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09-16-2008, 09:31 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 5,596
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AIG Bailout?
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09-16-2008, 08:24 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Location: Denver
Posts: 3,519
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09-16-2008, 08:28 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Any company that wants to grow to the point of being "too big to fail" needs to be willing to accept a reasonable amount of regulation to make their chances of failing very close to zero, IMO.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-16-2008, 08:43 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 3,895
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"off with their heads"~~dr. joseph-ignace guillotin
"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
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09-16-2008, 09:01 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Posts: 2,360
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$85 billion! So much for the promised end to the bailout culture.
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"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
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09-16-2008, 09:15 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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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.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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09-16-2008, 09:25 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Posts: 2,360
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Quote:
Originally Posted by brewer12345
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.
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.
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There is a fair chance that the uncertainty described in the second paragraph will be the "something" mentioned in the first paragraph.
Let's hope not.
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
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09-16-2008, 09:26 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Dec 2005
Posts: 1,228
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With Fannie, Freddie, Merrill, and AIG, the guv is spending hundreds of billions on these bailouts, just in the past week or so. That's more than the prez said the Iraq war would cost originally. Who is making these kinds of spending decisions anyway? I haven't seen any house or senate involvement at all. Can Bush just say "Yeah we'll cover it" as he runs for the exits?
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09-16-2008, 09:37 PM
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#9
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Recycles dryer sheets
Join Date: Jan 2007
Posts: 222
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Quote:
Originally Posted by free4now
With Fannie, Freddie, Merrill, and AIG, the guv is spending hundreds of billions on these bailouts, just in the past week or so.
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I didn't think they were involved with Merrill. BoA scooped them up.
As a follow up question, though, exactly how much money does the Fed have left to bail companies out?
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09-16-2008, 09:45 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by CompoundInterestFan
I didn't think they were involved with Merrill. BoA scooped them up.
As a follow up question, though, exactly how much money does the Fed have left to bail companies out?
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They can print an infinite amount of fiat money. The question then becomes what happens to the economy, inflation and the dollar as a result.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-17-2008, 05:59 AM
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#11
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Posts: 2,360
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Exactly. An empire founded on debt can't be sustained indefinitely, and the printing presses will be operating faster and faster.
__________________
"To know what you prefer, instead of humbly saying Amen to what the world tells you you ought to prefer, is to have kept your soul alive". Robert Louis Stevenson, An Inland Voyage (1878)
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09-17-2008, 06:27 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,543
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Quote:
Originally Posted by ziggy29
They can print an infinite amount of fiat money. The question then becomes what happens to the economy, inflation and the dollar as a result.
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these aren't bailouts, not even close to Chrysler in 1980. the interest on the AIG loan is 8.5% and Fannie is around 10% and the government is taking over management instead of letting the old management use the money for bonuses.
when it's over the government will just sell the stock
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09-17-2008, 06:39 AM
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#13
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Recycles dryer sheets
Join Date: Aug 2005
Posts: 335
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Quote:
Originally Posted by al_bundy
... the interest on the AIG loan is 8.5% ...
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Actually, it is 8.5% over LIBOR 3 month, so it is currently 11.3%, which is over $9 billion per year in interest. In other words, the new management at AIG is under pressure to sell off the assets (insurance companies, aircraft holding company, ...) at a rapid rate and repay the loan ASAP. That is, there will be an orderly unwinding of AIG, rather than a "disordered" unwinding.
I doubt that anyone on Earth has solid knowledge about whether the Fed will lose or make money on this deal. The US made money on the Chrysler bailout in the early 1980s, and made money on the mortgage bailouts of the Depression. And lost a lot of money in the S&L fiasco of the late 1980s.
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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09-17-2008, 07:05 AM
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#14
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,543
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i think bernanke said earlier this year that the goal over the next 2 years is an ordered liquidation of any company in trouble so that it doesn't torpedo the markets.
Yahoo is saying AIG had 73% institutional ownership, so this is probably a message to the investing community to start acting like owners and not just OK the election of any director that you golf with
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09-17-2008, 07:05 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,037
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"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
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09-17-2008, 01:09 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Oct 2005
Posts: 2,713
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where is Paulson's authority to do this?
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09-17-2008, 01:12 PM
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#17
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
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Quote:
Originally Posted by ladelfina
where is Paulson's authority to do this?
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We can't let pesky inconveniences like the U.S. Constitution get in the way of the federal government's business, can we?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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09-17-2008, 01:14 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2008
Location: No fixed abode
Posts: 8,765
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All I can say is make sure to vote in November. This kind of government intervention wouldn't be happening in a Republican administration.
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"Good judgment comes from experience. Experience comes from bad judgement." - Anonymous (not Will Rogers or Sam Clemens)
DW and I - FIREd at 50 (7/06), living off assets
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09-17-2008, 01:24 PM
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#19
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Moderator Emeritus
Join Date: Feb 2004
Location: minnesota
Posts: 13,228
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Quote:
Originally Posted by ladelfina
where is Paulson's authority to do this?
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Sorry, I am talking off for a bit so I don't have a cite, but the fed has pretty broad powers to lend money in unusual and exigent circumstances.
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No more lawyer stuff, no more political stuff, so no more CYA
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09-17-2008, 01:40 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 1,076
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Section 13 (3) of the Federal Reserve Act says:
In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.
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