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'AIG lost money ...where they underestimated the risk. Banks themselves were sloppy'.
So I guess they all meant well? Due to unforseeable circumstances beyond anyone's control, things didnt work out?
If I borrowed a quagsquillion dollars, and bet that the Canucks would beat Boston in the Stanley Cup final 10-0, and lost, would that be
1. 'underestimating risk' or
2. 'betting like a drunken lunatic sailor on leave with my Captain's stolen credit card'?
Click below to see a visual graph of Bankster's dirty needs arranged according to Abraham Maslow's hierarchy of needs: http://thesilvergoldhedge.blogspot.com/2011/05/banksters-dirty-hierarchy...
AIG, the Washington Generals of the rigged market casino.
"One issue about the AIG bailout that I have not been able to find a satisfactory answer for is what entity was really responsible for potential payments. The employees who lost the money all worked for AIG FP. Was AIG FP the entity that the banks faced, or was AIG actually the counterparty on the trades?"
AIG the parent had the AA rating and the capital. Don't see how FP operates to this scale without it. Ultimately the buck stopped there.
as the government is about to unload some of its AIG shares on the market
...much more apropo than "sell"
I you would have said to anybody 3 years ago that AIG would still be here, they would have smacked you.
AIG guaranteed AIGFP from the start. It was the basis of AIGFP's business model.
By the way, this is not a state secret. The fact that AIG guaranteed AIGFP has beeen publicly disclosed by AIG in its SEC filings for years.
old-school SAT analogy helps here:
AIG-FP : AIG
FNMA : ?
a. Federal Reserve
b. US Government
c. US Taxpayers
d. All of the above
Basically AIG-FP would not have been able to sell that credit insurance without backup from AIG the parent. You think Goldman was doing business with AIG-FP? No! They knew Hank "Ace" Greenberg's entire balance sheet would one day backup those useless CDS contracts. Just like all along everyone knew that when push-came-to-shove, FNMA/FHLMC debt would definitely be supported by the Federal Reserve. You think the Fed is gonna tell China/Japan to f0ck off with their agency paper? c'mon, that's a financial nuke we can't afford to use.
Off-balance sheet is where the action is my friends.
I would like to know what the Fed is going to do with its US debt. China and Japan can be told to F O. Is the Fed going to take possesion of the Washington Bridge and NJ TurnPike so that it can collect tolls?
More likely take over your house and collect rent.
I think Lewis's The Big Short gets into the "second derivatives" (writing options on baskets of CDOs) that blew up on AIG.
Let's Ask "Honest" Joe CassanoHe straightened "Empty Suit" Holder and the DOJ out on all their questions...
"Never trust a man who's last name ends in a vowel"
Dapper's pappy circa. 1970
Old Joe learned from the best...... Michael Milken.
And he work for the best.....Drexel Burnham Lambert.
Sweet... criminal pedigree...
So Cassano trained as a "philanthropist" under the felon Milken??
"Bailout out Wall Street for its own failure to manage counterparty exposure is an incredibly bad precedent but I believe Wall Street has learned its lesson."
Ummmmm, no. Wall Street has learned that Wall Street is TBTF, and will be bailed out again WHEN it becomes "neccesary."
Leeches are as leeches do.
<stop being a milk cow>
the AIG bailout is the "original sin" of the crisis response. if the gov't hadn't bailed out AIG, the financial system would have collapsed then, and we would have a new financial system now (maybe better), we'd have a real recovery. instead, trillions of taxpayers' dollars had been spent, the whole US went totally underwater trying to solve the crisis by "stimulus", and the only result is that the old financial system is still breathing.
politicians say the main cause of the crisis was the lack of regulation. but the real problem is the existence of the "bailout put", the fact that the TBTF act like they know that they will be bailed out when it is necessary. if markets were really "free", and we didn't even know the word 'bailout', then market participants would act like they have to take responsibility for their actions and investment decisions. what i've learned from the financial crisis is not that "markets can't repair themselves, and don't tend to balance themselves", but quite the opposite! markets always tend to balance themselves, but the waves of a market rebalancing, a real systemic crash in the corrupted system would be so hurtful in the short term, that politicians don't dare to let the markets clarifiy themselves, because they know it would hurt them, too, meaning phisically. so they do everything to "kick the can down the road", prolong the status quo for one more year, and one more, and one more, until the inevitable shit finally hits the fan, but it will be worse than it would have been if it had happened earlier and faster.
markets rebalance their own distorted ways in the long run, but market regulation and government control can't repair it, it just adds another distorting skew, another risk factor to the markets. the gov't control can virtually solve some problems in the markets, but if you try to lower the volatility by banning some derivatives, then the volatility, the market frustrations that have real fundamental reasons, will appear elsewhere in the system, so you didn't solve anything.
if anything goes wrong in the economy, the final bill will be payed by the taxpayers / consumers / retail investors / borrowers anyway. that's just the nature of things. but when things go wrong, paradigm shift occurs, it can be done fast, by drastical, large steps, or we can focus our every energy to try to prolong the old system. the second way is the harder and the more hurtful, more expensive one, still our leaders do everything to delay the inevitable changes.
Simply awesome and maybe this is why Tyler allows some mediocre posts - not for what they offer, but for the comments they illicit
i will never understand why they didnt disect the AIG problem away from the good AIG and allowed the cancer to spread everywhere......unless someone has a better reason, it has to be because of Goldman Sachs
I gave up at '...Wall Street has learned its lesson."
But they DID learn it. The lesson was moral hazard is dead (if it ever existed), go ahead and write whatever uncollateralized bullshit you want and trade it amongst yourselves for no real productive benefit - buy yachts, hookers and blow with the commissions. If it fails, fuck it, just give it to Timmy and Ben, they'll stuff it down the public's throat.
Austerity for those outside the game (gotta fill those uncollateralized obligations somehow!), more hookers and blow for those inside. This won't change without revolution.
I liked this book telling the AIG tale.
Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide<
Selling insurance has to be regulated and scrutinized by a third party somewhere otherwise insurance schemes tend to collapse.
what if it tanks to like $2 a share?
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