The Fed just bought AIG

[Flames in 07]

I'm not sure I know what the entire impact is, but he federal government holding a bunch of bad debt doesn't really feel great.

I guess they can always back things cause they can just print more money, but then inflation becomes a problem.

http://money.cnn.com/2008/09/16/news...ex.htm?cnn=yes

[Slava]

I posted a comment about this in another thread, but Norway went through a similar exercise in the early 1990's when they were all but forced to buy their largest bank. After a few years the bank was stabilized and the stock was sold off at the recovered prices.

I would think that is what will happen here. The Fed doesn't actually want to own AIG, nor do they want to own Fannie Mae or Freddie Mac...but they can't just stand idly by either.

[ShaolinFlame]

So what happens when all of the mortgages insured by AIG fail? Would the Fed be further on the hook for that? If they couldn't even operate another day, I have a feeling the 85 billion won't even cover a bit...

[Phanuthier]

Damn, thats a steep price for that debt. Definatly motivation for AIG to find something else, but at least they arn't going to die.

I read that they needed $14 billion in a week and something like $80 billion to ride out the year, so it looks like they'll be ok.

Next, WaMu.

[missdpuck]

http://www.businessweek.com/careers/...n_id=rss.daily

[Locke]

They should probably start by pulling their outrageous sponsorship deal with that deadbeat soccer team...

That could save them a cool $100 Million...

[HotHotHeat]

It's not a buyout, it's a 24 month, 11.5% interest loan.

[Traditional_Ale]

Originally Posted by Locke

They should probably start by pulling their outrageous sponsorship deal with that deadbeat soccer team...

That could save them a cool $100 Million...

Mind explaining how they're supposed to get the Spice Girls to perform at the company picnic then?

[Locke]

Originally Posted by Traditional_Ale

Mind explaining how they're supposed to get the Spice Girls to perform at the company picnic then?

Beg Beckham's wife to pull a few strings....?

[Traditional_Ale]

Originally Posted by Locke

Beg Beckham's wife to pull a few strings....?

Thats what I was getting at. You think they're gonna play if you take away his 100-million?

[HOOT]

The thing I find amazing is the more than 1 American would vote Republican again. Wow!

[Flame Of Liberty]

Originally Posted by HOOT

The thing I find amazing is the more than 1 American would vote Republican again. Wow!

What I find amazing is that someone would believe that Democrats would fix this mess considering their medicine is more of what has caused the problems in the first place - overregulated markets, lowered responsibility and increased moral hazard.

[HOOT]

Originally Posted by Flame Of Liberty

What I find amazing is that someone would believe that Democrats would fix this mess considering their medicine is more of what has caused the problems in the first place - overregulated markets, lowered responsibility and increased moral hazard.

Just for the record, I am not picking sides. I could care less what the states do since I have no say what so ever.

However just watching McCain say that things were fine when they are clearly not makes me wonder how anyone could vote for him, well I guess Palin is a MILF at least

[Claeren]

I think the point is that every voter in America should be voting for change.

Bush/Republicans had 8 years to set America on a strong path and over 8 years they have failed.

So the Democrats might not be better, but they couldn't be worse.

If there was a 3rd or 4th option then those would be on the table too??


But you cannot reward failure on the scale we have seen in the last 8 years with re-election. Americans have 3 times the debt and 1/3 the internal financial strength they had when Bush started!?


Although I guess the Chinese and Russains wouldn't mind another 8 years of Republican rule?


Claeren.

[Slava]

Originally Posted by Flame Of Liberty

What I find amazing is that someone would believe that Democrats would fix this mess considering their medicine is more of what has caused the problems in the first place - overregulated markets, lowered responsibility and increased moral hazard.

Can you provide some evidence that the over-regulation is what has caused any of this? I have seen a number of sources that actually indicate the EXACT opposite to your statement.

[Table 5]

Originally Posted by Flame Of Liberty

What I find amazing is that someone would believe that Democrats would fix this mess considering their medicine is more of what has caused the problems in the first place - overregulated markets, lowered responsibility and increased moral hazard.

Considering the fact the a lot of people feel that deregulation (championed by Greenspan under the Bush era), lack of responsiblity (hey, lets give everyone who breaths a loan!), were the big reasons that caused all this, I'm not sure why you would make such a foolish statement.

Nevermind the fact that naked short selling has slamed down a lot of these companies a lot further then they deserve.

[Table 5]

Originally Posted by Slava

Can you provide some evidence that the over-regulation is what has caused any of this? I have seen a number of sources that actually indicate the EXACT opposite to your statement.

why let reality get in the way of a hardline political stance?

[Ronald Pagan]

Originally Posted by HotHotHeat

It's not a buyout, it's a 24 month, 11.5% interest loan.

Not exactly. AIG put up 79.5% equity as collateral. The Fed essentially owns AIG.

[Flame Of Liberty]

Too Few Regulations? No, Just Ineffective Ones

THERE is a misconception that President Bush’s years in office have been characterized by a hands-off approach to regulation. In large part, this myth stems from the rhetoric of the president and his appointees, who have emphasized the costly burdens that regulation places on business.

And legislation that has been on the books for years — like the Home Mortgage Disclosure Act and the Community Reinvestment Act — helped to encourage the proliferation of high-risk mortgage loans. Perhaps the biggest long-term distortion in the housing market came from the tax code: the longstanding deduction for mortgage interest, which encouraged overinvestment in real estate.

In short, there was plenty of regulation — yet much of it made the problem worse. These laws and institutions should have reined in bank risk while encouraging financial transparency, but did not.

http://www.nytimes.com/2008/09/14/bu...in&oref=slogin


Are Fannie and Freddie Too Big to Fail?

The view that some institutions are far too big to be allowed to go under is another fallacy. According to the popular way of thinking, if a large institution is allowed to go under, this could cause severe damage to the economy, since the failure of a large institution would generate large disruptive shocks. Since everything in an economy is interrelated, this means that a major shock could end up in a massive disaster.

In a market economy, a business that reaches the state of bankruptcy is most likely pursuing activities that do not contribute to real wealth but rather squander wealth, i.e., activities that make losses. Since such activities cannot support themselves, it means that real savings must be taken away from activities that do generate real wealth.

The longer a losing activity is allowed to stay alive, the more damage is being inflicted on real wealth generators. So, on the contrary, the liquidation of a losing activity cannot cause more damage; rather, it is going to arrest the damage inflicted on wealth generators. Once the losing activity is gone, the wealth generators with more real savings at their disposal can start expanding wealth-generating activities and lay the foundation for healthy economic growth.

http://mises.org/story/3110

How to Avoid Another Depression

By late 2007 there were definite signs of major corrective forces acting in financial markets. However, whenever such corrections seemed to be ready to take place they were circumvented by government intervention. On December 12, 2007, the Fed announced the Term Auction Facility which would auction reserves at the Discount Window for a "broader range of counterparties" and against a "broader range of collateral" than open-market operations and without identifying the borrowers. This was the first extraordinary intervention.

Then in March, Paulson and Bernanke orchestrated the weekend purchase of Bear Sterns by J.P. Morgan, providing Morgan with a $30 billion, ten-year loan. This certainly was an extraordinary intervention. It also helped set a pattern of intervention that sends exactly the wrong signals to the market. Government officials at the Fed, Treasury, and elsewhere have been telling us that everything is fine in the economy and then, when bad economic news is announced, they claim that "it's not as bad as we anticipated." Then, when markets react to this misinformation, government comes in with some massive bailout in the form of a brand new, extraordinary intervention.

http://mises.org/story/3103

[Slava]

Originally Posted by Table 5

why let reality get in the way of a hardline political stance?

I hope that you don't mean my political stance because I didn't mean it to come across that way at all. I wish I could find a link, but I saw three different interviews Monday afternoon all of which detailed the need for further regulation in the markets and in investing in general.

Its difficult during a heated election to not bring politics in, but this seemed to me to be non-partisan. It makes sense given what the cause of the current crisis is here as well: the subprime fall-out is due in large part to far reaching sales of investment products that no one really understood. Control and regulation is one way to monitor and stop this from happening again.