AIG Bailout?

[chinaco]

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

 

[clifp]

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"

 

[Hamlet]

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.

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.

 

[Milton]

A couple of articles in yesterday's Financial Times make interesting reading.

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

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

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.

 

[FinanceDude]

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........

 

[cute fuzzy bunny]

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.

 

[cute fuzzy bunny]

$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.

 

[Nords]

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...

 

[Notmuchlonger]

Exacerbates! Exacerbates! Yaaahhhh!

Sorry, pet peeve.

HA! so you are one of them!

 

[harley]

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...

 

[Nords]

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...

I had a shipmate who frequently needed to give briefs before evolutions. Unfortunately he'd decided to call them "pre-evolutionary briefs".

 

[cute fuzzy bunny]

I think I have a few pairs of those.

I also used to say and do things that I knew bugged my subordinates. It was sort of a mine canary. If everyone kept their mouths shut, they were reasonably happy and rational enough to understand that correcting me was fruitless. If someone blurted out a correction, I knew they'd crossed over the line of rationality.

 

[barbarus]

where is Paulson's authority to do this?

It's rising from the flames of an immolating Constitution.

 

[youbet]

IMO, the FT is the best newspaper going.

Because it's pink?

 

[ladelfina]

I also used to say and do things that I knew bugged my subordinates. It was sort of a mine canary. If everyone kept their mouths shut, they were reasonably happy and rational enough to understand that correcting me was fruitless. If someone blurted out a correction, I knew they'd crossed over the line of rationality.

That is truly sadistic. Reminds me of my old boss who would secretly program his own key commands into our machines and then hover over our shoulders saying "why don't you just hit Ctrl-Shift-F-tilde?". He was looking to get punched! We took our "line of rationality" right out the door, leaving him high and dry.

--
I should start a thread on funny/bad usages and neologisms. Just recently I've seen the classic "Marshall Law" more than once, and this new one: "X will be the deathnail of Z".

I thought that was quite inventive!

 

[Milton]

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.

I worked for an imbecile who repeatedly talked about how he "could (sic) care less."

 

[ERD50]

I worked for an imbecile who repeatedly talked about how he "could (sic) care less."

I know someone who says that - plus, instead of saying " well, I'll never forget such and such..." he says "Well, the only thing I remember is such and such..."

My wife thinks I'm being rude when I respond and say "What is your middle name?" <pause... confused looks> then I say "Oh, I see you can only remember one thing..."


Or "how much less could you care about xyz...".

Yeah, they love it when I do that

-ERD50

 

[ERD50]

I also used to say and do things that I knew bugged my subordinates. It was sort of a mine canary. If everyone kept their mouths shut, they were reasonably happy and rational enough to understand that correcting me was fruitless. If someone blurted out a correction, I knew they'd crossed over the line of rationality.

That is truly sadistic. ...

It sounds to me more like someone who wants to surround himself with 'Yes-Men (and woman)". Or can't admit to a mistake. Neither one sounds like particularly good leadership qualities to me.

Sure, there are times when you wouldn't want to do it front of others, but you just might be doing your boss a big favor by correcting them (in the right manner) so they don't make the same mistake in front of their boss and/or customer. It's a judgment call of course.

-ERD50

 

[Finance Dave]

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.

Please note the below is not my opinion...but just what I've heard/read others saying (Henry Paulson was one of them.)

The reason AIG was bailed out and not Lehman is that AIG is a much different type of company. They are in a business that is so intertwined with corporate America and all the credit markets that to let them fail would be certain disaster.

Again, let me reiterate. The above statement is not my opinion and does not reflect my beliefs.

 

[free4now]

Sure, there are times when you wouldn't want to do it front of others, but you just might be doing your boss a big favor by correcting them (in the right manner) so they don't make the same mistake in front of their boss and/or customer. It's a judgment call of course.

Yeah, it would be sad if they became president of the USA and still didn't know how to pronounce 'nuclear'.

 

[cute fuzzy bunny]

I hate that. Supposedly there was a study group who determined that many americans pronounce it that way, so he decided to stick with it.

I wonder what all the fund companies like Vanguard who note Lehman indexes as comparators for their funds are going to do....

 

[Milton]

The above statement is not my opinion and does not reflect my beliefs.

If you have any personal opinions or beliefs on the subject, perhaps you'd like to share them.

 

[ladelfina]

Let's look at who might be behind the bailout expansion to include FOREIGN BANKS..

The New York Times reports this evening that "foreign banks, which were initially excluded from the [Wall Street bailout] plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks."

The Times further reports that two of the biggest foreign banks in need of such relief are Barclays and UBS. In fact, my understanding is that UBS is more on the line here than any other foreign bank.

Let's add this up.

John McCain's top economics advisor, who is widely believed to be his choice for Treasury Secretary, should he win in November, is former Sen. Phil Gramm. (Indeed, just last night his spokesman refused to say Gramm wouldn't be McCain's choice for Treasury Secretary.)

Gramm is both vice chairman of UBS's US division and a lobbyist for UBS.

If UBS successfully lobbied over the weekend to get in on the bailout, what was Gramm's role in the lobbying?

Talking Points Memo | The Big Question: 2+2=4?
http://www.nytimes.com/2008/09/22/business/22global.html

 

[al_bundy]

most of this toxic junk is US mortgages so not that big a deal

 

[ladelfina]

al.. If a mortgage is sold outside the US, we are guaranteeing that foreign entity's profit. Why? Will we invite Toyota to line up for bailout money behind GM?