Yesterday, the Federal Government (the taxpayers) bailed out American International Group, Inc. to the tune of $85 Billion dollars. Morgan Stanley and Goldman – Sachs were soon to join Lehman Bros. as the biggest weenies on the block. They now are looking for buyers! Surprise..Surprise! Someone bought the Lehman Bros. building and their stock investment arm for a little over $1 Billion dollars. They seem to have a way to go…condering they are down over $1 Trillion in reality. So, how did “the too big to fail” AIG reward the American taxpayer who bailed them out? Well, they got together with all the other slime Investment Banks (Unregulated right to steal groups)…and pulled out of all their Derivative and worthless Hedge Funds….at pennies on the dollar. Once out, they immediately invested in Crude Oil….raising the price by a spike of $6 dollars a barrel. They plan on continuing this process until they unwind all their worthless Derivatives and Hedge Funds. Oil was on its way to $60 dollars a barrel….before these weenies ponied up their “smash and grab” winnings!
In the meantime, our friend Chris Cox at the Securities and Exchange Commission…is standing on the sidelines…waving his latest edit about “no more short selling”….which has nothing to do with the rampant theft of these so-called Investment Banks. We still have that lovely “Enron Exception Rule”…brought into existence in the Budget Bill of 2000. It allows people to buy oil and natural gas with 5% down and 31 days to pay. It allows big run ups of commodity markets and is virtually “unregulated theft”! Dare we remind you of the huge spike in electricity and gas prices back in the Grey Davis days?
So, what now? The artificial “Speculator Spike-up World” is back into Crude Oil and Natural Gas. Poor T. Boone Pickens…just when he actually had a chance to save America…….Secretary Paulson saves AIG! Shouldn’t there be a “Brown Act”…or something against “collusion in Markets”? Oh sure, they have that….but the problem is anyone with a computer can watch the market buys and the amounts being secured. Even Aunt Mable…can join in the run up once those Institutional Investment boyz grab their mouse!
Morgan Stanley and Goldman – Sachs are busy trying to find stupid people to buy their baloney Investment vehicles! From National Lampoon’s Vacation: “Think Mom is going to buy that?” …”Nice talk..Rusty!”….
We need to let these dinosaurs……go the way of Prudhoe Bay! Squish them and get as much out of them as possible! By the way, the Shareholders are first ones to lose everything. Administrators, top sales guys and CEO’s all flourish into wonderful Government work as Economic Advisors!
OMG – I think that I actually comprehend a Winships posted article. Let me see if I got this right – this all means that we F**Ked, right? Have I got that right? – we are F**Ked ? … right ? …. or is it fuct, sounds like duct?
Those are some big numbers, 85 billion and so forth.
It even looks like the cat is out of the bag, these investment banks hold nothing but worthless paper.
When is the question going to be asked? Where did the trillions of dollars of value go? The funds went into these investment banks but the vaults are bear.
So where did the funds go?
*Junior…..you are so cool…….a mind like a steel trap we much say! No darling Junior……it just means that the price you pay for a gallon of gas will remain inflated because of these wonderful patriots…..on the throne of capitalism. Sadly, they refuse to flush!
*Cook…when someone is mugged on a subway….their wallets are empty..but
someone has that case. So it is with Hedge and Derivatives….usually, the process works this way: Dump a billion bucks into a Hedge Fund as chum…..
This usually attracks three or four billion more…which raises the share price.
The guy with the original billion pulls out two to three billion and lets the share
price fall……..until…..until…..someone says…..”I want to sell!” Then what you have is an “ill-liquid Hedge Fund”….which is desolved with the Original Administrators taking the lion share and giving the investors….pennies on the dollar! Some used to call it…..”A pyramid scheme”….but that was an insult to Pyramids!
Boy o Boy, that sure sound like a pyramid scheme, I guess the only reason it is legal is cause of all the checks written ti political parties and campaign committees.
This just might led to a Russian type shake up with the 2 main political parties banned , the top leaders jailed, and their corporate sponsors and puppet masters hunted down world wide like the criminal Nazis of WW2.
How are the peoples of NB holding up in all this anyway? The doors to the rooftops locked?
This bailout sets a horrible precedent and it is as big a creep toward socialism as Obamacare. How is there no one at all in government who understands or cares about free market economics?
Who cares about the cost of this bailout? No, really. I mean it.
The dollar is literally worthless anyway. I mean, it’s just paper, right? No commodity backing whatsoever. It’s empty, like major party rhetoric. I am so upset over this that I literally cried last night.
Then today I brought my son to school and had a fight with the ignorant, condescending tax-dollar-paid secretary Debra at Foster School in Lakewood (in case anyone else would like to complain on my behalf and make a government slug rightfully feel 2 inches tall). She marked my son tardy when in fact they’d locked all the gates early and he couldn’t get in. Ludicrous, right? All at once I was flooded with reminders as to why I’ve distrusted the government pretty much since birth. Because the lie. Cheat. Steal. Obfuscate. Lie some more.
It’s clear that even those with a very low pay grade are convinced that they’re better than the rest of us. That bitch at the school treated me I was one of the students! and on my way out a couple of parents made sure to let me know that she’s always like that. All I can say, and I think many of you who know me out there would agree with me, is that she was lucky as hell that my son was standing right there; but the other thing people know about me is that that trick only works once. Next time I’ll be sure to give my (also very assertive) son a lesson in invoking his authority as a citizen over the government peons that tell him, and his parents mind you, what to do… when the truth is that they work for us (at least in theory now).
Think about it: cops hate that whole ‘I pay your salary’ line, so why would a lowly desk clerk act any differently? Apparently we pay their salaries, but in their minds, we work for them somehow.
Seriously. Considering that people fork over 15-35% of their income without an argument, and in fact without any hesitation whatsoever, and on top of that we have to sell our debts and accelerate inflation just to make ends meet, why is everyone so complacent about government becoming so big that it can’t even govern itself while it still wants to tell the rest of us what to do? It’s neo-slavery. Do as they say, not as they do. I’m almost 30. I didn’t need my parents way back when and I certainly don’t need a 536-member set now!
So the next time a school official or a $10/hr clerk at City Hall talks to you like you’re a piece of shit, give it right back. Feel free to remind them how small and insignificant and worthless they are… as is the paper they’re being paid. Remind them that they’re cogs of a machine that doesn’t even care about them as it simultaneously falsely inflates their ego. This is the beginning of a more acute stage of the destruction of the Constitution and I’m ANGRY AS HELL! Where the is the outrage? I mean real outrage. It starts on a personal, day-to-day level.
I don’t like to use this kind of language here, but I have to call it how I see it: unless we replace almost the entire Congress (both major parties), we’re fucked. The American way of life is toast. There is no doubt in my mind that on our current course, America will be a third-world nation within 10 years. 10 years ago I predicted the government would fall within 25 years. Unfortunately, I’m pretty sure I’m right.
SMS
“This bailout sets a horrible precedent and it is as big a creep toward socialism as Obamacare. How is there no one at all in government who understands or cares about free market economics?”
Ron,
The more articles I’ve been reading about all these government bail outs, and watching it unfold on TV have had me worried. Eerily it reminds me of one thing “Atlas Shrugged”.
SEC Chair Chris Cox responds – “Cox Ignores McCain’s Criticism”
In the statement, Cox defends the actions of his agency with a list of steps he said were taken to avert the crisis and deal with its consequences. “It is precisely the wrong moment for a change in leadership that inevitably would disrupt the work of the SEC at just the wrong time,” he said in the statement.
http://voices.washingtonpost.com/the-trail/2008/09/18/cox_ignores_mccains_criticism.html
Cox is screwed, he thought those high brows were his friends, they left him holding the bag as they transfered billions to their offshore accounts.
He need to have the people subpoenaed or arrested and assets frozen, here and over seas. Or he should resign and let some hard ass collector from the IRS in there to do the nasty job.
AIG has no bad debt from CDO’s. Their problem is selling insurance (known as credit/default swaps). I copied this from another forum, but it does a good job of describing what the problem is, and what happened.
“I do not think that AIG had any problems with its insurance business. They had a wonderfully profitable operation in Asia (and China). Their property and annuity business is very profitable in the U.S. (insuring 1 of 8 homes in CA). They insure boats, jets, work comp… It’s the crown jewel of their business.
The insurance business is the collateral for the $85B government loan (at 8.5% above Libor). They also had to give the government 80% of the equity ownership via EPNs (equity participation notes). That is a massive dilution to current shareholders.
I am sure Berkshire would love to take some of that insurance business (except the work comp which they don’t like).
What sent AIG down the toilet was their credit-default swap business. They were selling paper against default on corporate debt and mortgage securities. The write downs on these toxic weapons of mass destruction caused their credit rating to fall which triggered clauses that required more collateral to back the swaps.
It was a failure of risk management on top of a highly leveraged financial position.
You have to go all the way to p.224 to find that AIG owned $190B in debt. I don’t think anyone knew how much liability was involved with those swaps (certainly not most of the 75-year old board members). I’ve never bought Citigroup as its balance sheet was too hard to understand; AIG was even more complicated. Just ignore the glossy photos and management’s poor summary and go straight to the audited shit and tell me what was going on within this hellhole of stockholder destruction.
http://www.ezodproxy.com/AIG/2008/AR…AIG_AR2007.pdf”
Chris Cox is a very smart guy. I have no doubt he will land on his feet. I hope that while he still retains the position he (we) will see some positive results.
and thanks again NV, nice summary!