AIG

[Topaz]

The US government is certainly having its business problems and AIG is just another company that its trouble. I did some research and I found that AIG is partners with Blackstone Group which is connected to the Carlyle Group. All these groups went bought up smaller business and now they find themselves in trouble and turn to the government and the stupid thing about this is alot of them are former Fed politicans.

http://www.nowpublic.com/world/feds-aig-ba...-get-150billion

[guyser]

Congrats on the link topaz.

I swear I could make money from this. Seems , and I checked, every time AIG gets into more trouble or needs to makje a bad announcment, I get an email one or two days prior from AIG re-iterating just how well monied and backed AIG Canada is ......with the tag line " not to worry, we will be there for you"

Of course I would need to figure out the angle to make money .......

[August1991]

The US government is certainly having its business problems and AIG is just another company that its trouble.

Topaz, AIG is not just another company, or some member of the Carlyle Group (whatever that is).

In some ways, AIG is at the financial heart of this financial crisis. Directly or indirectly, AIG offered to insure using "credit default swaps" collections of mortgages. These mortgages, now labelled AAA paper, were then passed on to other financial institutions seeking good returns. Quebec's Caisse, National Bank and Caisse populaire all bought these mortgages, along with many foreign (European) financial institutions. They thought that they were buying safe AAA paper.

It has turned out differently and now AIG is on the hook to pay out trillions. It as if AIG insured many houses in Australia and then suddenly, there was a fire. Unfortunately, AIG doesn't have the money to make good on the insurance claims but no one is prepared to consider what that really means.

La Caisse de dépôt in Quebec registered in part a loss of $40 billion due to its anticipated loss (write down) on these mortgages - people are starting to understand that AIG is not really an insurance company.

When you start asking around about how A.I.G. made money during the housing bubble, you hear the same two phrases again and again: “regulatory arbitrage” and “ratings arbitrage.” The word “arbitrage” usually means taking advantage of a price differential between two securities — a bond and stock of the same company, for instance — that are related in some way. When the word is used to describe A.I.G.’s actions, however, it means something entirely different. It means taking advantage of a loophole in the rules. A less polite but perhaps more accurate term would be “scam.”

Nocera NYT

IME, most bubbles involve alot of naivety but also some criminality. If there was criminality in this housing bubble, AIG is the culprit.

Edited March 2, 2009 by August1991

[Oleg Bach]

Toss them a hundred billion - let them circulate it...till it's gone - then toss them the same again and let them circulate it - in a circle - then stimulas packages work! If you send it out in a straight line out into the ether - while some cosmic pigs swallow it and demand more will not work.....a circulation of currencey has to take place - a circular current of currencey --- I am afraid that some one will simply steal it and it will be lost.

[msj]

IME, most bubbles involve alot of naivety but also some criminality. If there was criminality in this housing bubble, AIG is the culprit.

It's more than just AIG - look at the other sides to those swaps.

[msj]

And another interesting opinion about AIG from Ritholtz:

This part of AIG was nothing more than a giant structured finance hedge fund. Despite the fact this hedge fund had no rating, no supervision or oversight, it managed to trade off of the Triple AAA rating of the regulated half of the firm. Somehow, it was treated as if it was Triple AAA, regulated and guaranteed by the government.

This was nothing more than a giant scam, perpetrated by the people who were running the AIG hedge fund.

It was exempt from any form of regulation or supervision, thanks to the Commodities Futures Modernization Act. This ruinous piece of legislation was sponsored by former Senator Phil Gramm ®, supported by Alan Greenspan ®, former Treasury Secretary (and Citibank board member) Robert Rubin (D), and current presidential advisor Larry Summers (D). It was signed into law by President Clinton (D). It was the single most disastrous piece of bipartisan legislation ever signed into law.

Not that it is worth discussing here but I find it funny how Americans talk about "bipartisanship."

Why not strive for the ideal of non-partisanship? I mean, sure, in reality we all have our biases but can't we try to set those to the side in the hope that we can find enough objective evidence and objective insight so that political decisions can be made based on pragmatism rather than a compromise in ideologies?

[Sulaco]

And another interesting opinion about AIG from Ritholtz:

Not that it is worth discussing here but I find it funny how Americans talk about "bipartisanship."

Why not strive for the ideal of non-partisanship? I mean, sure, in reality we all have our biases but can't we try to set those to the side in the hope that we can find enough objective evidence and objective insight so that political decisions can be made based on pragmatism rather than a compromise in ideologies?

A fool's dream. What is "objective evidence". A hypothetical: Assume you believe that wealth possession should be equalized. You find objective evidence that progressive taxation is the best path to this goal. Well that's great - now you've convinced all those who share your priority as to the path to take. But I would say you can take your redistributionist dreams and shove them. No amount of objective evidence as to the best mechanism for wealth-redistribution will convince me that your goal is right. Hypothetically - take your pragmatic non-partisanship and shove it.

Pragmatism is meaningless without the context of goals. And goals are political, philosophical and moral. In my experience, more often than not, those who cry out for pragmatism instead of ideology have an ideology they are either trying to hide, or because they believe their ideology is so self-evidently true - they confuse their goals with facts.

[msj]

Another good article.

Interesting that 4 banks have 64 per cent of total commercial banking assets (admittedly, this definition is probably being quite specific and I don't have time to consider it right now.

As for arguing about non-partisanship vs bipartisanship - I'm going to leave that for another thread for those interested in discussing it.

[msj]

Another good article.

Interesting that 4 banks have 64 per cent of total commercial banking assets (admittedly, this definition is probably being quite specific and I don't have time to consider it right now.

As for arguing about non-partisanship vs bipartisanship - I'm going to leave that for another thread for those interested in discussing it.

[msj]

Delete double post - so that's why they happen.

Edited March 4, 2009 by msj

[August1991]

It's more than just AIG - look at the other sides to those swaps.

Good link/interview but I'm sorry if I think that Hank Greenburg is a self-serving son of a gun.

I suspect that Greenburg is starting this Goldman/Paulson link to save himself. The rats are pushing each other into the ocean to make space on a lifeboat.

[For those who don't know, Greenburg was the CEO of AIG until 2005 when he resigned under a cloud of accounting mispractices. Elliot Sptizer, the scion of a wealthy NY real estate family, wanted to prosecute Greenburg.]

Goldman Sachs was one of many counterparties to AIG insurance schemes and call me naive, but I don't think Paulson gave any preference to Goldman Sachs. [For those who don't know, Paulson worked for Goldman Sachs before going to Washington under Bush Jnr.] I think Paulson wanted to punish them all: Bear, Stearns and Lehman and the lot. If anything, Bush Jnr reigned Paulson in.

----

Nevertheless, there is truth to the idea that bailing out AIG amounts to bailing out the counterparties. I think this is why Obama/Geithner/Bernanke cannot bring themselves to putting AIG into bankruptcy.

Well, la Caisse in Quebec has written down its ABCP (AAA mortgage) losses. European banks are trying to do the same.

If the US taxpayer bails out AIG, it is bailing out foreigners.

----

After all, I think it is misleading to seek the culprit of this economic collapse. Going back further, before the collapse, it is even misleading to seek the culprit for the bubble.

We are in this situation now, and we should seek a way to get out of it. I would only seek a culprit if it helped to understand our situation.

This is not a murder mystery.

[msj]

No, we wouldn't want to find the culprits for this mess.

Why?

Because that would challenge Augusts' world view and, unlike Greenspan who can admit that his world view was, at least partially, wrong, August couldn't do a silly thing like that....

No, let's "fix" it by not bothering to try and prevent it from happening again.

[msj]

Another interesting article about AIG and their role in this crisis and how, in effect, the continued black hole bailout of AIG is also, indirectly, the continued black hole bailout of Goldman Sachs and others.

I find it particularly interesting how AIG helped European banks get around regulatory capital requirements and can't help but wonder why Canadian banks didn't go down this road too. Too conservative? Or too forward thinking? No one will ever really know.

Edited March 7, 2009 by msj

[Oleg Bach]

Another interesting article about AIG and their role in this crisis and how, in effect, the continued black hole bailout of AIG is also, indirectly, the continued black hole bailout of Goldman Sachs and others.

I find it particularly interesting how AIG helped European banks get around regulatory capital requirements and can't help but wonder why Canadian banks didn't go down this road too. Too conservative? Or too forward thinking? No one will ever really know.

Some how I wonder how our buisness leaders opened up the door to flood our markets over the last 20 years with foreign auto imports and "helped" other companies other than our own to "get around regulatory capital requirements" as far as trade....Yet they did not do the same for their own companies, GM etc. "Too conservative? Or too forward thinking?" ----------------------Looks like they were very forward thinking and abandoned their own companies to slowly decay because profits could be gained though the import of product from abroad - hence the collapse of THEIR own companies...Some one made these decisions on an international level - and those people are here in the USA and Canada.

- I guess being loyal to the base of operations that established you to begin with was not a corporate option - the same goes for the banks - It's almost if our guys took bribes and the deal was to destroy the competition - which was in effect to allow yourself to be destroyed for profit - but the head became rich and the average white and blue collar guy lost his job - well they always wanted the unions dead and now it is done. It appears to be a very clever long term plan - who ever cut the international deals that destroyed our domestic markets and manufacturing sectors betrayed the nation..

[WIP]

This just in: AIG, the insurance company that ran a side business underwriting high risk investments for high profits, and ended up as the largest single recipient of federal bailout money (170 billion), is rewarding its top executives with 165 million in bonuses! Isn't it time for federal marshalls to slap the cuffs on them and haul them off to jail? Maybe they can spend some time getting to know Bernie Madoff!

[bush_cheney2004]

.... Isn't it time for federal marshalls to slap the cuffs on them and haul them off to jail? Maybe they can spend some time getting to know Bernie Madoff!

What is the charge, oh indignant one from the cold dark North? Shall we imprison company officers and BOD just because you don't like the bonus program?

Edited March 15, 2009 by bush_cheney2004

[WIP]

Another interesting article about AIG and their role in this crisis and how, in effect, the continued black hole bailout of AIG is also, indirectly, the continued black hole bailout of Goldman Sachs and others.

I find it particularly interesting how AIG helped European banks get around regulatory capital requirements and can't help but wonder why Canadian banks didn't go down this road too. Too conservative? Or too forward thinking? No one will ever really know.

You know, actuallly what infuriates me most about the financial meltdown isn't the greed and fraud committed by the CEO's, it's the fact that they never would have had the opportunity to create the bubble that went bust if two things hadn't been allowed:

1. Being allowed to grow to the point where AIG and the major banks became companies that are "too big to fail." and

2. Alan Greenspan, refusing to allow newly invented derivatives like these credit default swaps, to be traded on an unregulated market that most of us who do not have firsthand knowledge of finance and investments did not even know existed until they started bringing down investment banks and insurance companies.

Here's Greespan a few years back when he was too big to fail - or was considered so golden that no Democratic or Republican politician would dare challenge him, shooting down the idea of regulating derivatives before a Senate committee:

For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.

[bush_cheney2004]

You know, actuallly what infuriates me most about the financial meltdown isn't the greed and fraud committed by the CEO's, it's the fact that they never would have had the opportunity to create the bubble that went bust if two things hadn't been allowed:

Which "CEO's"......which "bubble"......which "meltdown" ?

[WIP]

What is the charge, oh indignant one from the cold dark North? Shall we imprison company officers and BOD just because you don't like the bonus program?

They're as guilty as fraud as Bernie Madoff! There has already been one AIG executive convicted of fraud , there will be more! They can enjoy using their bonus money to buy protection for themselves in a prison general population!

[WIP]

Which "CEO's"......which "bubble"......which "meltdown" ?

Where have you been the last six months?

[bush_cheney2004]

They're as guilty as fraud as Bernie Madoff! There has already been one AIG executive convicted of fraud , there will be more! They can enjoy using their bonus money to buy protection for themselves in a prison general population!

You mean like Conrad Black? You have taken it upon yourself to charge all such officers with fraud? Amazing!

Maybe you want to cancel my bonus too?

[bush_cheney2004]

Where have you been the last six months?

Hint: in the actual country you watch from afar.

[WIP]

Hint: in the actual country you watch from afar.

Go to hell! My actual country has just as much skin in this game as yours.

Recently in my town, one of steel mills is shutting down operations indefinitely, auto plants are closing -- all thanks to the idiots you proudly wear as a nametag, and have been an apologist for these idiots who left the fox in charge of the henhouse. Yes, let's hear it for "let the market decide." They turned your banking system into a ponzi scheme that has wreacked havoc not only inside the United States, but all around the world.

[bush_cheney2004]

Go to hell! My actual country has just as much skin in this game as yours.

I seriously doubt that.....American wannabes are already in hell.

Recently in my town, one of steel mills is shutting down operations indefinitely, auto plants are closing -- all thanks to the idiots you proudly wear as a nametag, and have been an apologist for these idiots who left the fox in charge of the henhouse.

So buy the mill....design a new make....stop whining about the decisions of others when you won't take responsibility for your own.

Yes, let's hear it for "let the market decide." They turned your banking system into a ponzi scheme that has wreacked havoc not only inside the United States, but all around the world.

How would you know.....we haven't told you yet.

Edited March 15, 2009 by bush_cheney2004

[August1991]

1. Being allowed to grow to the point where AIG and the major banks became companies that are "too big to fail." and

2. Alan Greenspan, refusing to allow newly invented derivatives like these credit default swaps, to be traded on an unregulated market that most of us who do not have firsthand knowledge of finance and investments did not even know existed until they started bringing down investment banks and insurance companies.

How surprising when the majority of counterparties to AIG were those civilized, socialized, regulated Europeans:

AIG caved in to political pressure Sunday and released a list of some of the financial counterparties that benefited from its $160bn US government rescue, including some of Europe’s largest banks.

...

AIG paid out $22.4bn of collateral related to credit default swaps, $27.1bn to help cancel swaps and another $43.7bn to satisfy the obligations of its securities lending operation. The payments were made between September 16 and the end of last year.

Goldman Sachs, which has also accepted US government support, received payments worth $12.9bn. Three European banks – France’s Société Générale, Germany’s Deutsche Bank and the UK’s Barclays – were paid the next-largest amounts. SocGen received $11.9bn; Deutsche $11.8bn; and Barclays $7.9bn.

Many European banks used AIG’s credit insurance to keep from having to hold capital against their long-term securities holdings. Wall Street banks also used swaps to hedge their subprime mortgage-backed securities portfolios.

FT

This just in: AIG, the insurance company that ran a side business underwriting high risk investments for high profits, and ended up as the largest single recipient of federal bailout money (170 billion), is rewarding its top executives with 165 million in bonuses! Isn't it time for federal marshalls to slap the cuffs on them and haul them off to jail? Maybe they can spend some time getting to know Bernie Madoff!

Obama and Geithner approved those bonuses.

----

I wonder how ordinary American taxpayers will react when they learn that they have bailed out AIG managers and European banks.

Sadly, there is enough blame to go around. How we got into this mess is an academic question only of interest if its answer helps us to get out of the mess. This is a problem for the world and it is naive to believe that government regulation is a panacea. Market players are smarter than that.

Edited March 16, 2009 by August1991