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Old 09-18-2008, 05:07 AM   #41
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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.
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Old 09-18-2008, 08:07 AM   #42
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Somewhere theres a senior executive yelling "CDS? CDS?!? I SAID "CD's"!!!"
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Old 09-18-2008, 08:32 AM   #43
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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.
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Old 09-18-2008, 08:53 AM   #44
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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.
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Old 09-18-2008, 10:54 AM   #45
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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...........
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Old 09-18-2008, 08:50 PM   #46
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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.
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Old 09-18-2008, 09:02 PM   #47
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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.
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Old 09-18-2008, 09:53 PM   #48
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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.
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Old 09-18-2008, 11:40 PM   #49
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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.
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Old 09-19-2008, 01:39 AM   #50
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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.
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Old 09-19-2008, 04:08 AM   #51
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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.
I have not looked at AIG... but subsidiary companies of Holding companies are often owned by the insurance company directly. It could be an asset and liability of one of its insurance companies. It could also be a sub of an investment bank it owns. Holding companies are a tangle of insurance and other financial service companies today.

Deregulation has again made it ok for insurance companies to own banks... which was not allowed for years (after the great depression). IMO it was a bad move...

Clinton, Republicans agree to deregulation of US financial system
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Old 09-19-2008, 04:36 AM   #52
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I have not looked at AIG... but subsidiary companies of Holding companies are often owned by the insurance company directly. It could be an asset and liability of one of its insurance companies. It could also be a sub of an investment bank it owns. Holding companies are a tangle of insurance and other financial service companies today.

Deregulation has again made it ok for insurance companies to own banks... which was not allowed for years (after the great depression). IMO it was a bad move...

Clinton, Republicans agree to deregulation of US financial system

My understanding was that AIG set up a separate subsidiary to provide insurance on CDOs and CDS, which is something like a 3rd or 4th level derivative and I would think pretty much impossible to price without the aid of a computer model. Obviously the model was broken badly.

Which leads me to a flash of insight, the entire financial crisis is the result of software errors and there is an obvious solution.

"The second thing we do is kill all the software engineers"
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Old 09-19-2008, 08:06 AM   #53
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If he must engage in these deals, this seems like a reasonable principle to gage them by. If the Feds must take on the risk, the shareholders need to basically lose everything, to avoid moral hazzard problems.



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What is interesting is that Paulson, from Wall Street, is determined to "haircut" the shareholders of these companies, even those that continue to operate (Fannie & Freddie & AIG & Bear Stearns). But he doesn't seem to want to hurt those who did business with them.
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Old 09-19-2008, 08:47 AM   #54
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A couple of articles in yesterday's Financial Times make interesting reading.

FT.com - America will need a $1,000bn bail-out

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Were the financial crisis to end today, the costs would be painful but manageable, roughly equivalent to the cost of another year in Iraq. Unfortunately, however, the financial crisis is far from over, and it is hard to imagine how the US government is going to succeed in creating a firewall against further contagion without spending five to 10 times more than it has already, that is, an amount closer to $1,000bn to $2,000bn.... And it is hard to see how the central bank will be able to resist a period of allowing elevated levels of inflation, as this offers a convenient way for the US to deflate the mounting cost of its private and public debts.
FT.com - This greed was beyond irresponsible

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The word “irresponsible” does not begin to describe AIG’s behaviour. Like Bear, Lehman and others, it saw a way to get in on the growing action in mortgage-backed derivatives. Its bankers were soon earning huge fees for themselves and AIG by piling up unimaginable risks.... Call me a spoilsport, but I do not believe that AIG or any other capital markets institution should be allowed to play like that with my money (I am a US taxpayer) in future.
IMO, the FT is the best newspaper going.
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Old 09-19-2008, 09:11 AM   #55
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A couple of articles in yesterday's Financial Times make interesting reading.

FT.com - America will need a $1,000bn bail-out



FT.com - This greed was beyond irresponsible



IMO, the FT is the best newspaper going.
I couldn't agree with him more........I have a visceral dislike of "bail-outs" in general. $20 says NOONE, not one CEO or banker goes to federal prison for this mess, not one........
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Old 09-19-2008, 09:14 AM   #56
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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.
Sure, but when the stakes are that high and you're shooting for PR, then you make DOUBLE sure you've got a 99% sure thing case. You definitely dont want the negative headlines when you lose.

Unless of course you've spun it so hard that the public will think the guy is guilty no matter what a jury says.
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Old 09-19-2008, 09:15 AM   #57
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$20 says NOONE, not one CEO or banker goes to federal prison for this mess, not one........
Oh someone will have to be the sacrificial lambs. I'm just pretty sure they wont have been the most key decision makers. Or they'll just pick a handful at random and shoot them for effect.

Theres absolutely no way this all goes down without someone going down.
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Old 09-19-2008, 11:56 AM   #58
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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.
I managed to hold back my tears of sympathy. I think it's four decades of karma catching up to him.

Greenberg makes Chainsaw Al, Skilling, Fastow, LBJ, & Rickover look like Barney the Purple Dinosaur...
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Old 09-19-2008, 12:12 PM   #59
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Exacerbates! Exacerbates! Yaaahhhh!

Sorry, pet peeve.

HA! so you are one of them!
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Old 09-19-2008, 03:48 PM   #60
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HA! so you are one of them!
I spent 5 years working for a boss that misused "exasperate" at least 3 times/week. If I had corrected him the first time I might have gotten away with it. But I had enough political sense to realize that making your boss look foolish wasn't a good decision. So I had to sit there and take it, over and over and over...
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