SubscribeUnfortunately we can’t start cutting interest rates just yet because we are also frightened by the massive speculation in the financial markets with stock buybacks, mergers, leveraged buyouts, and trillions of dollars in derivatives floating around some of which we do not even know who the ultimate guarantor is. We are hoping but do not know that the ultimate guarantor of these derivatives is not Madame Merriweather's Mud Hut in Malaysia.The core of the issue is assuming laissez faire operation of critical sectors of our economy was a valid form of governance. IMO this has been demonstrated to be Not The Case, since in the end we are still monkeys and can get ourselves into very unpleasant situations that require a higher order solution than what got us there.
Among Obama's campaign contributors are many Lehman Brothers Executives, such as CEO Richard Fuld ($2,300), President Joseph Gregory ($4,600) and dozens of other top Lehman Executives. On June 19th, Lehman shareholders filed suit against Fuld and Gregory for the company’s exposure in the subprime market. In addition to dozens of Lehman executives are Obama's bundlers from Lehman Borthers who have raised top dollar for the campaign. Direct contributions from Lehman Brothers have exceeded $395,000 for Senator Obama.(source)
John Rhea - (over $500,000) Co-Head of Lehman Bros. Global Investment Banking
Mark Gilbert - (over $500,000) Lehman Brothers Senior Executive
Christine Forester - (over $500,000) Lehman Brothers Senior Executive
Theodore Janulis – Bundler (over $100,000) & Lehman Brothers Head of Global Mortgages
Nadja Fidelia – Bundler (over $50,000) & Managing Director of Lehman Brothers
No, it tells the market that AIG's got a rich uncle that will backstop him if needed.If that's the case, I don't understand why people have been saying things like "AIG would go bankrupt tomorrow without a bailout".
AIG's financial crisis intensified Monday night when its credit rating was downgraded, forcing it to post $14.5 billion in collateral. The insurer has far more than that in assets that it could sell, but it could not get the cash quickly enough to satisfy the collateral demands. That explains the interest in obtaining a bridge loan to carry it through
AIG's financial crisis intensified Monday night when its credit rating was downgraded, forcing it to post $14.5 billion in collateral. The insurer has far more than that in assets that it could sell, but it could not get the cash quickly enough to satisfy the collateral demands.So this entire problem (or at least this immediate aspect of it) is merely due to some legalese contract that AIG had (with who?) that overlooked (or rejected) the possibility of non-cash collateral as "collateral", even in the extreme short term?
"80% of the company" means "80% of equity", not "80% of assets."Ah, this makes a hell of a lot more sense now.
China classifies 68 offenses as capital crimes. More than half are non-violent offenses such as tax evasion, smuggling, corruption and drug-related crimes.
Critics accuse China of using arbitrary standards to hand out death sentences and brutal methods to carry out executions. Beijing has used executions to crack down on white-collar crimes and executed batches of prisoners in public rallies scheduled on national holidays to maximize attention.[1]
Now John McCain can come out and condemn this action, and show that he's a maverick that disagrees with the administration.I think that John McCain should hire me as an economic advisor. I am clearly qualified. I have, several times, been close enough to Wall Street that I could see it. In fact, I have even been on Wall Street.
Never will our city be destroyed by Zeus' decree,
Nor by the will of the bless'd immortal gods,
For, born of a potent father, great-hearted guardian
Pallas Athena spreads her hands o'er our city
But, by money seduced, the Athenians themselves
Seek mindlessly to corrupt the great city,
Joined by the iniquitous schemes of their leaders,
Who from arrogance great woes shall suffer:
For they understand not how to restrain gluttony,
Nor best to order their feasting in quiet.
Sparing neither sacred ground nor public goods,
Greedily they steal from the one place or the other.
They fail to protect the rev'rend temples of Justice,
She who notes silently what is and what has been,
Who in time shall come exacting retribution.
Behold, an inex'rable harm visits all Athens:
To vile slavery is she swiftly progressed,
Which rouses up from slumber civil strife and war
War that wipes out for many their cherished youth;
Now our much-loved city is soon worn down by faction,
While the wicked stir them to confrontations.
These evils ensnare the whole people; but the poor,
Many of them, depart to a foreign land,
Plundered, and bound up in shameful fetters.
For the slave's yoke bears all other wickedness.
Thus does the public evil come home to each of us:
Straining, the courtyard gates no longer hold fast,
The evil leaps o'er the high walls; it finds everyone,
Even him fleeing to the inmost chamber.
This my soul commands me teach the Athenians:
A bad constitution brings civic turmoil,
But a good one shows well-ordering and coherence,
As it puts shackles 'round about wrong-doing
It smooths out the rough; it checks greed, tempers hubris,
And withers the fruits of reckless impulse.
It takes crooked judgments and makes them straight,
Softens arrogant deeds, halts seditious acts,
And ends the bile of grievous strife. And so under it,
Everything for mankind becomes whole and wise.
What the Fed is doing with this bailout is turning a large amount of super-size fake money, derivatives, into ordinary fake money, dollars. This is a bit indirect, because they're propping up the insurer who backs many bad derivatives, but as AIG pays out, that's the net effect: dollars transfer from Fed to AIG, claims on bad derivatives are filed, AIG transfers cash to holder of bad derivative. Voila, bad debt monetized. The Fed will probably need to funnel a lot more than a piddly $80 billion into AIG.It kind of sounds that way, eg, in the WSJ:
That the government would prop up AIG financially offers a stark indication of the breadth of the insurer's role in the global economy. If it were to have trouble meeting its obligations, the potential domino effect could reach around the world....Does that last sentence mean that the US government has now agreed to reimburse policy holders' mortgage losses up to at least $85 billion?
AIG was a major seller of "credit-default swaps," essentially insurance against default on assets tied to corporate debt and mortgage securities. Weakness at AIG could force financial institutions in the U.S., Europe and Asia that bought these swaps to take write-downs or losses.
If financial behemoths like AIG are too large and/or too interconnected to fail but not too smart to get themselves into situations where they need to be bailed out, then what is the case for letting private firms engage in such kinds of activities in the first place?FT Blogs
But AIG takes the biscuit. Here was a huge multinational insurance group with a reputation for solid underwriting and risk management that decided to diversify from insuring risks it knew well – car crashes and fires – to covering derivatives it did not understand.
Of course, it thought it understood them. In presentations to investors this year, it emphasised how thoroughly its AIG Financial Products arm assessed the risks of insuring CDOs. It ran all the data and decided that, in the worst case, it risked losing $2.4bn on the portfolio.
Well, $24bn of write-downs later – a mere 10 times its maximum estimate – the company has burned through its equity, spread financial chaos to all corners of the earth and humiliated the US Treasury. The job of insurance companies is to guard others against catastrophes, not cause them.
Think of it as a once-in-a-lifetime everythings-gotta-go sale on the NYSE and NASDAQ.
"Hasn't Mr. Market been saying both companies possibly are going to fail? If you put them together, how does that make a better company?"Thank you mister market!
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posted by mr_roboto at 8:19 PM on September 16, 2008 [70 favorites has favorites]