Dow: 6726

[sbell111]

I am a director working for a huge financial corporation. Want to try again?

Again, if you disagree with a liberal, you are either stupid or uneducated...

On the other hand, who hasn't met a completely clueless exec?

 

[AndyLL]

LOL - Not sure why you want to get personal but envy will get you nowhere in life. You could try to get a job with one of these companies that you hate and make some real money. Got any skills?

Already do... on the financial technology side. We're the guys that provide things like Swap risk analyst tools that you guys then ignore.

I am not a Republican and I do not listen to that blow hard. My fiscal views have not changed in 20+ years. But, hey, don't let the facts get in the way of a good rant - again...

Careful... you'll have to apologize to the blowhard.

You still haven't addressed my points of why we can't let companies like AIG fail.

 

[DisneyBamaFan]

Since you are a director of a financial corporation and you imply we should let AGI fail I am very interested in why you think that AndyLL
theoris about letting AIG fail are not pretty much on target.

Please explain.

I am interested in why someone who is a director of a HUGE financial institution would want to see the financial
institutions fail.

Your thoughts please.

None of my replies were to his AIG post, but here goes:

AIG is a pretty special creature. It is, far and away, the largest insurance carrier in the world. If it had been allowed to fail, the entire global insurance industry would not have been able to mee the capacity shortage. That would have driven up insurance premiums around the world.

The flip side, the insurance industry is in the middle of a protracted "soft" market. Simply said, that means that there is more capacity than demand, so the prices for insurance has plummeted. Those of you who have recently purchased new policies in areas like term life might have noticed that the rates are about half what they were just 5 years ago.

So - could we have let AIG fail? Short answer - yes. The timing was, and is, perfect for this with the increased capacity and reduced demand. Companies around the world would have to pay more for their insurance, but they should be paying more now. If AIG charged what it needs to charge to make a profit, it could succeed. But it will not raise its rates and become less competitive with the insurance companies as long as the taxpayers are there to fill in thier budget gaps.

Also, if AIG raised its rates, the other companies would also raise theirs, ending the soft market, helping many ancillary industries. I wonder if the talking heads discussed any of these things...

 

[DisneyBamaFan]

On the other hand, who hasn't met a completely clueless exec?

LOL - I have met more than you could imagine. Wait - was that an insult?

FWIW, if you think the execs are clueless, talk to your congressman - about anything...

 

[AndyLL]

None of my replies were to his AIG post, but here goes:

AIG is a pretty special creature. It is, far and away, the largest insurance carrier in the world. If it had been allowed to fail, the entire global insurance industry would not have been able to mee the capacity shortage. That would have driven up insurance premiums around the world.

The flip side, the insurance industry is in the middle of a protracted "soft" market. Simply said, that means that there is more capacity than demand, so the prices for insurance has plummeted. Those of you who have recently purchased new policies in areas like term life might have noticed that the rates are about half what they were just 5 years ago.

So - could we have let AIG fail? Short answer - yes. The timing was, and is, perfect for this with the increased capacity and reduced demand. Companies around the world would have to pay more for their insurance, but they should be paying more now. If AIG charged what it needs to charge to make a profit, it could succeed. But it will not raise its rates and become less competitive with the insurance companies as long as the taxpayers are there to fill in thier budget gaps.

Also, if AIG raised its rates, the other companies would also raise theirs, ending the soft market, helping many ancillary industries. I wonder if the talking heads discussed any of these things...

uhhh... you realize that while AIG is called an insurance company their insurance division is solid and even making a profit.

The issue is their non-insurance portion of the holding company mainly the 400 Billion in Credit Default Swaps.

The problem is not AIG going away but 400 Billion in assets that those CDSs are covering.

If those CDSs become downgraded then 400 Billion in assets become downgraded and 100s of banks worldwide have capital margin calls that many of them can't meet. That means that many good companies go down with them.

The goal with AIG is that it will eventually go away but in a way that the profitable assets can be sold off to cover the CDSs. If that can happen then the Government gets most of its money back.

If it just fails then it will cost the taxpayers anywhere from 300-500 Billion dollars (that includes the amount already given)

Its not to hard to make the same case for CitiGroup and several others.

No one wants these companies and their management to go away any more then I do.

But they just can't fail... they have to be saved then we can go after those resposible.

 

[DisneyBamaFan]

..The issue is their non-insurance portion of the holding company mainly the 400 Billion in Credit Default Swaps.

The problem is not AIG going away but 400 Billion in assets that those CDSs are covering.

If those CDSs become downgraded then 400 Billion in assets become downgraded and 100s of banks worldwide have capital margin calls that many of them can't meet. That means that many good companies go down with them.

The goal with AIG is that it will eventually go away but in a way that the profitable assets can be sold off to cover the CDSs. If that can happen then the Government gets most of its money back.

If it just fails then it will cost the taxpayers anywhere from 300-500 Billion dollars (that includes the amount already given)

Its not to hard to make the same case for CitiGroup and several others.

No one wants these companies and their management to go away any more then I do.

But they just can't fail... they have to be saved then we can go after those resposible.

Tell me why a financial company with the assets of AIG cannot be allowed to fail?

If AIG fails, they declare bankruptcy. They are a holding company, and their various subsidiaries would be sold off to the highest bidder. Those funds would go to pay their creditors. Then the pieces of their financial enterprise that have value would be sold off, and the proceeds applied to the creditors. In the end, there is not more AIG, but other financial institutions and insurance carriers get stronger. Sure, a few other companies would fail as they bet too heavily on AIG, but that is life.

Banks fail. The world keeps turning. The original AIG bailout was stupid. Further bailouts will not help. We are pouring money down a bottomless pit. There are tens of trillions in credit default swaps out there. AIG is just the tip of the iceberg. The real solution is to ban CDSs, and make all existing CDSs void...

 

[SteveInBrooklyn]

But they just can't fail... they have to be saved then we can go after those resposible.

That's what I keep hearing. That the banking system can't fail, or else the US and world economy fails with it.

 

[DisneyBamaFan]

That's what I keep hearing. That the banking system can't fail, or else the US and world economy fails with it.

Maybe you have not noticed - the US and global economies have already failed, even though we have not let any major banks fail...

 

[DisDreaminMom]

On the AIG topic, my late father (passed away 2 years ago) used to talk about how awful AIG was and what problems it caused in the industry. He was a 3rd generation insurance company owner and specialized in legal issues in insurance. He was very concerned about the combining of the insurance company assets and financial institutions' interests. He basically forecasted that this type of thing could happen, and that was a number of years ago when they first changed the laws allowing this. The banks were just slobbering over the thought of getting their paws on insurance company "investments". I'm pretty sure he's rolling in his grave over what's happening now.

I don't know what the answer is in this situation. Mark to Market rule change would be a solution I would like to see, but I doubt it would happen. The truth is this should have never been allowed in the first place, and it's not just AIG that's the problem.

 

[AndyLL]

Tell me why a financial company with the assets of AIG cannot be allowed to fail?

If AIG fails, they declare bankruptcy. They are a holding company, and their various subsidiaries would be sold off to the highest bidder. Those funds would go to pay their creditors. Then the pieces of their financial enterprise that have value would be sold off, and the proceeds applied to the creditors. In the end, there is not more AIG, but other financial institutions and insurance carriers get stronger. Sure, a few other companies would fail as they bet too heavily on AIG, but that is life.

Once again... its not AIG anyone cares about it's all their counterparties to their CDSs.

Many of them would fail also.

 

[DisneyMomOK]

Wonder what tomorrow will hold...