So much for "No more Bailouts"

[eliza61]

While I understand (the best I can) the "buyout" the Fed made of AIG, I wonder about our Constitution that says Gov't does NOT have the power/right to do this very thing, take over (80% in this case) a company that "shareholders" own.
According to some, "it" should had failed (due to THEIR poor investments,etc) so that some one else picks up/buys the pieces and makes money.
How many other "failures" will the gov't "feel they have too bailout?
Wait till the "legal eagles" eventually start suing the gov't for "NOT taking over failing companies, or "taking over failing companies that STILL fail", a CAN of worms indeed
I realize that AIG's "reach" was very wide and something had to be done, I hope this eventually works out!
How come we don't hear about the people "fired" at the Top who made the DECISIONS in the first place and sunk them?????

As with every thing tink, I understand it to be in the wording. They (fed) claims they are not taking over AIG simply "lending" it money. AIG will still have it's CEO and executive board (which makes absolutely no sense to me, If I screwed up like that at work, my hindparts would be on the street).

I could be wrong.

 

[harleyquinn]

While I understand (the best I can) the "buyout" the Fed made of AIG, I wonder about our Constitution that says Gov't does NOT have the power/right to do this very thing, take over (80% in this case) a company that "shareholders" own.
According to some, "it" should had failed (due to THEIR poor investments,etc) so that some one else picks up/buys the pieces and makes money.
How many other "failures" will the gov't "feel they have too bailout?
Wait till the "legal eagles" eventually start suing the gov't for "NOT taking over failing companies, or "taking over failing companies that STILL fail", a CAN of worms indeed
I realize that AIG's "reach" was very wide and something had to be done, I hope this eventually works out!
How come we don't hear about the people "fired" at the Top who made the DECISIONS in the first place and sunk them?????

Wow, I've never seen more " in one post! You win the """ Award!

(BTW, I agree with your points!)

 

[RitaE]

As with every thing tink, I understand it to be in the wording. They (fed) claims they are not taking over AIG simply "lending" it money. AIG will still have it's CEO and executive board (which makes absolutely no sense to me, If I screwed up like that at work, my hindparts would be on the street).

I could be wrong.

In the case of AIG, the top guy is fired.
Ironically though, he is rather blameless. He's only been in the position since June and he was brought in to try and prevent this. It was just unpreventable.

Don't feel too badly for him though, he's walking away with a $5million Golden Parachute. Really not a bad gig for 4 months work.

 

[a1tinkfans]

Great thread you guys!!

I'm just enjoying your perspectives. I don't have much to add.

I do have a very small 457 through AIG that I had been thinking about not contributing to anymore and putting the funds elsewhere. I guess this is my sign to move forward with that.

I have to tell you, My GUT and MANY "people in the know" say DON'T pull out, add more! Ya Know, kinda like.....BUY stocks when they're down, things are cyclical and will turnaround. I only say this because you mentioned it is very small and perhaps a gamble is worth it here??
Best of luck!!
I actually used to do work for AIG, indirectly, outside contractor and "lost" that account 8-9 months back, they were "cutting back" and indeed they were!
They also called in several middle management people one day, literally out of of the blue and said You're fired, no packages, nothing, meanwhile the people at the top were still pulling their huge salaries, crazy! Now the guy they hired to "fix" the mess walks away with millions, FOR WHAT???

 

[FayeW]

According to CNN- Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.

This makes me so mad!!!! So many people were so irrisponsible- the people borrowing the money, people loaning the money and people insuring the loans!!!!!! I'm blaming all three on this one!!!! If you couldn't afford the loan, you shouldn't have bought a house. If they credit was lousy and the customer was a high risk, you shouldn't loan them money and insure the loan!!!!! It is common sense.

You think it makes you mad, you should be on my side of the border! Our investments have taken a kickin' thanks to Monday's wild ride, and there isn't anything I (or my government) can do about it. Talk about feeling helpless...all of our savings and investments are at the mercy of the US economy. Even though we only have 20% of our money in US investments, the TSX and the Canadian banks were effected by Leihman Bros and Merrill Lynch.

To top it off, I work in the Canadian mortgage market. I just had a commitment for a client for a mortgage product that is offered exclusively by AIG. If AIG went under, it would have effected not only my personal finances, but my income as well!

 

[A Mickeyfan]

Personally, I am glad they bailed them out. My mother has all her money with them. She is 78, not married & has cancer... I would hate to see her lose all she has now.. she lives off of her money from there. Her chemo treatments cost her $150 copay.. each treatment! She doesn't get her medical treatments free.. she needs her money to pay her medical bills or she will not get them. Her meds run her $1000 per month! Yes, she gets Social Security.... $365 a month.. She does own her own house free and clear and thank goodness for that.
So....Yes, I am glad they were bailed out.. my mother still has her money to withdraw from to live off of....
I did suggest she pull it out of there before they do go under, but now AIG has about 2 years, that is longer than my mother has

I wonder how many other elderly are in the same boat as my mother, who stand to lose all their money & may not live long enough to re-coop it back??????

So maybe now some of you can see how saving AIG saves the average person too.. the person who has their money invested in there... not the big wigs of the company but the average person.. one who stands to go totally under if AIG fails...one who will have nothing to live on, no sufficent income to make ends meet. What happens to the average person then? Did anyone think of them?

 

[moredisneyplease]

I really worry about this economy as a whole right now and this recent buy out just worries me more...........

 

[harleyquinn]

I have to tell you, My GUT and MANY "people in the know" say DON'T pull out, add more! Ya Know, kinda like.....BUY stocks when they're down, things are cyclical and will turnaround. I only say this because you mentioned it is very small and perhaps a gamble is worth it here??
Best of luck!!
I actually used to do work for AIG, indirectly, outside contractor and "lost" that account 8-9 months back, they were "cutting back" and indeed they were!
They also called in several middle management people one day, literally out of of the blue and said You're fired, no packages, nothing, meanwhile the people at the top were still pulling their huge salaries, crazy! Now the guy they hired to "fix" the mess walks away with millions, FOR WHAT???

I know this is a great time to buy!! I just don't know if I want that money with a company that has to be bailed out. Not that I don't want money in the market--just not with an irresponsible company. (Not that I'm too sure there are any responsible ones left.)

 

[disney1990]

Snark all you want, but the collapse of AIG would have had both global and granular implications that the failure of Lehman or any other IB would not have. Too many losers in that scenario to count.

The US government really had no other choice.

Jane

Even Suzie Orman said today that the government had no choice but to bail out AIG. I just don't know where we are headed as a country.

 

[eliza61]

Personally, I am glad they bailed them out. My mother has all her money with them. She is 78, not married & has cancer... I would hate to see her lose all she has now.. she lives off of her money from there. Her chemo treatments cost her $150 copay.. each treatment! She doesn't get her medical treatments free.. she needs her money to pay her medical bills or she will not get them. Her meds run her $1000 per month! Yes, she gets Social Security.... $365 a month.. She does own her own house free and clear and thank goodness for that.
So....Yes, I am glad they were bailed out.. my mother still has her money to withdraw from to live off of....
I did suggest she pull it out of there before they do go under, but now AIG has about 2 years, that is longer than my mother has

I wonder how many other elderly are in the same boat as my mother, who stand to lose all their money & may not live long enough to re-coop it back??????

So maybe now some of you can see how saving AIG saves the average person too.. the person who has their money invested in there... not the big wigs of the company but the average person.. one who stands to go totally under if AIG fails...one who will have nothing to live on, no sufficent income to make ends meet. What happens to the average person then? Did anyone think of them?

I truly do empathize, unfortunately it's a bit of a catch 22. This year, according to abc world news we have spent over 800 billion dollars (with a b) bailing out various entities (fannie & freddie mac, AIG, the loan to refinance folks who were about to go into foreclosure, etc etc) and some where down the line we have to balance the sheets. Which may mean while we are helping out our elderly now, our children & grandchildren's generation are going to be in deep do-do. Many experts predict that this will be the first time since WWII that the standard of living for the middle class will go way down. As a parent, that scares me and I'm really scared when I think of my "golden years"

Now Washington Mutual Bank is on the block looking for help from their debt.

 

[m&m's mom]

The founder of AIG was on GMA this morning. He has personally lost $5 billion of value from the stock decline. He basically said that almost all the practices- sound financial procedures and basic business practices were done away with as soon as he left.
I am frustarted that all of the financial mess we are in largely comes from people letting other people/businesses borrow money they had not business getting to begin with.

 

[bridget]

Lehman brothers is at $ 0.13 (thirteen cents) a share. If it goes up to .26 you've doubled your money!! (I'm being sarcastic). This was a company that's stock was at over $65 last year!!!!

I feel very bad for the everyday Lehman/AIG/Countrywide/WaMu, etc employee (the loan processor, the computer tech person, admin assistants, etc) that had their retirement with their company, and now have nothing!!!!

To me this is Enron times 20 and just getting worse!!!!

 

[Colinsmom]

I just wanted to clarify something that I've seen in a couple of posts on this topic.

AIG going bankrupt is VERY different than the insurance companies owned by AIG becoming insolvent. Your insurance policies were not threatened by AIG's imminent bankruptcy. AIG the parent company was in trouble; AIG's insurance companies were still likely adequately capitalized (and thus in good financial condition). I can't say this for 100% certain because I haven't personally reviewed their capital ratios, but the state insurance departments get involved when insurance companies are on the brink of insolvency, not the feds or the Federal Reserve. If you don't believe me, look at the history of Conseco. Conseco (the parent company) went bankrupt about 6-7 years ago but they still honored (and are honoring - they are out of bankruptcy and still in business) all of their insurance obligations. Some were sold to other companies, but that doesn't really impact the policyholder as they can't change the original terms of the policy that you purchased. The parent company was bankrupt but the insurance subsidiaries were still solvent.

Make sense? Probably not - I'm too close to this stuff and can't help but speak in "tongue" sometimes.

 

[Alphabetsoup]

I think they should all have to pay it back with interest to the government or go to prison.

I SOOO agree with this! Who should we lobby to get this done? Anyone want to start a petition?

 

[Alphabetsoup]

HIH a big insurance company went under...the goverment didn't bail it out. And, as noted by a previous poster, not only did the people insured with them lose out, but all of the employees lost everything as well....totally sucked to be nearing retirement only to find that your retirement is now POOF...gone.

I'm with others of you who are getting quite worried about the state of things. My hubby has been unemployed since November...he can't even manage to get hired for fast food (he has a college degree, one manager flat out told him that would rule him out). I know it is only going to get worse....I just pray my contract lasts it's full three years.

So here is a question...what do y'all reckon will happen next?

 

[MoniqueU]

Well we were scheduled to have my husband have a health exam for an life insurance policy with Matrix Direct, who I have gathered is owned by AIG. So we cancelled that and will look elsewhere.

I am also a customer of WAMU which I love and now it looks like they will be at the very least taken over by someone. It has been a weird week here for sure as we are indirctly in the middle of the mess though not hurt by it so far like some others.

I will be interested to see what the markets do in the morning;

 

[Colinsmom]

HIH a big insurance company went under...the goverment didn't bail it out.

That doesn't really happen here in the U.S. If an insurance company becomes insolvent, it is taken over by the state insurance regulator (of its state of domicile) and eventually bailed out (although not necessarily at 100 cents on the dollar to all policyholders) by the rest of the insurance industry. Go to nolhga.com for more reading on this subject, if you like.

 

[Took]

Yes, I get that AIG's tentacles reach everywhere. But let's make no mistake about it, they were saved because of their derivatives book of business and the not for the little old lady and her annuity. They were worried about systemic risk. That's all that I'm saying.

And boy are you right.....they've become a bloated behemoth with too many irons in the fire. Time to downsize.....

I say, get busy selling assets AIG....and like *now*, pay the taxpayers back and let the chips fall where they may. If I was a policy holder in any form, I'd be on the phone this morning moving my business elsewhere.

Can we say "trust-busting" or "tentacle-lopping" or something similar. That's one reason such laws were invented -- to prevent this kind of infiltration and control of the market (there were other reasons, too). I'm very frustrated about the AIG buyout. I'm still smarting over the 1987 S&L crisis (read "corporate welfare").

On a bright note, does the buyout mean I'm finally a corporate CEO since I "own" them?

 

[wall*e2008]

I have to tell you, the Fed jumped in to buy this thing for one reason.....and it wasn't because of their insurance business. It was because they have a 400 Billion dollar Derivatives Book, or "Credit Default Swaps". This is the scary "meltdown" scenario....all connected with the Shadow Banking System.

Credit Default Swaps (CDS) are essentially insurance policies sold to protect some kind of security that I purchased. If my investment drops too much, well, the insurance company will pay face value of the CDS that they sold to me.

So, say I run a Hedge Fund, and I go out and purchase a large chunk of mortgage debt (Collateralized Mortgage Obligation or CDO) that has been bundled together and sold by yet another hedge fund or investment bank. I'm a hedge fund owner, and so I like to "hedge" my bets a bit. So I go to AIG and buy that Credit Default Swap on my newly purchased CDO.

Believe it or not, these credit default swaps were sold like candy, and they were sold on every type of debt imagineable, but linked to securitized mortgages in unprecedented numbers. The models put together by the financial geniuses at these companies were built on the idea that housing prices never fall. I kid you not. That's the honest truth.

And so, when you're a hedge fund heavily invested securitzed mortgages, and you're leveraged 30:1 or *more*, (meaning that you're holding about 3% in cash), and housing drops 20%, well your creditors now require that you put up more collateral (cash) because your credit to debt ratio has dropped considerably. You're in trouble.....this is called a "Margin call".

Well, no problem you think.....I'll go over to my friends at AIG with my handy dandy Credit Default Swap and I'll be all good. But all of *their* models also showed that housing prices would never drop. So they sold so many CDS, well, it was like free money wasn't it? Except housing prices fell, and they fell bigtime.

So, what it comes down to is that AIG needed 80 Billion dollars by today to meet Credit Default Swap obligations. If they didn't get that money, and that 80 Billion didn't get paid, then it could "in theory" spiral out of control because all of these banks, investment banks, insurance companies are so interconnected. The problem is....everyone is soooooo overleveraged, that one relatively minor money wrench in the derivatives market is enough to set off a chain reaction and a resulting market crash until cooler heads prevail.

I think we'll read very long novels in the coming years about how close we came to that yesterday. A sort of Chernobyl of the financial world if you will.

So, don't let them fool you that this was about "protecting the policy holders". That a huge load of BS.

I hope all of this makes sense.....lol!

What a great description of what happened.

 

[Mrs.Reese]

As of 11am, the "almighty" dow is up 54 pts. I just wonder when the bailouts will stop. Yes AIG failing would have been huge but it could still happen. What's to say they won't have more calls on their credit swaps?

In other news, unemployment is officially 6.1%. http://blogs.moneycentral.msn.com/t...nemployment-rises-to-6-1-on-its-way-to-8.aspx There is currently a bill going through congress to extend unemployment benefits for even longer than the current 26 weeks you can get due to emergency unemployment benefits being enacted.