AIG Bailout?

[REWahoo]

I'm a good capitalist, I think, but any business that wants to grow to the point of being "too big to fail" has got to accept a reasonable amount of regulation to greatly reduce the chance of meltdowns like these from occurring.

Or be forced to break up into smaller companies...

 

[Art G]

I'm a good capitalist, I think, but any business that wants to grow to the point of being "too big to fail" has got to accept a reasonable amount of regulation to greatly reduce the chance of meltdowns like these from occurring.

I agree with you. However, if we just let them fail, they'll take down a huge chunk of economy with it. So, what do you do? They insure so many different things around the world!

 

[Art G]

Or be forced to break up into smaller companies...

That just exasperates the situation. In fact, they'd probably appreciate the opportunity to dump their bad debt into a couple companies and watch the shareholders flounder. This may be what BOA is doing with Countrywide.

 

[TromboneAl]

That just exasperates the situation.

Nicely put.

 

[REWahoo]

My point was "too large to fail" companies should be prevented via regulation from gaining that position. They should be forced break up into smaller companies prior to becoming a potential time bomb in the economy. Before becoming too large to fail, they need to become too large to exist.

 

[Art G]

That would entail companies actually policing themselves, and that's not gonna happen. Can you imagine what happens to the share price if a company willingly splits for economic reasons? In reality, it would be best for the overall market, but it wouldn't happen. There are a whole lot of things that need fixing in the market right now.
BTW, ironically enough, I just got a call from AIG assuring me things were safe.....of course, they didn't offer any guarantees.

 

[cute fuzzy bunny]

If only there were some way of keeping companies from entering more than one kind of financial market or type at a time...

 

[harley]

That just exasperates the situation. In fact, they'd probably appreciate the opportunity to dump their bad debt into a couple companies and watch the shareholders flounder. This may be what BOA is doing with Countrywide.

Exacerbates! Exacerbates! Yaaahhhh!

Sorry, pet peeve.

 

[cute fuzzy bunny]

So in other words, you're exasperation is exacerbated?

 

[ERD50]

Can you imagine what happens to the share price if a company willingly splits for economic reasons? In reality, it would be best for the overall market, but it wouldn't happen.

It isn't all that uncommon - companies split off divisions, usually with the explanation that that will allow them to 'focus' on their core whatever. It's probably a bogus excuse to cover up their poor management 90% of the time, but it does happen voluntarily.

Not sure what the answers are. I'm a free market kinda guy, but if a company gets so big and entwined in everything to be considered 'too big to fail', well, it's not really a free market anymore. So as REWahoo says, split 'em up before they get that big.

-ERD50

PS to Harley - the two words are somewhat interchangeable - no?

ex·as·per·ate

1. To make very angry or impatient; annoy greatly.
2. To increase the gravity or intensity of:

ex·ac·er·bate

To increase the severity, violence, or bitterness of; aggravate:

 

[harley]

Nope, people get exasperated (irritated); situations get exacerbated (made worse). Sort of like affect, effect.

 

[Retire Soon]

There is a big difference between WM and AIG, IMO. AIG did lots of stuff at the holding company level that caused them a liquidity crisis. WM did most everything out of bank entities, which have all the liquidity goodies that go with it: discount window access, Federal Home Loan Bank membership, etc. So unless something causes a massive run on the bank by actual depositors, its hard to see how WM will have a liquidity crisis that will cause them to suddenly fail. The $64k question for WM is whether they have so many bad loans on the book that they eventually run out of capital. I don't think anyone can guess as to whether they have enough capital with any degree of confidence, at least at this point in time.

If WAMU has no liquidity crisis, why are they looking for a buyer?

http://www.nytimes.com/2008/09/18/business/18wamu.html?_r=1&oref=slogin

 

[haha]

Exacerbates! Exacerbates! Yaaahhhh!

Sorry, pet peeve.

You are going to be a busy man.

ha

 

[haha]

Nope, people get exasperated (irritated); situations get exacerbated (made worse). Sort of like affect, effect.

I can effect any affect I want to.

Ha

 

[chinaco]

... AIG did lots of stuff at the holding company level that caused them a liquidity crisis...

Do you know if those Credit Default Swaps that pulled them down were owned by the insurance company(s) or some other investment bank subsidiary?

 

[clifp]

I listened to ex AIG head Hank Greenberg's interview with Charlie Rose and he said it was a subsidiary that was doing the CDS. He also said that NY insurance regulator agreed to allow $20 billion be transferred from various insurance sub to the parent holding. He felt that with investments from private equity funds, plus selling some assets AIG could have raised $50 billion, maybe not enough but better than borrowing $80 billion from the Fed at 11% and losing 80% of the equity.

I have to say I felt sorry for the 83 year old D-Day survivor who spent his whole life building the company only to see it go down the drain in one day.

 

[cute fuzzy bunny]

Somewhere theres a senior executive yelling "CDS? CDS?!? I SAID "CD's"!!!"

 

[Robert the Red]

I have to say I felt sorry for the 83 year old D-Day survivor who spent his whole life building the company only to see it go down the drain in one day.

Considering the borderline criminal behavior that forced Greenberg out of AIG (e.g., Is Buffett in trouble? - By Daniel Gross - Slate Magazine or A top insurance company as the new Enron? | csmonitor.com), I don't feel too sorry for him.

 

[MGYog]

AIG is so vast, they have got to be bailed out. They were, just last year, one of only 8 companies in the world that were rated AAA. Go figure.

AIG IS too, too big, so now we'll be bailing out non taxpayers with our taxes (as we are wont to do). I am at a loss for words.


Big Asset Sales Likely for A.I.G. - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

...
Though its name is American, the company is rooted in Asia. According to company lore, its founder, Cornelius Vander Starr, a World War I veteran, traveled to Asia with only 300 Japanese yen (less than $3 by today's exchange rates) in his pocket and started the firm in Shanghai in 1919.

With a partner, he sold marine and fire insurance and expanded rapidly throughout the Philippines, Indonesia and China by hiring locals as agents and managers, a business strategy A.I.G. uses today. Nearly half of A.I.G.'s 116,000 direct employees — about 62,000 people — are in Asia.
...

Geographically, A.I.G. is sprawling. One of its life insurance companies operates in 50 countries and other units offers other products, like health insurance and retirement services, in countries like Japan and the United States. It claims to be the largest life insurance company in the Philippines. Its private bank is based in Zurich.
...

A.I.G. 's Asian asset management business has $115 billion in assets, and the company peddles mutual funds in the Philippines, Hong Kong and Singapore and investment trusts in Taiwan.

The company is a sizable investor in Asian development projects, from toll roads in the Philippines to Seoul's international finance center. It is also a major investor in the Taiwan government. As of February, A.I.G. held $14.2 billion in Taiwan government bonds, 13.1 percent of Taiwan's total issued government bonds.

 

[FinanceDude]

AIG IS too, too big, so now we'll be bailing out non taxpayers with our taxes (as we are wont to do). I am at a loss for words.


Big Asset Sales Likely for A.I.G. - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

...
Though its name is American, the company is rooted in Asia. According to company lore, its founder, Cornelius Vander Starr, a World War I veteran, traveled to Asia with only 300 Japanese yen (less than $3 by today's exchange rates) in his pocket and started the firm in Shanghai in 1919.

With a partner, he sold marine and fire insurance and expanded rapidly throughout the Philippines, Indonesia and China by hiring locals as agents and managers, a business strategy A.I.G. uses today. Nearly half of A.I.G.'s 116,000 direct employees — about 62,000 people — are in Asia.
...

Geographically, A.I.G. is sprawling. One of its life insurance companies operates in 50 countries and other units offers other products, like health insurance and retirement services, in countries like Japan and the United States. It claims to be the largest life insurance company in the Philippines. Its private bank is based in Zurich.
...

A.I.G. 's Asian asset management business has $115 billion in assets, and the company peddles mutual funds in the Philippines, Hong Kong and Singapore and investment trusts in Taiwan.

The company is a sizable investor in Asian development projects, from toll roads in the Philippines to Seoul's international finance center. It is also a major investor in the Taiwan government. As of February, A.I.G. held $14.2 billion in Taiwan government bonds, 13.1 percent of Taiwan's total issued government bonds.

We may look back at this period a couple years from now and see how shrewd a business deal the Fed made. If the companies recover, the Fed's ownership of that will be cashed out at a large multiple.

Leave it to me to find a silver lining...........

 

[clifp]

Considering the borderline criminal behavior that forced Greenberg out of AIG (e.g., Is Buffett in trouble? - By Daniel Gross - Slate Magazine or A top insurance company as the new Enron? | csmonitor.com), I don't feel too sorry for him.

I am aware of the allegations against Hank and as a Berkshire shareholder was unhappy that Warren and company got dragged into the mess.

At the end of the day nothing was really proved that AIG and Greenberg did anything wrong. Hank has insisted that he was a victim. Of course he was forced out of AIG and charges were filed against him. But considering the Happy Hookers best friend, Elliot Spitzer was behind the prosecute/witch hunt, maybe Hank deserves the presumption of innocence.

Given the power of prosecutors anytime one is shown to be a rogue, I automatically attached some crediability to the claims of innocence from any of the folks they have prosecuted. Examples include the prosecutors in the Duke Rugby case, Texas's infamous Henry Wade (Wade vs Roe), and now Elliot Spitzer.

 

[harley]

Given the power of prosecutors anytime one is shown to be a rogue, I automatically attached some crediability to the claims of innocence from any of the folks they have prosecuted. Examples include the prosecutors in the Duke Rugby case, Texas's infamous Henry Wade (Wade vs Roe), and now Elliot Spitzer.

You've just exposed a bias I wasn't aware I had. I also assume innocence when someone is charged with something in a case with national level exposure, unless the accused is a politician or multi-gazillionaire. Then I tend to believe the worst, right from the start.

I'll have to add this prejudice to the list of character faults I'm trying to overcome on my path to non-cynical enlightenment.

 

[cute fuzzy bunny]

Your prejudice might be reasonable. No DA is going to bring iffy charges against a powerful person with plenty of money for good lawyers. They tend to prefer doing that with the average riff raff equipped with public defenders.

 

[clifp]

Your prejudice might be reasonable. No DA is going to bring iffy charges against a powerful person with plenty of money for good lawyers. They tend to prefer doing that with the average riff raff equipped with public defenders.

Unless of course, the DA is the ambitious sort, who has his eye on higher political office. My impression of Elliot was that he needed a separate mansion for his ego.
I'd point out the Duke [-]Rugby [/-] lacross team were also wealthy and fortunately for them able to afford decent lawyers, but if you are trying to win over black voters, putting away "spoiled" rich white kids who rape poor black girls, is good at the polls.

 

[youbet]

Duke lacross team....... And yeah, there was something about that case from the beginning that didn't seem to add up.... A prosecuting attorney looking for fame and glory can be a dangerous thing.