legislative authority for the bailout at Tuesday night’s meeting. “The secretary and the chairman of the Fed, two Bush appointees, came down here and said, ‘We’re from the government, we’re here to help them,’ “ Mr. Frank said. “I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it.”
The decision was a remarkable turnabout by the Bush administration and Mr. Paulson, who had flatly refused over the weekend to risk taxpayer money to prevent the collapse of Lehman Brothers or the distressed sale of Merrill Lynch to Bank of America. Earlier this year, the government bailed out another investment bank, Bear Stearns, by engineering a sale to JPMorgan Chase that left taxpayers on the hook for up to $29 billion of bad investments by Bear Stearns. The government hoped at the time that this unusual step would both calm markets and lead to a recovery by the financial system. But critics warned at the time that it would only encourage others to seek bailouts, and the eventual costs to the government would be staggering.
Yes, we did:
I warned from the start of stimulus-palooza that we were headed in this direction. Both political parties support these massive government interventions–from empowering judges to meddle with private contracts to backing billions in mortgage securities. This isn’t the last step. It’s the first. And you know who will end up getting screwed: The responsible and the frugal.
***
The Fed’s statement tonight:
The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under Section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.
The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.
The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.
The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
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Trackbacks
- Bjorn Tipling » Blog Archive » What I find amazing beyond anything…
- United States Takes Over AIG » The American Mind
- The Rude News » Blog Archive » Democratic Slush Funds: Our Homes
- REVOLTING: Steal from the poor to give to the rich | The TIW Blog
- WunderKraut » Blog Archive » Where’s My Government Bailout?
- Which is why we need strong regulations… and don’t need McCain! « Cowardly political musings…
- “Epic Selloff” • UPDATED: So Much For Fiscal Responsibility « Gunservatively!
- Michelle Malkin » Obama and McCain both support $25 billion automaker bailout
- Webloggin » Update: McCain Called for Reform in 2005 - McCain Calls For a 9/11 Like Commission to Investigate Wall Street Failures
- Regulation…who did what and when? UPDATE « Mcnorman’s Weblog
- Michelle Malkin » Why Henry Paulson must be “contained”
- Michelle Malkin » Dear Congress: Put the gun down now
- Michelle Malkin » Wasn’t the bailout supposed to calm the financial markets?
- Buck Naked Politics
- Michelle Malkin » AIG’s reward for failure: Another $30 billion in taxpayer-backing
- Invest in the Best, not the Worst « Frustrated with Politics
- So much President Obama taking a stand against Bush’s failed policies, eh? Another $30 billion to AIG | Fire Andrea Mitchell!
- Michelle Malkin » AIG: Ain’t it gag-worthy?
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Categories: AIG, Subprime crisis
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So my taxes will now help to pay for Rush’s insurance, awesome. Who else am I helping to cover?
Ya know, I’d rather see the money go to help Hurricane Ike victims then AIG. But that’s just me.
Of course they bailed them out. Like Rush said on his show today…they don’t want an inquiry or any type of investigation on this….because then the politicians will be investigating one another.
And we cannot have that!
They are only postponing the inevitable.
Here’s what I don’t understand:
To work in a high-level position of any of these financial companies, chances are you have to have an Ivy League or near-Ivy League degree.
To get into an Ivy League school, you need to be “smart.”
To get promoted to CEO of a major company, you need to be “good.”
How do people who get so far in life screw up so royally?
These banks and institutions wouldn’t hire me to work for them, but I wouldn’t make the same mistakes their Ivy League CEOs made. I have too much common sense, something they don’t teach at Harvard.
Once started you can’t stop an avalanche with a hand shovel, can’t stop it with a snow plow.
No one knows where this all will out, but we do know that the snow mass is giant and unstable, and already moving.
The robber barons are back.
And we keep electing this idiotic group to Congress. If they want to bail out greedy CEO’s it should come out congressional paychecks!
Byamtine — as you say you ain’t in the business, for only those able to tolerate or be blissfully ignorant of the long established way of human mass manias like tulip bulbs and of the mass financial epidemics of corruption like John Laws scheme or Soviet communism are able to continue in such business once joined. But don’t think that a good salary, office and bonus would not have left you dimwitted too, had fortune escorted you in the right door at the right time.
Unfreakin believable.
Thomas Sowell:
The Federal Reserve, that privately owned country club of worthless currency, opens their knurled hands, reaches into our collective pockets and extracts money in a flash. And we have no recourse because our representatives are but silent sentinels doing the bidding of the pin-strip suited pirates of Wall Street. Do you know what puckering sounds like?
Hello gobnit, my name is Ford and me and my cousins Chevy and Dodge are looking for some cheese to be handed out. We heard this is the place to get some.
The government has bailed them out, but I don’t believe my taxes are safe yet. If all else fails, the taxpayer will still suffer. It’s time to let these fools fail and suffer.
So, Uncle Sam, on top of supporting my own family, I have to… support the families of those on welfare, pay for the houses that others can afford but call home, pay for failing quai-governmental “businesses”, pay for failing businesses in general, pay for homes of people stupid enough to live in a hurricane-prone area and have no homeowners insurance…? Goodness, this month’s paycheck is going to have to stretch pretty far I guess.
Oh wait, I’ve got the solution: put more government bureaucrats in charge of these organizations… Yeah, that’s the ticket. [yes, that was sarcasm]
The real culprit of all this is the US Supreme Court. Under the original constitution, before it was rewritten in the late 30’s, the shenanigans, such as the $50 trillion welfare liabilities, massive debt, and Fannie Mae’s would all have been unconstitutional. As Madison understood, if power can be abused, it will be. Therefore, government, especially the central government, should have severely limited authority. As long as rent-seeking remains constitutional, no politician will be able to change it, Palin included – the pressure to give in is simply too great. The Founders understood that Big Government can never be Good Government – you have to choose.
Great, just great! Dems will be all over this tomorrow because of course it’s Bush’s fault and the evil republicans. Explain to me again why I always hear a bad economy is good for the democrats in an election year. Seriously, why do people believe that crap?
Pardon my french, but this is just bullsh!t!!! So, now I’m paying for insurance twice??
I feel like I’ve been transported to the Bizzaro World!!
I’m tired of bailing out greedy jackasses with no business sense!! We are about a half-step from turning into the U.K.!!
This will just perpetuate the problem. When corporations are allowed to capitalize success and socialize failure, then taxpayers are screweed one way and f*cked the other. Period.
The ghost of FDR still roaming the halls of D.C. Financial insitutions and insurance companies are the new “welfare queens.” How much will the golden parachutes for the AIG execs be worth?
Absolutely right.
Ah, yes. Former talk show host, Ken Hamlin, The Black Avenger, would have said, again: “This is another one for the BOHICA File, folks, ‘Bend Over, Here It Comes Again’!”. And they (our guv’mint) keep doing this to us taxpayers, and they still don’t give us any K-Y to ease the pain. Jeez, guys! Have a heart! Yeeowch!
Of course Barney F****T is bass-ackward. Aren’t they all?
ACK!!!!!!! Head exploding!
Michelle,
Why hasn’t this bill been passed?
http://www.govtrack.us/congress/bill.xpd?bill=h110-698#votes
Or this…?
http://financialservices.house.gov/pr07282006.html
Sarc on
Oh come on you whussies! We will just print the 85 billion and make the loan. Then when the cronies at AIG figure out a way to NOT PAY, the Fed will route the unpaid debt through the bond market and wreck IT. So what? Just a buncha greedy hoodlums in the bond market anyways!
/Sarc
The club that runs AIG is majority democrat and part of the Clinton fascist network. There are many reasons for both Clintons to be in prison right now, but this housing boondoggle is an important one.
Investigate it all right now and start passing out the Orange Jumpsuits— and that includes one to the would be next Senate Majority Leader Hilldebeast herself.
If Ivan Boesky and Mike Milken had to at least do country club time….so should these perps.
What’s to say that it wasn’t Enron style accounting that fueled this bubble?
Get ready to bend over tax wise even if Odumpfka isnt elected POTUS.
And just wait til it runs downhill to the local level.
ROFLMAO
I love it when globalists are trying to wreck the country.
Bear1909 out
An interesting letter…
http://aba.com/NR/rdonlyres/76DCD307-2D7E-48A6-A10F-623175F0AEAD/48491/ILCStateBankAssnLetter032107.pdf
This should not effect taxpayers directly (touch wood) – AIG is a huge company and they have very solid assets in the insurance side of their business, and it is quite possible that side of the business could clear out this $85b debt in just a few years, so don’t panic just yet. A bailout of Lehmans on the other hand would be throwing good money after bad, so as much as it hurt the economy and probably prematurely triggered the AIG situation, it was wise that the Fed didn’t bail them out.
The alternative – an AIG collapse – would have most certainly destroyed world markets and economies, not least of all our own. This bailout may not be successful in the long run, but it’s better than what would certainly happen if AIG went into bankruptcy. At least now there’s a chance we’ll survive. As much as it sucks, the Fed didn’t really have a choice imho. To not act would seal our fate – the total collapse of the US economy, the end of the US as a world superpower, and the start of multiple wars across the globe as other countries fought for the position the US vacated. It would not be pretty, and it may still happen, but at least there’s a chance now.
I really don’t like it at all, but that’s how I see it. The Fed tried to get private companies to take the slack, but they wouldn’t, so they had no choice. 11th hour and all that.
I better add that I own shares in AIG, and this move by the Fed will dilute them so badly that they’ll be near worthless, relatively speaking. I’m paying already, but I realize the alternative is worse for everyone, not just AIG shareholders. Just thought I’d mention that point after my previous post, because this is personal for me.
Ah yes, Barney Frank, who five years ago said, “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” upon hearing of a plan by the Bush Administration to tighten federal oversight of those two institutions.
Obama, Barney and Co. – The Change We Need!
/sarc
When there is an apparent contradiction, check your assumptions. There are no contradictions.
1. you don’t have to be smart to be ivy league, just rich and/or well connected
2. you don’t have to be good to become CEO of a major corp, just well connected
3. the people who have gotten so far in life are incompetent to be in the posts they hold
The culture of incompetence and corruption has led us here. The culture of incompetence has given us Barack Obama. What will get us out this mess?
I may have missed a comment that covered this, but I’m more worried about Uncle Sam taking an 80% stake in AIG than I am about them bailing them out.
I think they needed to be bailed out considering their large footprint in the consumer market (unlike Lehman).
But, the last thing we need is for the government taking permanent control over a large company that provides those same consumer services/products.
Socialism is forever creeping in to stifle our freedom and liberty. It’s disturbing enough that it’s happening under a GOP administration; but all will be lost if the Dems get their paws on our economy
Is no one else freaked out that century old financial powerhouses are collapsing?!
Bailouts are the least of my worries right now.
Agreed ShoreMark, it is disturbing that the government now has ownership (or conservatorship) of the largest lending and now largest insurance company on the planet. It’s almost like backing into nationalization. Fortunately the terms of the AIG bailout are, I believe, limited to 2 years only, to allow time for the market to stabilize and for AIG to break off and sell some of their many assets in order to repay the government. It’s not open-ended.
The Democratic Socialists have historically had more success pushing their Socialist programs in the aftermath of crisis…Great Depression, JFK assassination, etc.
I think they are actively trying to create a crisis in the hope that it will lead to an Obama presidency. Don’t fall for it, and pray that the rest of America doesn’t fall for it.
We already have fallen for it. And, yes, this IS nationalization of major industry. These are very dark days for the US. Perhaps not as dark as the ones to come
Pay attention, my friends… We Americans, who actually pay taxes, are totally screwed.
Would that I was a loser and could have talked my beloved husband into not paying the effing mortgage!!!
There is no right to own things for which you cannot pay!! EVER!!! What a charming lesson to teach our children.
I’m feeling so fullfilled that I’ve busted my ass my whole life to succeed and provide for my family so that other people could sit on theirs and live off of my hard work. Good God Almighty….
Great. The Feds are going to step in and do to AIG what they did to Fannie Mae and Freddie Mac – and probably put Franklin Raines or Jack Johnson in charge. Of course, if Obama wins in Nov, they’ll be in charge anyway.
I appreciate your optimism, nyc123me, I’m an optimist at heart too.
But, can you think of a government funded toll road, one that had tolls “to pay for only the construction,” that has ever actually had the tolls canceled?
We’ve been waiting for over 50 years for the Garden State Parkway to be paid for…
Here is a must read:
The Best Congress Money Could Buy
I knew that AIG would get help when they started angling for that “loan.” That means they were in even more desperate straits than was originally conceived. My, Pres. Bush will never live this one down.
I thought it interesting that the feds think it’s only a “loan” until AIG uses the loan and it becomes taxpayer money. All of us schmucks who live within our means and budget our entire lives have to bail these people out. They played around with precarious financial instruments and “we’re” gonna pay the piper.
Michelle is right, this whole thing is bass-ackwards.
Whose next? Why are just some of these companies failing and not all of them? Could it be the risk these guys were willing to take? What have they been doing over the last ten years? This did not happen overnight?
This is insane. American financial markets are among the most heavily regulated on Earth. Frank is an idiot who is just looking to score political points rather than actually help with anything.
Not that there’s any help to be had, now that the government has decided to throw our money down this rat hole (I mean the financial mess – not Barney Frank. He’s a completely different kind of hole)
Im sure glad I turned down their offer to switch insurance to them a few weeks back not the kind of company I want to do business with.
I just wish we could have a total reorganization of the MSM…Anybody for bailing out the NYT?
But then again I should just cancel all my insurance policies and blow the money on toys. After all I can just get the government to bail me out when I get in trouble.
Heh, true ShoreMark. Government (almost all governments actually) are notoriously adept at running any business shockingly poorly. Given the size of AIG’s other business units though, which are quite separate, I’m hoping there’s too many pies there for the government to get their fingers stuck into over 2 years, although I’m sure they’ll try. Again, the alternative of an AIG bankruptcy would spell certain doom for everyone. We may just be delaying the inevitable, but at least there’s hope.
For those saying this sets another precedence, and the auto manufacturers will be next; I don’t think so. I mean sure, they’ll ask, but I don’t see the Fed helping them. It’s long been public knowledge that the big auto manufacturers are going down the gurgler, and anyone with at least some business sense would have long since sought alternate investments, so the impact of one of the big auto manufacturers going bankrupt would be relatively limited compared to AIG or Fannie / Freddie – because the market’s had time to prepare for that eventuality.
Basically, it doesn’t get any bigger than AIG, or Fannie and Freddie in their respective areas. If there was any companies that warranted bailout, those are them. I don’t expect we’ll see any more in the future from the Fed. But who knows.. we’re talking about the government after all..
I had insurance premiums ready to mail to these POS today. and dear husband and I called the seller and pulled the plug for 2 weeks… who wants to bet it is NEVER??? What a COS.
I note that the source of AIG’s distress is “derivatives.” Derivatives are the snake oil of the 21st century. They serve no economic purpose and should have been banned years ago, along with the denial of capital gains tax breaks to hedge funds, another useless form of Wall Street entity.
Actually, if you want to help the country, start buying AIG shares now they have a backup. It’s a risk, but I think the future of this country is worth that risk. Confidence in the markets is exactly what is needed to turn us around. ..and if that doesn’t do it for you, AIG shares are dirt cheap right now. Buying at market open this morning (Tuesday) and selling in the mid afternoon would have got you near a 200% return on your investment. Not bad for 5 minutes work.
I went out and blew my paycheck on scratch tickets but I didn’t win anything so I think the government should give me back my money so I can buy more scratch tickets.
So if we, the people, now own Fannie Mae and Freddie Mac, and AIG, what else are we going to socialize? Airlines? Auto industry? Think this will put the breaks on universal health care, AKA socialized medicine? Exactly where is the money supposed to come from?
There is no money Ron, it’s just numbers on paper. Effectively AIG are lending the money to themselves now.
Nite all.
We’re already there, Rocky. Look at education. Education is, assumably, state-controlled. However, if the federal government has it’s tentacles in it (money, agency, etc.) then it is just as must a nationalized entity as any private industry such as the mortgage brokers.
There is no competition in education which makes it a limp, futile attempt at preparing our kids for their future. People are very blase about “bailouts” until they make the connection that it’s “their” money. Same with education. It ain’t free and your hefty property taxes are paying for not only your kid’s education but some kid’s free lunch, etc.
I’m sorry, Obummer, it ain’t “neighborly” to expect those who succeed to pay for other people’s lack of success.
at this point, I can’t figure out why counterfeiting money is illegal…..
Is that not what our Government is doing?
How can we ‘bail-out’ something when we have no money?
Are you people all STUPID? Seriously! As much as I love this site, and MM, she’s in the wrong here to be pissed off about this.
1. The Feds DID NOT save mortgage companies.
2. The Feds DID NOT save brokerage houses.
3. The Feds DID save the LARGEST insurance company in the nation, which in case you hadn’t noticed, has just taken HUGE insurance hits from two major HURRICANES this year! This means, as an INSURER, they’ve had to dip into their capital reserves to PAY for Gustav ‘08 and Ike ‘08. This reduction of capital left them operating on a very thin margin, which wasn’t helped by the major mortgage-lending crisis. Because they couldn’t secure new loans to maintain some measure of liquidity, they went to “junk bond” status overnight. Hence, no new loans forthcoming from anyone.
Are you starting to get the picture? Let me spell it out; for OUR $85 billion-dollar loan, to be repaid in 24 MONTHS, we (the Feds) get a nearly 80 PERCENT interest in a company worth over $1 TRILLION! The Feds have a veto say in the payment of any dividends, which means the shareholders will be protected from huge losses, but also will NOT realize a profit from the mismanagement of AIG’s mortgage-lending division.
This is not the bailout of some fly-by-night operation. This could possibly “right the ship” and prevent major banks like Chase-Manhattan and Bank of America from failing.
Before you all run around screaming like Chicken Little, realize that SOME of those Ivy Leagers MIGHT have just done something GOOD today! It is NOT the “privatization of an industry”. Not by a long shot. There WILL be an orderly sell-off of some AIG assets, and I’m sure they’ll take a hard look at their lending practices, but this is to prevent a HUGE collapse! If AIG goes down, so many banks will fail it’ll make the Great Depression look like a minor recession, world-wide. People, they’re not telling you how thin the ice really is right now. This deal might just give the financial system enough time to pull through…
I love you all… I really do, but sometimes the lack of financial accumen displayed is disheartening.
Did anyone else notice today that Sen. McCain promised to “shore up the FDIC system”? Barak Obama wants to give out a “$50 billion dollar economic stimulus package”! He’s going to simply give away $50 billion? You’re all screaming about financial impropriety, and someone who’s not even the President yet, and complaining about how much the government has already spent, is simply going to up that total amount by $50 billion? On top of that, how does he plan on distributing it? By percentage of taxes paid? Not hardly. Probably in a straight rebate check paid to everyone in the US. So people who paid little in the way of taxes stand to get a bunch back! Socialization of the Federal Income Tax system, directly, and in his “good neighborly” way.
Dear Lord, please save us from Sen. Obama!
We’ve got the MSM taking pot-shots at McCain’s supposed detachment from reality when, in fact, he’s right. The financial sector is NOT the US economy. The basic fundamentals of free trade in the US are completely sound. The market is working EXACTLY as it should. People bought more than they could afford, at prices far higher than the properties were worth, and it’s come home to bite them hard. Sen. Obama wants to pass a law preventing foreclosures (read the fine print, “they shouldn’t lose their homes”) and the MSM is still just singing his praise. It’s sickening to behold. The whole point behind not paying for something is, you don’t get to keep it. That’s a simple fact of live, but not in Sen. Obama’s world. There’s more in the way of dangerous policies wrapped up in just one of Obama’s speeches today than in the entire 6.5 years President Bush has been in the White House!
I just don’t get it…AIG, Fannie, Freddie and possibly WAMU going to the Feds to get $$$ to help them out of their mess. If anyone that posts here did that, we would have lost everything (house, card, etc…) and be on the street…
On top of it, having Nancy, Barney, Charlie R and Charlie S and other Donks who are obviously clueless in financial affairs, telling everyone that “the sky is falling/not falling” is such a joke…most ethical Congress every, my pasty white @$$!
It’s like someone who has a terrible case of constipation and needs a MASSIVE SH!T to make them well again!!! The country needs to sit down,HAVE A MASSIVE SH!T, and flush the bankrupt companies,socialist wanking, and big government entitlements down the toilet.
Oh look, Pelosi is already blaming Bush!
What’s the point Pelosi? Your statement makes it clear you’ve already decided the outcome. Is it going to change anything? Nope. Will it cost millions of taxpayer dollars just to validate your hatred? Yes.
The fault is greed – greed from individual houseowners, mortgage brokers, shareholders demanding higher returns, and right up to big corporates doing anything to produce a good return to maintain shareholder confidence. Bush does not control that Pelosi.
But since you bring it up, exactly why did YOU not act Pelosi? You’ve been sitting in that chair doing nothing for a couple of years now.. what’s your excuse?
Stupid stupid stupid Pelosi.
On September 17th, 2008 at 12:16 am, rotarymunkey said:
Are you people all STUPID
—————
No,not stupid, just shell shocked! Thanks for the explanation.
Am I invisible?
Nite. For sure this time. I think.
On September 17th, 2008 at 12:26 am, nyc123me said:
nyc123me,
No, I see you. G’nite to you, too…
Brother, can you spare $20 for a cup of coffee? (not Starbucks)
Ms. Malkin,
I am a creature of Wall Street. My column tomorrow will address this inconvenience (it’s not a crisis).
I agree with most of what you wrote, but you were wrong about Bear Stearns. That was not a bailout. JP Morgan bought it at a fire sale price and fired everybody, ruthlessly punishing the firm for its excessive risk taking.
This was appropriate.
The government got Lehman right, and totally blew it on AIG and Fannie and Freddie.
The answer is for us all to say YES to moral hazard, and NO to bailouts.
Bears Stearns was not a bailout. Those who think otherwise, I say…B.S.
That stands for Bear Stearns.
Respectfully,
eric aka the Tygrrrr Express
http://www.tygrrrrexpress.com
WSG
Per the WSJ, AIG’s insurance business is operating normally. It is their derivative business that is bringing them down. Informed people should know the truth…
Yes, it’s nationalization – total socialism. Also, this is likely the tip of the iceberg if some adults don’t show up in D.C. pronto to enforce presonal accountability. Almost seems like Barney Frank, et. al., blocked President Bush’s regulatory efforts a few years ago with an eye towards creating a crisis that would allow back-door nationalization of Fortune 500 companies. If one were to believe in conspiracy theories, that is.
And so the end begins….
I’m not an economist, nor do I play one on television.
It seems to me, though, that Socialism is being installed into our government in plain view.
If rotarymunkey is correct, and the Insurance “loan” to AIG is repaid, it isn’t like pouring money into the corrupt Fannie and Freddie, and not getting a return.
Investigate the Democrats! Those self-righteous sons of bitches have abused their positions for years with their witch hunt inquiries and investigations. INVESTIGATE THEM!
DO NOT let them off the hook! They claim they will put Bush and Cheney on trial for as yet unproven “crimes.” Well, this financial crisis is a DIRECT RESULT of Democrat malfeasance. Put every last one of them on trial under the RICO act.
When America elected a spoilt brat, who has never held a responsible job, what else did they expect?
Ha-ha, you didn’t actually say that did you?
The next stinky shoe to drop?
Lehman Brothers.
Can they please pay 80% of their dividends to the US Treasury?
Came in late on this, but it seems McCain-Palin can get out in front of this, say, “This is how we differ from the administration,” and run with it.
Just a thought.
Ok, now I am totally confused. So far we have bailed out the mortgage initiators (countrywide), the brokers (bear sterns), and the loan holders (fannie and freddie). What the heck is AIG even insuring in the flippin deritive market any more? The numbers make no sense to me. If I am already ‘on the hook’ for 5 trillion of the underlying assets, why/how can the fellows holding the paper above it have a cash flow issue?
I do not think this is the real story. I think this is another major fraud, passsed thru by Paulson and onto the hapless Bernanke.
It is clear that these 2 do not know what they are doing and should be removed/replaced immediatly.
I can see no end to this madness. 50 billion for the car companies and probably another 50 billion for wamu.
And do not forget, with AIG nicely ‘covered’ by the fed, their execs WILL be STEALING major golden parachutes for all their troubles.
I suppose I need to get going and head for work this morning. I better, before the government bangs on my door again, sticks a gun in my face, and robs me one more time, for my “fair share”. Sigh. Who will be given billions tomorrow? By the time my paycheck gets to me, I won’t have much money to pay for anything, which is exactly what the government wants. That way, I become a “slave” of the state…work hard for a pittance, while I watch the elite hold big parties/fundraisers. Krushchev said, “We will bury you”. Looking at today, he may have a point now.
Well….the icing on this cake is our power company…..PROGRESS ENERGY wants a 16% increase on its bills starting in January.
Seems to me they should decrease their employers, not increase pay or incentives to others, CEO bonus and others need to stop until the economy recovers. DON’T THEY HAVE TO SACRIFICE?
WHERE is our bailout?????????
Enough is enough!
They should have let AIG fold. Bad business is bad business. They wanted to DOUBLE my auto insurance rates early this year so I took my business elsewhere. Darwinism works in all areas. The weak die, the strong survive. This is just wrong.
That should read….employees.
Well, what do you expect from a…
Oh, nevermind.
Twenty or thirty years ago, banks were banks, investment houses were investment houses and insurance companies sold insurance.
Then the friends of politicians said, “oh if I could just sell insurance to my investment customers, I could make the costs to my customers much lower!”
The banks said, “if I could offer insurance and investments to my home owners, I could make everything more affordable!”
The insurance companies said, ” hey, if I could offer investments, my customers could get a cheaper price for their insurance needs!”
What they all offered to sweeten the whine is contributions and jobs to their political buddies and here we are today!
Most of them don’t care what happens to us and they honestly think that we are stupid. We are stupid because we never vote them out of office.
VPN is acting up, goes down every 12 min., so this will be a hurried post, but I can’t wait until I get back home
You’re correct, of course. Afterall, we’re still paying taxes & surcharges for the Spanish/American War, the electrification and telephoning of rural America, & the War of 1812.
I had thought that 99.9999+% of America had electricity, and phones, too, but I suppose I could be mistaken.
As for the War of 1812, I’d wish we’d hurrry and win it. We all know how the Spanish/American War is going, so I won’t comment.
I am certain if we give Bwarney Fwank the Bordello franchase, we’d be off drilling 15min after the Bill was signed. I know Bwarney wood[sic] be…
Folks, this feels like Campaign Fin. Reform. I remember how GWB hollered up & down how he’d discharge his oath to protect & defend the Constitution, and if the bill didn’t do XYZ, he’d not sign it… and before the echo of his voice in the room faded, he’d signed it. I find his cave here no surprise.
We need to start NOW, writing him about this and about the Traitorcrat phoney “drill-Bill”. If we don’t, then this Republic will not survive.
The above written isn’t histronics, but an accurate assessment.
Yeah! time to leave for home! Read you guys tonight!
God help us. This is insane.
Every man, woman, and child in the United States was just FORCED to loan AIG $280. If you have a family of four, you just loaned AIG over $1,100 – whether you wanted to or not.
Nancy Pelosi and Harry Reid are pigs, so we expect this from them – but to call George Bush a “disappointment” at this point is inadequate.
And, remember, he’s demonstrably more competent in these areas than either Barry or Juan. What do the next four years look like for us?
Pray. And I’m not kidding: pray.
Heard on a Fox news commentary about the colapse of lending institutions that the banks had a term called “NINJA Loans”. That stood for “No Income, No Job no Assets”. And they wonder why so many people defaulted?
*vomits*
It’s not being bailed out. It’s being LIQUIDATED. The alternative was to have AIG default and that would have lead to havoc. With the exception of Shelby I don’t think anyone seriously thought they should let AIG default and dump all this stuff onto their counterparties.
Here the government is giving them a super-secure short term loan while they go sell their assets. If they had defaulted, they would have had to gone out and dump these assets at fire sale prices to the Chinese, Koreans and others. Now, they can sell them at market prices and use those funds to pay off this toxic waste.
Also – no one wants to deal with the insurance side of the business. They write some huge percentage of workers comp. Regulators would have had to go in and run the company – not sure anyone really wanted that – especially when the unit could function on its own if they are given time to find a real buyer.
This is the type of thing the Fed is suppose to do – use funds to help prevent economic breakdown. They will get paid back – and remember, they have complete control over AIG now and can do whatever it takes to prevent them from losing money – so if it looks bad they can just file and have their super-secure claim.
Now, if we had actually tried to regulate this monster before the collapse, maybe this could have been prevented – but that is another story. Bush even saw the need for this years ago, as you even mentioned earlier..although not for AIG, but for Freddi Mac and Fannie Mae.
http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
This is only the beginning . . . just wait until the enlightened voters elect that Bolshevick, Obama. Get ready to say goodbye to a once great Republic.
I think when all is said and done, the banking conglomerate (primarily those associated with the Rothschild group and the other large one)will only suffer paper losses.
Those on the outside will foot the bill – i.e. the taxpayer.
The only other losers are those who invested heavily in AIG and Lehman or who worked for them and lost their jobs.
Raspberries to the bailoutapalooza.
Wondering where mcCain’s ad is showing that he saw this coming in 2005 with a bill that was shot down by the dimwit party of b hussein odumbo?
I’ve been with major corporations for decades, and worked there under bosses just like Obama. They never bother to learn how to be good at the job they are in, because they are too busy politicking for their next promotion. They claim all the credit for the work done by those under them.
Decades ago the Peter Principle was formulated, and today it is just as valid now as it was back then.
Every one has different skills and competencies. Each step up the ladder requires new skills, which some have or can get while others will never have. An expert salesman may be a horrible sales manager. A talented sales manager may not be able to be an adequate VP of Sales.
People are promoted to the level of their incompetence. Then instead of being demoted back down to where they can be most effective, they are allowed to remain where they are incompetent forever, screwing up everything beneath them.
Toss an unbelievable amount of greed and an overwhelming degree of hubris into the mix, and you get what we are now reaping.
No, we are not wrong or stupid. AIG was an INSURANCE company. They should have enough reserve and reinsurance in place to cover losses from Gustav and Ike. Had they not blown their reserve on failed investments… this is a case of poor management, not circumstance.
In theory, you are right and we will see repayment of the AIG loan. In practice – this sets a dangerous precedent (i.e., the government taking over major industrial players). For the anti-capitalist, this is a win. For the capitalist, this is a dangerous slippery slope.
Finally, ask yourself what fundamentals are going to change to allow AIG to repay its $85 billion obligation… one that no private entity was willing to float? If repayment were a slam dunk, someone in the private sector would have scooped them up and enjoyed some ROI on the transaction. Alas, there isn’t any to be had!
The ice is extremely thin. By nationalizing AIG (read between the lines), we only delay by some amount the collapse to which you refer. Again, the fundamentals haven’t changed. The US is stripped of its core assets: manufacturing, a product-based economy, the engine of the middle class… and, our balance sheet is listing.
I’m NOT a doom and gloomer – I’m just telling you that we need to swallow the bitter pill and figure out how to rebuild. Government takeover of business with tax-payer money is not the answer.
WE THE PEOPLE NEED TO STAND UP AND DEMAND A NEW GOVERNMENT!
LET THE RICH LOSE IF THEY MAKE A MISTAKE! IF I MAKE A MISTAKE, I HAVE TO PAY.
BUSH AND CONGRESS MUST GO! THE FEDERAL RESERVE MUST GO! IF THE MARKET CANNOT SUSTAIN THESE ILL MANAGED CORPORATIONS, LET THEM CLOSE! THE FREE MARKET & CAPITALISM WILL TAKE CARE OF THE ADJUSTMENT.
RockyR:
Remember Chrysler? The government made it’s money back and then some. It also saved thousands upon thousands of jobs for people. People that would have been collecting welfare.
A strictly market-based approached would have caused AIG to flood the market with its shitty real estate. In any case, who’s going to cough up $80 billion to earn middling ROIs simply for the sake of the global economy? Goldman Sachs isn’t in that business. That’s the federal government’s game.
AIG is not being bailed out. It’s being liquidated. The Fed now owns an 80% stake and can ensure that AIG’s assets are sold at market value, rather than being pawned to the chinese. AIG’s insurance operations are still profitable. It has over one trillion dollars worth of assets. Are you honestly claiming that we’d be so much better off if they were sold at six cents on the dollar?
I agree with Michelle over 95% of the time, but I have to differ this time.
RockR
Do you remember Chrylser? The Feds bailed out them and saved thousands upon thousands of jobs. The Feds also got their money back and then some.
A strictly market-based approached would have caused AIG to flood the market with its crappy real estate. In any case, who’s going to cough up $80 billion to earn middling ROIs simply for the sake of the global economy? Goldman Sachs isn’t in that business. That’s the federal government’s game.
AIG is not being bailed out. It’s being liquidated. The Fed now owns an 80% stake and can ensure that AIG’s assets are sold at market value, rather than being sold at garage sale prices to the Chinese and the UAE. AIG’s insurance operations are still profitable. It has over 1 trillion dollars worth of assets. Are you honestly claiming that we’d be so much better off if they were sold at six cents on the dollar?
I agree with Michelle 95% of the time, this is the 5% I have to disagree…
Congratulations everyone! We are now all the owners of 89% … of nothing.
The million dollar policy on my plane.
Thanks man.
So the US government now owns Freddie Mac and Fannie Mae and AIG. And of course, the government socialized prescription medication for the elderly.
Essentially, the US has now socialized the home mortgage industry, a big chunk of pharmaceuticals and is moving into insurance. Automobiles are most likely the next industry.
And we still call this capitalism and a market economy?
Bush, supposedly a Republican, has effectively launched the US down the path to a socialist economy in 8 years. And either Obama or McCain will complete the transformation over the next 8 years. They won folks.
Obama will finish the job. Plus creating our very own SA and SS. William Ayers for SecDef! Bernadette Dohrn for SecState! Barney Frank for Supreme Court! Jerry Wright for White House Chaplain!
McCain will be satisfied with just giving the Southwest to Mexico. He got real upset with Russian taking over a couple of Georgian provinces. I wish he’d get as excited about our own borders.