I’m still mad that we don’t get to have a little American flag on the AIG soccer team we sponsor in Britain.

BadgerHawk on October 28, 2009 at 11:43 AM

That would be Manchester United. :) :) :)

http://www.ameinfo.com/177654.html

http://www.ameinfo.com/177654.html

And spent 90 million on a Chinese Auto maker
http://www.insideline.com/lifan/us-insurer-aig-buys-135-percent-stake-in-chinas-lifan.html

Confirmed: US used AIG to bail out banks
…

1) AIG was in the process of renegotiating those contracts. That’s what happens in a bankruptcy.

MarkTheGreat on October 28, 2009 at 2:10 PM

Negotiation wouldn’t have happened in bankruptcy. Creditors would have been prioritized based on security and treated without bias within it’s appropriate classification.

Also, I don’t recall AIG ever filing bankruptcy.

1) AIG was in the process of renegotiating those contracts. That’s what happens in a bankruptcy.
2) Absent govt intervention, the banks would have gottem less than 100% of what was owed to them. AIG was shooting for 40%.
3) Due to govt intervention, the banks got 100% of their money. This happened in no other bankruptcy. The only reason the banks got their money, was because the govt gave AIG a lot of money.

4) Even a liberal should be able to see that the govts money went through AIG, directly to the banks.

MarkTheGreat on October 28, 2009 at 2:10 PM

–Banks on the other side probably had a hard time believing that the US would allow AIG, with $170 billion of loans and investments from the US, to file for bankruptcy over another $13 billion.

MarkTheGreat on October 28, 2009 at 2:10 PM

Is your problem with the fact that it happened, or how much money went to them? If the government is bailing out a company so it can meet its obligations to pay x, y, and z, then government money is going to x, y, and z.

This wasn’t a front to funnel money to other banks. It was to perform contracts AIG had signed.

Jimbo3 on October 28, 2009 at 12:09 PM

Man, are you getting desperate.

1) AIG was in the process of renegotiating those contracts. That’s what happens in a bankruptcy.
2) Absent govt intervention, the banks would have gottem less than 100% of what was owed to them. AIG was shooting for 40%.
3) Due to govt intervention, the banks got 100% of their money. This happened in no other bankruptcy. The only reason the banks got their money, was because the govt gave AIG a lot of money.

4) Even a liberal should be able to see that the govts money went through AIG, directly to the banks.

The problem with the collateralized debt obligations (CDOs) is that they took a mispriced underlying obligation and multiplied it by 50 or 100 times. Regulation of derivatives like CDOs might have helped minimize that multiplier effect.

Would AIG have been able to sell those derivatives had they been given “junk” status? If they had been, they would have probably been only to get $0.40 on the dollar for them in the first place.

crosspatch on October 28, 2009 at 1:55 PM

–What you’re talking about (I think) is the credit rating. Moody’s and S&P, among others, gave AAA credit ratings to the highest levels in collateralized debt obligation pools. They were somehow convinced that the default risk on the highest levels were very low. That was because the highest levels of collateralized debt obligations were the first to receive payment and because the debt obligations were overcollateralized (that is, mortgages for 110% of the value of the highest level were put into the pool, so there would have to be a 10% default rate on all the mortgages in that pool before you even got to the question of which level was the first to receive payment).

Moody’s and S&P, and others, are private rating agencies. They are not government agencies.

Would AIG have been able to sell those derivatives had they been given “junk” status? If they had been, they would have probably been only to get $0.40 on the dollar for them in the first place.

If you can tolerate strong language, this article gives a pretty good description of what went on.

Gee, if I didn’t know better, I’d think there was a plan to . . . Oh, wait . . .

Greyledge Gal on October 28, 2009 at 1:32 PM

Also keep in mind that the TARP IG came out last week and said the issue of the banking industries solvency is now worse, than before the TARP was implented. If Obama’s intent was not to destroy us through fiscal implosion, he could not effectively do any better at it if it was.

Does anyone even know if the myriad financial time-bombs he is planting can be effectively defused, if & when we are able to be rid of him?

Greyledge Gal on October 28, 2009 at 1:29 PM

Thank you sister, sorry for the obscene amount of typos, total abondonment of sentence structure and plethora of missing & duplicate words.

My typing skills are worse than delorable and become yet more pronounced when highly agitated (which Team Obama accomplishes daily) and over-caffeinated.

But I take it, that you got the gist my rant.

Besides a social security trust fund that is stocked with IOUs and has no cash reserves, that is.

To a larger point, it’s almost like the US doesn’t actually give a f*ck about getting the taxpayers money back (shocka!). It’s the same reason they converted their preffered shares in GM (which receive dividends but no voting rights) into common stock (no longer paying a dividend but have voting rights).

It’s about control.

BadgerHawk on October 28, 2009 at 1:24 PM

–When you’re down $500 in Vegas, you care alot. When you’re down $1 trillion, you figure you’re f**ked anyways.

And it was Turbo Tim who made the decision that the mortgages were “riskless” when he was at the NY Fed. THAT decision right there was the one thing that caused this whole mess to unravel as it did.

–No, Turbo Tim. The NY Fed had nothing to do with these being “riskless”. The various laws prohibited anyone from regulating credit swaps–i.e., saying that these needed reserves because they had some risk. The fact that there was no regulation is what likely caused this problem.

And it was Turbo Tim who made the decision that the mortgages were “riskless” when he was at the NY Fed. THAT decision right there was the one thing that caused this whole mess to unravel as it did. Nobody at any point in the chain was required to have any reserves to cover defaults because Geithner assured everyone that the taxpayer was on the hook for it and the government would print the money if it had to in order to cover the mortgages … which is basically what happened.

So my question remains … what ELSE are we on the hook for that we don’t completely know about?

But rather than the government buying these “toxic” assets as TARP was originally billed as its purpose, the cash was instead injected into AIG who paid off the owners of the derivatives (thereby retiring them) and also used the capital to pay off the defaulting mortgages.

Exactly! A year later we sit here with all these toxic assets waiting to implode and more toxic assets being made daily because the government is forcing more people who can’t afford them to buy homes. Not to mention the commercial loans that are on the brink of failure.

Gee, if I didn’t know better, I’d think there was a plan to . . . Oh, wait . . .

The end result is that the banks still own a large number of upside down mortgages that haven’t defaulted (yet)and instead of lending, have been building up their reserves to handle the next wave of defaults.

crosspatch on October 28, 2009 at 1:27 PM

And the banks currently have no incentive to negotiate new terms with home owners or to sell foreclosed properties, because to do so would require them to report the losses (which for some are massive) on their quarterly reports.