Unbelievable! The Fed has stepped in to save AIG to the tune of $85 Billion! Can anyone explain to me how they figure out which fuckwits qualify for corporate welfare and which ones don't? If I was Lehman or Merrill, I'd be pretty pissed right now. As it is, I'm just stunned.
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So what do you do? -I work for an investment banking firm. Oh okay; you are like my brother, he works for Edward Jones. -No, a college degree is required in my profession
Scale.
You scooped me!
It just doesn't make any sense to me. They must just think the world will absorb as many worthless dollars as they're able to print. Bear Stearns, Fannie and Freddie, now AIG - does anyone in the world believe we have enough money to cover these tabs? At what point do the Chinese and the rest of our major lenders raise the bullshit flag?
This country is fucked...
I'm afraid I have to agree.
By the end of all of this, the government will be stretched so thin that there won't be anyone to bail the country out of credit card woes.
Nothing is too big to fail, or shouldn't be. Essentially the government will have an 80% share in one of the largest private insurance enterprises worldwide. This is completely unprecedented for a purportedly "free" and unhampered market.
The Federal Reserve, with its abhorrent interest rate policies, and the subsidizing of home ownership for decades has seriously screwed up incentives in the marketplace. When people point to the gross mismanagement of Fannie, Freddie, and the boards of large banks, the real scrutiny rests with the government, who orchestrates completely bogus fiscal policy and the Fed, which has prioritized consumption over any sort of fiscal restraint for years now.
And now the Dems and Republicans want even MORE regulations on the financial markets! I'll be.
As I understand it, the Fed now owns 80% of the company. The stock is NOT collateral. AIG is now a wholly (or almost wholly) owned subsidiary of the Federal Reserve Bank.
communism!
So we just got done with the Fannie and Freddie and now AIG is becoming the monster...
I think a lot of you are underestimating the consequences of AIG failing. This is a huge company, with massive derivatives exposure. If AIG were allowed to default, confidence would further erode and AIG's counterparties would be impacted dramtically.
I think Paulsen and the Fed made a prudent move here. They've showed through the Lehman example that they will not bail out any old companies and in both Lehman and AIG, shareholders have taken big losses.
If any of you were around during the Asian Flu about ten years ago, you'll remember some fairly prominent voices in the wilderness (Warren Buffett, Jim Rogers, et al) warning about the derivatives disaster that was inevitable.
This is the Fed sweeping shit under the rug. There is NO justification for not allowing AIG to fail. Why don't more people realize that this HAS to happen for the ship to eventually right itself?
I don't care who you vote for, taxes are going up as a result of all this shit.
It's called inflation. You think the Fed had an EXTRA $85 Billion just laying around? Shit no. They're printing that shit. I don't think anyone even pays attention to M1 anymore, the figures are so distorted. And they called ENRON crooks...
So what do you do? -I work for an investment banking firm. Oh okay; you are like my brother, he works for Edward Jones. -No, a college degree is required in my profession
The implication that the Federal Government now owns an 80% stake in AIG is incorrect. The Federal Reserve Bank owns the stake. This is an important distinction. The Federal Reserve is no more federal than Federal Express. It is a private bank.
To think that the government now owns AIG would mean, by extension, that any profits (however unlikely) would flow back to the government and trickle down to the taxpayer. That is NOT the case. Any profits from AIG are retained by the Federal Reserve, a private company.
Any losses, however, are paid for by the U.S. taxpayer. It is an absolute no-lose for the money-printing FED and an absolute no-win for you and I. You'll begin paying for this travesty tomorrow morning at breakfast or on your drive to work (if you still have a job) through the instantaneous effects of inflation.
You're welcome, Bernanke. Thanks for being a dick and bailing out this POS, but saying no to our lousy quarter of a point today.
The Fed is an independent entity within the government. Private banks elect members of regional Fed banks while the Board of Governors is chosen by the President. In any case, its role is not technically a for-profit "private" bank, but an independent government-sponsored regulatory instrument. Plus, the bank's "income" is from interest on US government securities. All profits are sent to the US Treasury after expenses are paid.
So technically Braverman, profits DO flow back to the government provided there are any left after expenses. Losses, you correctly point out, ARE borne by the U.S. taxpayer, either deliberately through taxes or indirectly through economic slowdown, inflation, etc.
QED.
So what do you do? -I work for an investment banking firm. Oh okay; you are like my brother, he works for Edward Jones. -No, a college degree is required in my profession
in any other case, i'd be opposed to the fed stepping in. this, however, is different. derivatives have made our financial system way too intertwined. aig is counterparty to almost ~$400B of credit default swaps. the systemic damage of aig going bankrupt in a matter of days would be unbelievable.
though we're quick to point the finger, "wall street" is a big reason our country is in this mess right now.
Is to rip the band-aid off all at once. Let the failures fail, and get back to a sane monetary policy. Right now the gold standard is sounding pretty good...
Im one of the biggest proponents of free market capitalism but theory and application are very different in a highly leveraged intertwined global economy. No one on this board (or 99% of WS) has any idea how adverse the far reaching effects would have been had the Fed let AIG fail. The systemic risk and counter-counter party risk made this particular entity worthy of being "saved". The economy is cyclical and we are suffering from an over abundance of liquidity and a government that demanded that every own a home (regardless of their ability to put up a down payment or pay a mortgage) and now the gov is trying to solve the problem by throwing more money into the system.
Bottom line is...I like to think that the people in charge are some of the brightest people in the world and have the country's best interest in mind but I remain skeptical
Well tell that to LEH. I sat in on a public call on Monday that basically was a giant FUBAR about what's going to happen to the bank's 70 million-odd swaps/contracts that are missing a counterparty right about now. Not to mention all their other assets.
Too bad the sweet pile of Lehman's (highly undervalued) assets weren't enough to throw a lifeline to.
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