AIG may be nationalized

[w¡n9Nµ7 §£@¥€r 123]

The Federal Reserve will provide a roughly $85 billion bridge loan to AIG (AIG.N) and take a nearly 80 percent stake in the company, according to a source briefed on the matter.

http://news.yahoo.com/s/nm/aig_loan_dc

[Dan J 277]

The Federal Reserve will provide a roughly $85 billion bridge loan to AIG (AIG.N) and take a nearly 80 percent stake in the company, according to a source briefed on the matter.

http://news.yahoo.com/s/nm/aig_loan_dc

Where is the "Free market can do no wrong" crowd?

[one...two...tree 2,762]

I don't see how we can continue bearing the weight of all these financial institutions falling down like dominoes. In a way, I'm thinking maybe it'd be better if McCain were elected because whoever the next President is, he's f##ked...

[w¡n9Nµ7 §£@¥€r 123]

The Federal Reserve will provide a roughly $85 billion bridge loan to AIG (AIG.N) and take a nearly 80 percent stake in the company, according to a source briefed on the matter.

http://news.yahoo.com/s/nm/aig_loan_dc

Where is the "Free market can do no wrong" crowd?

Who thought America's introduction to socialism would occur under a Republican President?

... whoever the next President is, he's f##ked...

Just a thought, now that we're officially socialist: We should nationalize a health insurance provider next

[w¡n9Nµ7 §£@¥€r 123]

BTW, the Feds aren't simply rescuing the C-level executives of AIG. They're also rescuing all of AIG's policyholders, commercial, personal and specialty.

[w¡n9Nµ7 §£@¥€r 123]

CNN.COM is confirming:

The Federal Reserve says it is taking over crumbling insurance giant AIG in an $85 billion rescue plan.

[w¡n9Nµ7 §£@¥€r 123]

Details:

The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) up to $85 billion. In return, the federal government will receive a 79.9% stake in the company.

Officials decided they must act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.

...

AIG will sell certain of its businesses with "the least possible disruption to the overall economy."

Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.

http://money.cnn.com/2008/09/16/news/compa...sion=2008091621

[w¡n9Nµ7 §£@¥€r 123]

So what do our conservative friends over on Free Republic think about this?

Some choice comments:

AIG is too big to fail.

*****

More corporate welfare. We get the bills, the executives walk away with millions upon millions of dollars and no one says a word about their fraud.

*****

I wonder if anyone in the media will ask just where this $85 billion comes from? Do they realize that the Fed conjures it out of thin air?

*****

I guess giving all those home loans to illegals, and repackaging them for other ‘investors’ to buy, wasn’t such a good idea afterall.

*****

Nothing is too big to fail! Even if the federal government were to fail, we could defend ourselves with a levy en masse, if necessary, before we build a new one.

*****

Who’s next?

Me! Me! Me! Pick me!

*****

Yep. United Socialists States of Americo coming soon!

*****

If AIG failed, it would set off a domino effect across the insurance industry and the cost of lost equity to TAXPAYERS would be infinitely larger than $85 billion.

*****

If the government is taking an 80% stake then AIG has been nationalized. We now live in a socialist country.

*****

All of our economic woes stem from bad investment due to credit expansion. We need an economic contraction to sort things out. So long as the fed keeps bailing people out, we are only prolonging the crisis.

*****

It was a great idea! AIG, Lehman, none of their CEO’s are going to be hurt. All our politicians who have $$$ invested will now be saved. The only ones hurt are you and I and we are expendable. Have you noticed?

*****

The current shareholders just lost 80% of their stake. Not exactly a happy scenario for them.

*****

Of course this’ll cost the taxpayers. Where does the Fed get its money? Inflation, i.e. counterfeiting.

*****

Trust me, I’m NOT in favor of bailouts. However, the cost to taxpayers of AIG failing would be far more than $85 million. Nearly every major fund is heavily invested in AIG.

*****

I'm old enough to remember when Margaret Thatcher undertook to sell UK owned businesses. It took awhile, but she did it before being given the boot by her own party.

Will be interesting to see how long it takes the next pres to unload Fred and Fran and the Fed to unload AIG.

*****

The underlying structure of the deal is a good move. Long run impact is a net positive.

*****

If AIG fails then yes the taxpayers will be on the hook. If AIG succeeds as I expect them to, then the taxpayers get their 80B back plus interest plus an 80% equity stake in AIG.

*****

If we’re to maintain some semblance of a free market in this country, a company, big or small, that mismanages itself into insolvency must be allowed to fail. If we allow our government to socialize investment loss or take over entire businesses or industries, our nation will devolve into a water-treading socialized democracy characterized by economic stagnation, declining birth rates and, ultimately, the loss of all freedom — like most of Western Europe.

*****

No one voted for it, but our government has nationalized some of our largest financial institutions, including much of the mortgage market. This used to be called socialism. Whatever you call it, we sure as hell can’t afford it. We’re a much poorer country than most of us think.

*****

AIG is now the government-owned insurance company. I wonder if they will give us free health insurance?

*****

Depression averted. For now.

The Fed had not choice but to save AIG to prevent a system wide financial panic and subsequent meltdown. They should not have bailed out Bear Stearns but they had to take on AIG.

By my count, the Fed has about $100 to $150 billion left uncommitted to play with. Another big bailout and they are broke. So what happens then? Do they pretend they still have US treasuries money and just keep tossing money out that they don’t have, or do they say “sorry, we’re broke to”?

Who bails out the Fed? Does GW just tack all future bailouts onto the surging national deficit?

*****

[w¡n9Nµ7 §£@¥€r 123]

This is a good read, from the New York Times, dated 9/15/2008:

Late Monday, A.I.G. was downgraded by the major credit rating agencies ... This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

A.I.G. does business with virtually every financial institution in the world. Most important, it is a central player in the unregulated, Brobdingnagian credit default swap market that is reported to be at least $60 trillion in size.

Nobody knows this market’s real size, or who owes what to whom, because there is no central clearinghouse or regulator for it. Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss. The insurer (which could be a bank, an investment bank or a hedge fund) is required to post collateral to support its payment obligation, but in the insane credit environment that preceded the credit crisis, this collateral deposit was generally too small.

As a result, the credit default market is best described as an insurance market where many of the individual trades are undercapitalized. But even worse, many of the insurers are grossly undercapitalized.

...

If A.I.G. collapsed, its hundreds of billions of dollars of mortgage-related assets would be added to those being sold by other financial institutions. This would just depress values further. The counterparties around the world to A.I.G.’s credit default swaps may be unable to collect on their trades. As a large hedge-fund investor, A.I.G. would suddenly become a large redeemer from hedge funds, forcing fund managers to sell positions and probably driving down prices in the world’s financial markets. More failures, particularly of hedge funds, could follow.

...

Wall Street isn’t remotely prepared for the inestimable damage the financial system would suffer if A.I.G. collapsed.

[Mr. Big Dog 10,747]

Just a thought, now that we're officially socialist: We should nationalize a health insurance provider next

Silence. I kill you!

[Dan J 277]

An interesting point I found about the AIG bailout:

This nationalization poses an especially large challenge for John McCain, who is now railing against corporate greed and lack of government regulation of the financial industry. What he doesn't talk much about is how deregulation happened. It was the 1999 Gramm-Leach-Bliley Act that repealed the 1933 Glass-Steagall Act and thus eliminated the depression-era walls between between banking, investment, and insurance that made this crisis possible. Glass-Stegall erected walls between banking, investment management, and insurance, so problems in one sector could not spill over into the others, which is precisely what is happening now. The primary author of the Gramm-Leach-Bliley Act was none other than McCain's economic advisor, former senator Phil Gramm (who thinks the country is in a "mental recession"). McCain fully supported the bill and has a decades-long track record of opposing government regulation of the financial industry. His new-found conversion to being a fan of regulation is going to be a tough sell as Obama is already pointing out that McCain got what he wanted (deregulation) and this is the consequence.

From this guy: http://www.electoral-vote.com/

[almaty 19]

Just a thought, now that we're officially socialist: We should nationalize a health insurance provider next

commies for christ..coming to your wall street soon

[one...two...tree 2,762]

An interesting point I found about the AIG bailout:

This nationalization poses an especially large challenge for John McCain, who is now railing against corporate greed and lack of government regulation of the financial industry. What he doesn't talk much about is how deregulation happened. It was the 1999 Gramm-Leach-Bliley Act that repealed the 1933 Glass-Steagall Act and thus eliminated the depression-era walls between between banking, investment, and insurance that made this crisis possible. Glass-Stegall erected walls between banking, investment management, and insurance, so problems in one sector could not spill over into the others, which is precisely what is happening now. The primary author of the Gramm-Leach-Bliley Act was none other than McCain's economic advisor, former senator Phil Gramm (who thinks the country is in a "mental recession"). McCain fully supported the bill and has a decades-long track record of opposing government regulation of the financial industry. His new-found conversion to being a fan of regulation is going to be a tough sell as Obama is already pointing out that McCain got what he wanted (deregulation) and this is the consequence.

From this guy: http://www.electoral-vote.com/

Good post!

Here's from what I posted earlier this morning:

However, it should be the government's job to stabilize the financial system; the question is how. Unfortunately, neither the Federal Reserve, nor the government, nor the presidential candidates have the slightest clue. Neither a blame game nor desperate piecemeal fixes will work. This is not about Republican or Democratic policies, but systemic bipartisan deregulation. Only a quick bout of sweeping and decisive regulation can fix what's broken.

In 1932, three years after the 1929 stock market crash, the banking system last stood at a brink of implosion. Franklin Delano Roosevelt zoomed past Herbert Hoover into the White House. The country was struggling through a Great Depression unleashed by the forces of unregulated economic greed. FDR stood up to the unrestrained power of Wall Street and contained it. The resultant New Deal included a stoplight at the heavy intersection of financial capital and unregulated greed, called the Glass-Steagall Act of 1933.

Decisively, the Glass-Steagall Act forced institutions within the banking community to pick a side. If you want to deal with the population at large, take their deposits, give them a safe place for their savings and make reasonable loans for which you are as responsible as the borrowers -- terrific. As a commercial bank, you will have the newly established Federal Deposit Insurance Corporation (FDIC) backing your depositors. We, the federal government, will regulate you.

If you want to raise capital through speculative investors at home or overseas -- fine. But as an investment bank, you don't get our backing and you don't get to mix it up with citizens' lives or use their capital to fund your trading activities.

That simple premise, the pristine logic of the Glass-Steagall Act, not only kept consumer and speculative capital from intertwining within the same institution; it simplified the ability to understand the activities of all financial organizations. Transparency was not perfect, but it was more easily accomplished.

Lehman Brothers got a taste of the intent of Glass-Steagall. Its demise is ugly, not just because of its 156-year history, the 25,000 employees who are suddenly without jobs, or the long list of institutions to which Lehman owed money that will be slugging it out in bankruptcy court.

http://www.visajourney.com/forums/index.ph...t&p=2225088

[rocks 494]

[metta 0]

Just a thought, now that we're officially socialist: We should nationalize a health insurance provider next

commies for christ..coming to your wall street soon

Wifey and I were discussing AIG takeover this morning and she observed how ironic it is that capitalism ultimately end up in socialism as witnessed by FED takeover of AIG

An interesting point I found about the AIG bailout:

This nationalization poses an especially large challenge for John McCain, who is now railing against corporate greed and lack of government regulation of the financial industry. What he doesn't talk much about is how deregulation happened. It was the 1999 Gramm-Leach-Bliley Act that repealed the 1933 Glass-Steagall Act and thus eliminated the depression-era walls between between banking, investment, and insurance that made this crisis possible. Glass-Stegall erected walls between banking, investment management, and insurance, so problems in one sector could not spill over into the others, which is precisely what is happening now. The primary author of the Gramm-Leach-Bliley Act was none other than McCain's economic advisor, former senator Phil Gramm (who thinks the country is in a "mental recession"). McCain fully supported the bill and has a decades-long track record of opposing government regulation of the financial industry. His new-found conversion to being a fan of regulation is going to be a tough sell as Obama is already pointing out that McCain got what he wanted (deregulation) and this is the consequence.

From this guy: http://www.electoral-vote.com/

Good post!

Here's from what I posted earlier this morning:

However, it should be the government's job to stabilize the financial system; the question is how. Unfortunately, neither the Federal Reserve, nor the government, nor the presidential candidates have the slightest clue. Neither a blame game nor desperate piecemeal fixes will work. This is not about Republican or Democratic policies, but systemic bipartisan deregulation. Only a quick bout of sweeping and decisive regulation can fix what's broken.

In 1932, three years after the 1929 stock market crash, the banking system last stood at a brink of implosion. Franklin Delano Roosevelt zoomed past Herbert Hoover into the White House. The country was struggling through a Great Depression unleashed by the forces of unregulated economic greed. FDR stood up to the unrestrained power of Wall Street and contained it. The resultant New Deal included a stoplight at the heavy intersection of financial capital and unregulated greed, called the Glass-Steagall Act of 1933.

Decisively, the Glass-Steagall Act forced institutions within the banking community to pick a side. If you want to deal with the population at large, take their deposits, give them a safe place for their savings and make reasonable loans for which you are as responsible as the borrowers -- terrific. As a commercial bank, you will have the newly established Federal Deposit Insurance Corporation (FDIC) backing your depositors. We, the federal government, will regulate you.

If you want to raise capital through speculative investors at home or overseas -- fine. But as an investment bank, you don't get our backing and you don't get to mix it up with citizens' lives or use their capital to fund your trading activities.

That simple premise, the pristine logic of the Glass-Steagall Act, not only kept consumer and speculative capital from intertwining within the same institution; it simplified the ability to understand the activities of all financial organizations. Transparency was not perfect, but it was more easily accomplished.

Lehman Brothers got a taste of the intent of Glass-Steagall. Its demise is ugly, not just because of its 156-year history, the 25,000 employees who are suddenly without jobs, or the long list of institutions to which Lehman owed money that will be slugging it out in bankruptcy court.

http://www.visajourney.com/forums/index.ph...t&p=2225088

Good article Steven. Thanks.