Black Hole AIG Needs Another $10 Billion

[Bindare_Dundat]

After all the money AIG's had shoveled at it, why does it need another $10 billion? Because, as the Wall Street Journal reports, the money its gotten from the government are supposed to pay off its bad CDS bets -- essentially, the money went to retiring the underlying CDO --- but it's also stuck $10 billion on what were just bad bets, not necessarily designed to help clients manage risk.

The $10 billion in other IOUs stems from market wagers that weren't contracts to protect securities held by banks or other investors against default. Rather, they are from AIG's exposures to speculative investments, which were essentially bets on the performance of bundles of derivatives linked to subprime mortgages, commercial real-estate bonds and corporate bonds.

These bets aren't covered by the pool to buy troubled securities, and many of these bets have lost value during the past few weeks, triggering more collateral calls from its counterparties. Some of AIG's speculative bets were tied to a group of collateralized debt obligations named "Abacus," created by Goldman Sachs.

[240 is Back]

I'd say we give it to them.   they seem like really good guys.

[marcus]

Things have been stressful for them. A vacation would be a good way for their board members to clear their heads.

[Hedgehog]

I say give it to them.

But only in exchange for stock control.

[JOCKTHEGLIDE]

its a stressful economy right now they need a week long vacation with the extra 10 billion.....give them a hell yah.

[Hedgehog]

It's unbelievable how impotent the politicians act.

They're the elected representants of the people.

They're there to protect the interest of everyone, the interest of the tax dollars.

Why not just tell the banks and the big Three that: "Sure, we're gonna save your asses, but we're getting stock control of the companies in return. We're gonna decide who's gonna stay and who's gonna have to leave the executive room. Once the situation looks better, we will sell the shares so the tax payers won't lose money"

[Soul Crusher]

Because they get huge campaign contributions from these people.  Both sides are in on this.

The taxpayer is the one who gets the shaft.

[shootfighter1]

Yeah, lets give it to them.  Its Christmas and all.  F-cking assholes.

[MuscleMcMannus]

It's unbelievable how impotent the politicians act.

They're the elected representants of the people.

They're there to protect the interest of everyone, the interest of the tax dollars.

Why not just tell the banks and the big Three that: "Sure, we're gonna save your asses, but we're getting stock control of the companies in return. We're gonna decide who's gonna stay and who's gonna have to leave the executive room. Once the situation looks better, we will sell the shares so the tax payers won't lose money"

Because that's called "nationalization".  It's unAmerican and unConstitutional and anticapitalist. 

[Bindare_Dundat]

It's unbelievable how impotent the politicians act.

They're the elected representants of the people.

They're there to protect the interest of everyone, the interest of the tax dollars.

Why not just tell the banks and the big Three that: "Sure, we're gonna save your asses, but we're getting stock control of the companies in return. We're gonna decide who's gonna stay and who's gonna have to leave the executive room. Once the situation looks better, we will sell the shares so the tax payers won't lose money"

You want government to micro manage every aspect of whats suppose to be a free market?

[Hedgehog]

You want government to micro manage every aspect of whats suppose to be a free market?

No need for micro management.

But as the AIG is a very important bank for both the world and national economy, it cannot be allowed to fall.

But at the same time the tax payers who saves the bank has to be protected.

This can be done if AIG is temporarily getting managed by a federal rescue team and the government also gets main share control in exchange.

This solidifies the bank.

Once the bank is healthy again, the government gets out, hopefully with a non-loss or even a slight net profit for the tax payers.

It has been done before in other countries, and it is being done currently in the UK and several other countries.

Several big banks are getting saved through a temporary partial or full government ownership to prevent economic collapse.

[Hedgehog]

Because that's called "nationalization".  It's unAmerican and unConstitutional and anticapitalist. 

I don't care much if it's "un-American" or "un-Constitutional" or "anticapitalist".

Plenty of capitalistic economic scientists are welcoming it.

If any such action could help the world economy and also make better use for the tax payers money in regards to dealing with the banks, I have absolutely no problem with it.

Then I am a pragmatic.


Remember Herbert Hoover. He sticked to his ideas of letting the market regulate itself. I'm sure Ron Paul would've loved Hoover, BTW.

Hoover was a total failure.

Then came the great Franklin Delano Roosevelt. One of the greatest political thinkers ever IMO. Easily the greatest American president ever, and someone who took USA to the top.

[Bindare_Dundat]

No need for micro management.

But as the AIG is a very important bank for both the world and national economy, it cannot be allowed to fall.

But at the same time the tax payers who saves the bank has to be protected.

This can be done if AIG is temporarily getting managed by a federal rescue team and the government also gets main share control in exchange.

This solidifies the bank.

Once the bank is healthy again, the government gets out, hopefully with a non-loss or even a slight net profit for the tax payers.

It has been done before in other countries, and it is being done currently in the UK and several other countries.

Several big banks are getting saved through a temporary partial or full government ownership to prevent economic collapse.

Would Japan fit into your opinion?

[Soul Crusher]

I don't care much if it's "un-American" or "un-Constitutional" or "anticapitalist".

Plenty of capitalistic economic scientists are welcoming it.

If any such action could help the world economy and also make better use for the tax payers money in regards to dealing with the banks, I have absolutely no problem with it.

Then I am a pragmatic.


Remember Herbert Hoover. He sticked to his ideas of letting the market regulate itself. I'm sure Ron Paul would've loved Hoover, BTW.

Hoover was a total failure.

Then came the great Franklin Delano Roosevelt. One of the greatest political thinkers ever IMO. Easily the greatest American president ever, and someone who took USA to the top.

FDR, by all studies, did not help, but hindered the depression from ending sooner.

WW2 got us out of the depression, not the New Deal.

[Slapper]

FDR, by all studies, did not help, but hindered the depression from ending sooner.

"By all studies"??  What studies are you talking about??

Take, for example, unemployment:

1933 (first year of introduction of the New Deal economic programs): 25.2%
1936 (last year of introduction of the New Deal economic programs): 13.2%
1941 (when we entered the war): 8.5%

Take GNP:

1933 (first year of introduction of the New Deal economic programs): 68.3
1936 (last year of introduction of the New Deal economic programs): 101.6
1941 (when we entered the war): 114.2

Aside from this, the New Deal introduced programs that are still active today, like the Social Security system, the SEC (imagine what the financial system would be like today without any oversight what-so-ever?,) FDIC, heck, half the infraestructure in New York was built back in the 30s!

Now, we must make a distinction between what is positive for 95% of Americans and what is positive to that 5% that is not contempt with owning 75% of the shit. To those 5% the New Deal did not result in "favorable business conditions" precisely because for a brief time in American history, albeit rather reduced in scope, the American government was put to work for The People. Big Business does not like that. Period. So when talking about these economic programs the usual rethoric tends to be on negative side.

WW2 got us out of the depression, not the New Deal.

To put it mildly, what got us out of the Great Depression was the fact that we entered a war, we won it, and we virtually had a 1-billion people market "devouring" everything we made. Pure chance. Imagine we entered the war, the Japanese/German axis won and we were left without a market.

[Hedgehog]

Would Japan fit into your opinion?

Are you referring to the huge economic stimulus plan that Japan announced yesterday that they will launch?

I think a stimulus plan directed towards infrastructure will get the US economy moving real fast.

Not only will the actual building of infrastructure trigger economic growth, but the much needed improvement of the infrastructure will lead to big leaps for a lot of businesses.

Even farmers will see benefits, as they may be able to transport their crop cheaper and faster if the logistic system is brought up to 21st century standards.

As for the big 3 car companies - there is a lot of know how that would be lost if they would just be closed.

But there needs to be a drastic change of direction.

I really don't know how that should be done.

But I don't think this is a time when focusing on principles.

This is a time to fix the problems.

[Bindare_Dundat]

Are you referring to the huge economic stimulus plan that Japan announced yesterday that they will launch?

I think a stimulus plan directed towards infrastructure will get the US economy moving real fast.

Japanese asset price bubble and lost decade

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid.

Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Bank of Japan began to cut interest rates, and today they are near zero percent. The main Japanese stock market is hovering near an 18-year low, and the country's manufacturers now face stiff competition from China.


Don't Try to Spend Your Way Out of a Crisis. Japan ramped up spending on public works projects. It didn't ease the financial crunch, and left the Japanese countryside riddled with concrete.

Save, Save, Save. Japan's economic fall was cushioned by the fact that Japanese consumers have one of the highest savings rates in the world. That allowed them to maintain virtually the same rates of consumption throughout the 1990s. American consumers have no such savings to draw upon.

[JOCKTHEGLIDE]

Because they get huge campaign contributions from these people.  Both sides are in on this.

The taxpayer is the one who gets the shaft.

true and the regular tax payer is the one strugglign also......

[Hedgehog]

Japanese asset price bubble and lost decade

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid.

Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Bank of Japan began to cut interest rates, and today they are near zero percent. The main Japanese stock market is hovering near an 18-year low, and the country's manufacturers now face stiff competition from China.


Don't Try to Spend Your Way Out of a Crisis. Japan ramped up spending on public works projects. It didn't ease the financial crunch, and left the Japanese countryside riddled with concrete.

Save, Save, Save. Japan's economic fall was cushioned by the fact that Japanese consumers have one of the highest savings rates in the world. That allowed them to maintain virtually the same rates of consumption throughout the 1990s. American consumers have no such savings to draw upon.

Japan has from what I know a great infrastructure.

It's a fairly small country, but any money that the government invests in the infrastructure through directed tax cuts and funding, may actually have paid off for Japan in the end.

If you think of it, Japanese people are very high-tech in general. Japan also have a long history of investing in highspeed public transportation, eg the Shinkanzen (already in the early 70's during the first oil crisis).

I agree with you about the Japanese and their high saving rate being a big factor in why Japan won't take a nose dive in the coming year.

I'm not saying spending for the sake of it is what's needed during an economic crisis.

But there's a definite need for governments to initiate large infrastructural projects.

The reasons are several:

* It will create jobs, and poverty and the social problems that comes with the huge layoffs in a economic crisis  may be avoided.

* The improved infrastructure is a long-term investment in the nation's wealth. The spin off effects of a greater infrastructure is likely big.

* Building during recessions are always cheaper. A good time to initiate these kinds of projects. And there is no risk of overheating the economy either.


If nothing is done, there's a big risk that markets get monopolized, since only the strongest corps will survive through this crisis. The smaller companies will get whiped out.

I don't think anyone want that.

That would be a disaster for the little guy.