Fed Bails out AIG

[pcolatide]

What is interesting is that neither candidate will come out and say clearly they are for it or against. That's what I call leadership?

 

[crmsnrevelation]

Now your lessons begin....



[ame="http://www.youtube.com/watch?v=ZWKlz2Z4Nlo"]YouTube - G. Edward Griffin on the Federal Reserve System[/ame]
A summary of the Fed.




[ame="http://www.youtube.com/watch?v=F3TAh1gy6rc&feature=related"]YouTube - Second Look at the Federal Reserve by Edward Griffin 1 of 7[/ame]
Part 1 of 7 of a wonderful lecture that every person that is a citizen of the united states needs to hear.
If you want to hear the truth about the fed and dodge the history lesson skip to part 3-7. The link is here.
[ame="http://www.youtube.com/watch?v=Ja9YlQ2wXnM"]YouTube - Second Look at the Federal Reserve by Edward Griffin 3 of 7[/ame]



Everytime I listen to this lecture I get Hotter than the black leather seats of a car in death valley.


I have purchased several copies of "The Creature from Jekyll Island" and have given them as gifts. Each person has been floored after reading it.

Its time to wake up!

 

[crmsnrevelation]

Are there any Constitution scholars that would know the constitutionality of using taxpayer money to save a private company? Are they getting by with this by calling it a loan?

The root of the problem isnt using taxpayer money.... The constitution was pretty much thrown out as far as money goes when Richard nixon took us off the gold standard and your dollar was left to inflate against nothing. Read article one section ten.

The first line tells me everything i need to know. "Silver and gold"
http://www.usconstitution.net/xconst_A1Sec10.html


Ron Paul isnt looking like such a bad choice after all huh? He predicted every bit of this mess.

 

[Mamacalled]

Are there any Constitution scholars that would know the constitutionality of using taxpayer money to save a private company? Are they getting by with this by calling it a loan?

I am against this all the way but according to the administration, this is a loan that the country will eventually make money off of. They also say that the economic impact of such a company failing is far reaching to many Americans across the country. Loans, home and auto insurance, 401K etc. It is a hard call. Neither candidate is talking about this move much. I think McCain came out and said it would be best for the country and I have not heard Obama say one way or the other. This is obviously a tough call. As I said, on the surface I am against it and I think the Bush administration initially said there would be no bailout but if the consequences of not doing it are to spiral the country into a depression, then I would flip flop on this issue.

I do like McCain calling for an investigation into this. Responsinle people need to be punished.

Oh hell, the Constitution is a living document. In other words, it has no teeth or true meaning anymore. Didn't you know that?

 

[The Tusk]

Here we go again paying for another failed business! Nothing like "white-collar welfare"!

It's never as simple as those who don't understand markets and economics would like it to be.

The Fed and the Treasury Dept were presented with two bad options:

- "bailing out" the nation's largest insurer (I'm sure if you were paying north of 11% for a loan, you wouldn't feel very bailed out) with all of the cost borne by the shareholders
- letting the nation's largest insurer - the guys who insure everything from autos to lives to your parents' mortgage to credit-default swaps held by Citi - declare bankruptcy and potentially take down innumerable other institutions with whom they have relationships

Since preventing a(n even more) massive economic meltdown - virtually guaranteed in option 2 - is in their job description, the Fed and Treasury decided to step in and keep things from exploding. Their job is to ensure economic stability to the greatest extent possible without overburdening the market with regulation while protecting the consumer from predatory corporate practices.

Lefties love to cry "corporate welfare" when things like this happen but it isn't. The shareholders are getting their just desserts in this episode, just like with Lehman and Bear Stearns (check out the 12-month stock charts for Bear, AIG, Lehman and Merrill Lynch if you don't believe me).

Similarly, the government gets to dispose of (the most valuable) assets if AIG defaults on the loans. This is a buyer's market and the government is buying at a significant discount.

For my fellow righties saying "let it fail", you might want to consider the implications of a depression in your thinking before throwing your strict-constructionist chubby out of whack.

 

[TRUTIDE]

It's never as simple as those who don't understand markets and economics would like it to be.

The Fed and the Treasury Dept were presented with two bad options:

- "bailing out" the nation's largest insurer (I'm sure if you were paying north of 11% for a loan, you wouldn't feel very bailed out) with all of the cost borne by the shareholders
- letting the nation's largest insurer - the guys who insure everything from autos to lives to your parents' mortgage to credit-default swaps held by Citi - declare bankruptcy and potentially take down innumerable other institutions with whom they have relationships

Since preventing a(n even more) massive economic meltdown - virtually guaranteed in option 2 - is in their job description, the Fed and Treasury decided to step in and keep things from exploding. Their job is to ensure economic stability to the greatest extent possible without overburdening the market with regulation while protecting the consumer from predatory corporate practices.

Lefties love to cry "corporate welfare" when things like this happen but it isn't. The shareholders are getting their just desserts in this episode, just like with Lehman and Bear Stearns (check out the 12-month stock charts for Bear, AIG, Lehman and Merrill Lynch if you don't believe me).

Similarly, the government gets to dispose of (the most valuable) assets if AIG defaults on the loans. This is a buyer's market and the government is buying at a significant discount.

For my fellow righties saying "let it fail", you might want to consider the implications of a depression in your thinking before throwing your strict-constructionist chubby out of whack.

A voice of reason. Good to hear from you again Tusk.

 

[jthomas666]

Lefties love to cry "corporate welfare" when things like this happen but it isn't. The shareholders are getting their just desserts in this episode, just like with Lehman and Bear Stearns (check out the 12-month stock charts for Bear, AIG, Lehman and Merrill Lynch if you don't believe me).

For the most part, I agree with you, but the shareholders aren't exactly the ones who drove Lehman and BS into the ground. What fate awaits those CEOs whose reckless behavior has wrought such havoc?

 

[Tider@GW_Law]

Are there any Constitution scholars that would know the constitutionality of using taxpayer money to save a private company? Are they getting by with this by calling it a loan?

I am against this all the way but according to the administration, this is a loan that the country will eventually make money off of. They also say that the economic impact of such a company failing is far reaching to many Americans across the country. Loans, home and auto insurance, 401K etc. It is a hard call. Neither candidate is talking about this move much. I think McCain came out and said it would be best for the country and I have not heard Obama say one way or the other. This is obviously a tough call. As I said, on the surface I am against it and I think the Bush administration initially said there would be no bailout but if the consequences of not doing it are to spiral the country into a depression, then I would flip flop on this issue.

I do like McCain calling for an investigation into this. Responsinle people need to be punished.

Doing a Congressional investigation into this would be little more than wasting more of the taxpayers' money. They might get a few things on the record that they might have not gotten otherwise, but I highly doubt it. I don't yet see anything that warrants an SEC or DOJ investigation, but I'm sure they're working on it. If that comes to fruition, some civil penalties or settlements might come about - but probably not likely. I think the best bet right now is on shareholder suits coming out of the woodwork.

This is a loan coming through the Fed, which has been charged with various tasks through Articles I & II of the Constitution (don't have time to go through it all - but it's clearly constitutional). Both Obama and McCain expressed qualified support of the bailout, while Palin gave some babbling and incoherent criticism of it the other day at a diner.

I do not like the idea of bailing out private companies because I believe it encourages them to be riskier than they normally would, as they now feel like there is a fed safety net to catch them when they take bad risks. However, I understand the dangers of the "ripple effect" that the Fed keeps talking about - and if the smart folks at the Fed fear it enough to make this bailout that they knew they would take a lot of flak over (and spend 35 hours of closed door meetings over Sat. & Sun. on it), then I think the danger to our economy was very real and tremendous.

Either way, I agree with what both McCain and Obama have said about it so far, and I think Palin's comments were downright comical.

 

[Tider@GW_Law]

For the most part, I agree with you, but the shareholders aren't exactly the ones who drove Lehman and BS into the ground. What fate awaits those CEOs whose reckless behavior has wrought such havoc?

An early retirement and perhaps a slightly lower severance package (only mid-low 7 figures), but I doubt even that. They might have to deal with some civil litigation down the road, but it won't cramp their style too much.

 

[bamacon]

When you follow the money trail behind this debacle you find out exactly why Congress is trying to put the lid on this disaster. When you are asking the American taxpayer to potentially pay for all this crap that is precisely the time to have an investigation, hearings, trials etc. It is also time to see some heads roll.

 

[The Tusk]

For the most part, I agree with you, but the shareholders aren't exactly the ones who drove Lehman and BS into the ground. What fate awaits those CEOs whose reckless behavior has wrought such havoc?

Are CEOs the captains of their ship, ultimately responsible for performance? Yes. Are they signing off on every deal? No. If you think they should be, you're very disconnected from reality. In that environment - billions in assets and income, 25,000+ emplopyees, disparate lines of business - a requirement to have CEO sign-off on everything would cause business to grind to a halt.

 

[jthomas666]

Are CEOs the captains of their ship, ultimately responsible for performance? Yes. Are they signing off on every deal? No. If you think they should be, you're very disconnected from reality. In that environment - billions in assets and income, 25,000+ emplopyees, disparate lines of business - a requirement to have CEO sign-off on everything would cause business to grind to a halt.

You are missing (or ignoring) my point. You decry leftists screaming "corporate welfare", while failing to exhibit much outrage for the corporate executives--at the CEO level and lower executive levels--who took control of the corporate ship, set a course for rocky reefs, and then cried "full speed ahead."

"The shareholders are paying the price"? Dude we're all gonna pay the price, shareholders or not.

 

[The Tusk]

You are missing (or ignoring) my point. You decry leftists screaming "corporate welfare", while failing to exhibit much outrage for the corporate executives--at the CEO level and lower executive levels--who took control of the corporate ship, set a course for rocky reefs, and then cried "full speed ahead."

"The shareholders are paying the price"? Dude we're all gonna pay the price, shareholders or not.

Outrage with no ability to directly influence the outcome is pretty pointless. I (and I imagine you) have better things to do than get mad about AIG's CDO investments.

It's easy to Monday-morning QB decisions when they go wrong, especially when they go wrong in spectacular and public fashion but it's not like Bob Willumstad walked into the AIG boardroom and said, "Hey, let's run this place into the ground, screw our shareholders and potentially take down the national economy!" That's a very simple point that people with little to no business experience miss. Lefties seem to attribute nefarious intent to all corporations and executives. While there are certainly examples of that - Enron, Tyco - this isn't one.

"Dude", what price are *you* paying right now? The shareholders are getting squeezed, the top executives have had their reputations destroyed and the taxpayers have collateral against the risk we're undertaking.

On the topic of executive compensation, legislating what's acceptable profit or acceptable pay for executives is flat-out stupid. If you want to rail against executive pay packages, I suggest that you invest in a company and attend board meetings to make yourself heard. If you just don't like people making (a lot) more than you - even when things go wrong - I suggest you go ahead and vote for Obama since he's going to attempt to massively redistribute wealth if elected.

 

[Bamaro]

It's easy to Monday-morning QB decisions when they go wrong, especially when they go wrong in spectacular and public fashion but it's not like Bob Willumstad walked into the AIG boardroom and said, "Hey, let's run this place into the ground, screw our shareholders and potentially take down the national economy!" That's a very simple point that people with little to no business experience miss. Lefties seem to attribute nefarious intent to all corporations and executives. While there are certainly examples of that - Enron, Tyco - this isn't one.

No but they set the course of engaging in risky business practices. They would have been first in line for the rewards had those practices paid off. They need to now take responsibility for their failures.
Unfortunately, at that level they usually cash in big one way or another.

 

[The Tusk]

No but they set the course of engaging in risky business practices. They would have been first in line for the rewards had those practices paid off. They need to now take responsibility for their failures.
Unfortunately, at that level they usually cash in big one way or another.

They get paid to take risks. A "safe" business is on that gets trounced by its competitors. And they are taking responsibility for their failures. AIG's leadership is now unemployed, Merrill Lynch doesn't exist as a stand-alone entity anymore, Bear Stearns is dead and Lehman is fire-saling assets while navigating Chapter 11.

Again, if you have issues with executives getting paid what they're getting paid, buy some stock, attend the AGMs, vote for board members who support less exhorbitant pay packages and make a difference. Otherwise you're (collectively) just whining because someone is making more money than you. If you think "there oughtta be a law..." or some other way to "make them pay" for failure - that isn't illegal or immoral - beyond what's happening now, we have nothing left to discuss.

 

[TexasBama]

"Dude", what price are *you* paying right now?

Where does the money come from for this (as well as all the bad debt writedown presently being proposed)? Who are the ultimate guarantors of this?

 

[The Tusk]

Where does the money come from for this (as well as all the bad debt writedown presently being proposed)? Who are the ultimate guarantors of this?

Yep, taxpayers are footing the bill but they are also protected by collateral. Additionally, as it stands now the "bad debt writedown" means that the institutions selling the debt will have to recognize the losses prior to selling to the Treasury.

That isn't the government absorbing losses, it's the government acting as a buyer in a market where there isn't enough liquidity for anyone else to buy. There are questions regarding how the prices will be set - that will be the deciding factor in the extent to which we are "guarantors of this" - but the framework to mitigate that risk is in place.

 

[TexasBama]

Yep, taxpayers are footing the bill but they are also protected by collateral. Additionally, as it stands now the "bad debt writedown" means that the institutions selling the debt will have to recognize the losses prior to selling to the Treasury.

That isn't the government absorbing losses, it's the government acting as a buyer in a market where there isn't enough liquidity for anyone else to buy. There are questions regarding how the prices will be set - that will be the deciding factor in the extent to which we are "guarantors of this" - but the framework to mitigate that risk is in place.

Tusk, looks like to me none of these guys have any collateral except their cash accounts and office furniture, once you net out everything else. At least Enron had some hard assets.