AIG: We Need More Money
And so, more errors of these emergency bailouts begins: Once committed to the initial $85 billion dollars, what choice does nation have but to throw good money after bad.
Down the rathole:
AIG is asking the US government for a new bail-out less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85bn loan, according to people close to the situation.
AIG’s executives were on Friday night locked in negotiations with the authorities over a plan that could involve a debt-for-equity swap and the government’s purchase of troubled mortgage-backed securities from the insurer.
People close to the talks said the discussions were on-going and might still collapse, but added that AIG was pressing for a decision before it reports third-quarter results on Monday.
AIG’s board is due to meet on Sunday to approve the results and discuss any new government plan, they added.
The moves come amid growing fears AIG might soon use up the $85bn cash infusion it received from the Fed in September, as well as an additional $37.5bn loan aimed at stemming a cash drain from the insurer’s securities lending unit.
AIG has drawn down more than $81bn of the combined $122.5bn facility. The company’s efforts to begin repaying it before the 2010 deadline have been hampered by its difficulties in selling assets amid the global financial turmoil.
Un-frickin-believable . . .
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Source:
AIG in talks with Fed over new bail-out
Francesco Guerrera
FT, November 8 2008 00:36
http://www.ft.com/cms/s/0/1b1b2622-ad2c-11dd-971e-000077b07658.html
November 9th, 2008 at 7:48 am
Never mind. We got our multi-million bonuses, already safely banked away, and at the end of the day the Government will pick up the tab. So who cares?
If things aren’t COMPREHENSIVELY fixed, this WILL happen again. It is moral hazard but it’s also more than that, it was moral hazard in a regulatory vacuum.
November 9th, 2008 at 8:19 am
It does mean that initial loan money is all gone never to return to the gov’t.
November 9th, 2008 at 8:55 am
Reminds me of an article in yesterday’s WSJ:
“How Far Will Deleveraging Go?”
http://online.wsj.com/article/SB122611122832410627.html
November 9th, 2008 at 9:35 am
What we (the Federal Government) don’t already own of AIG we have options on. What do they have left to trade? They’re trying to sell us something they have already negotiated away.
November 9th, 2008 at 10:41 am
I think they’re a little short of change on their next party on a cruise ship – so we need to finance them for the black-tie evenings and masseuse-company afternoons. The mornings will be spent in hangovers. Please don’t bother them – it’s a full scale orgy in process.
November 9th, 2008 at 11:21 am
It is clear the free-market ideology is out of hand when something like this happens…twice..with the same company. The non-Chicago style of economics that was dismantled in the 80s, worked in the 80s, but now we see how such an ideology is similar to a snake eating its own tail to survice…I expect this to continue for quite some time…
November 9th, 2008 at 11:21 am
If you sleep with thieves, don’t be surprised in the morning if your wallet feels lighter.
November 9th, 2008 at 11:45 am
Indeed. Sleeping with thieves, in the Den of thieves. Keep it up boys I’m going to get long manufacturers of pitchforks and torches.
November 9th, 2008 at 11:46 am
Hey…I thought the taxpayer was going to make money on these bailouts? Were we snookered?
November 9th, 2008 at 11:53 am
Let them go BK and guarentee the insurance with US money. That way any property damage, auto damage, etc etc get covered without the big bailout blanket.
November 9th, 2008 at 11:58 am
If we let AIG go bust, then all those default swaps they sold to the banks in the US and Europe are worthless which then causes everyone else to realize their losses and forces them to raise more capital. Same goes for the mortgage insurers. The whole system is held together by strings and rubber bands.
November 9th, 2008 at 12:09 pm
I am shocked, shocked to learn that taxpayers’ money may have been lost during the initial AIG bailout. I have bad news for you: this will happen with other “one-stop financial supermarkets”, possibly including C and BAC.
One or two smart people this week commented to me that they felt that something was going on and another shoe was about to drop, perhaps this was it.
I am inclined to agree with JB: AIG have been screaming about the world blowing up if they fail. Let’s cover the world instead and make sure it doesn’t blow up. Now that people can see the CDS positions a little better it should be possible to at least evaluate the potential damage. Then we can allow AIG to go BK and sell all of their assets, with all proceeds to go to the government to pay for the bailout insanity. Any private investor still in this cesspool is clearly insane.
The same applies to MBIA, Ambac and the rest. These companies are all worthless and have no means of generating revenue – except for the original business of AIG, which can now revert to the little regional insurance companies whence they stole/acquired it (by price fixing and other forms of lying and cheating). Small solvent regional banks and insurance carriers may end up doing well out of this crisis in the long run.
In addition, I would add this: I really think it is time to start stringing some of these guys up by their balls. I am sure by now the NY AG has enough evidence to grab them by the short and curlies. Let the show trials and perp walks begin. Draw up a chair, America, the party is just getting started.
November 9th, 2008 at 1:30 pm
“Un-frickin-believable . . .” – yes and no . Yes we’ve been taken and it is no surprise .
The flood gates were opened when the anything goes TARP legislation passed . I wonder how things will be under the Obama administration .
November 9th, 2008 at 4:07 pm
This “free marlet” stuff sure is expensive for the rest of us. I kind of like the sound of “negative equity” for the FIRE section of our economy. I just got my notice of the Blue Cross Health insurance premium increase for 2009 (THIRTEEN POINT THREE PERCENT!). Yeah, these guys know the real rate of inflation alright. They desperately need to become “motivated selllers”. Just imagine a decrease in bank fees and insurance of all types by the same amount the market has dropped. The health insurance mafia really needs to get out of the “your money or you life” (literally) raquet. These guys think a captive market is a bunch of fish in a barrel. Health insurance shouldn’t be hold up insurance. The latest scam is “preventive screening” versus “diagnostic” . Here’s how it works. You want a full blood panel and you schedule it as preventive, you pay the plan minimum. Oh, but uou go to your doctor with a pain somewhere and he schedules a test, THAT’S DIAGNOSTIC. It’ll cost you extra pal. You see, you have insurance to provide a good living for administrators of Blue Cross like our fellow in Vermont who gets about $600,000 a year. Health insurance is about making money, not about keeping you healthy. So stay healthy and we’d love to insure you. If you’re sick or fit into the 98% of humans that get sick, expect to pay extra. What do you think this is, a charity ward? We’re FREE MARKETEERS (known centuries past as pirates).
November 9th, 2008 at 4:09 pm
Is the money just gone then? Did no one benefit? Because if the money did disappear like in a bonfire all that is left is the debt. Which is Chinese peasants savings that The US taxpayer owes them back. Right?
To me this is a failing of the fiat money system. That money can effectively disappear but the vestige of it remains in the form of debt. If one was to replace money with… say potatoes you could at least be sure that some one got to eat the potatoes.
Who ate the damn potatoes!
November 9th, 2008 at 4:15 pm
If you take the “F” out of potatoes, what do you get?
That’s what Im trying to tell you. There ain’t no F”n potatoes!
There’s a lot of pirates, though.
November 9th, 2008 at 4:35 pm
as I said somewhere else…
Come now everyone no gnashing of teeth. Until the old rule of thumb, 3x, is violated there’s nothing to see here. The original begging was $85billion, at $256 billion we can legitimately start complaining.
While waiting for that number you would do well to contemplate why wiser old hands said “no plan” is the best “plan” when all the hobgoblins were trotted out a couple of months ago. Had Bernanke really been a student of history he would have known this.
November 9th, 2008 at 4:49 pm
Patrick Neid,
Friend, this wasn’t annual budget request manipulation. There never was a “plan”. Kevin Phillips on Bill Moyers explained it fully. It was the culmination of “use a crisis to make MORE money” for the elite. There was NEVER any plan to help the common man. If you think there was, you were fooled. And that is why congress and the NY attorney general are sharpening their teeth right now. It’s going to be a fun year.
November 9th, 2008 at 5:40 pm
leftback for Treasury Secretary!
November 9th, 2008 at 6:07 pm
@ Thanks, constant, that is my first nomination…
@ AGG: regarding your increasing health insurance piracy, I mean premiums. You are of course correct. these people are thieves. The result of the public outcry against the Clinton health care plans was to allow these fat cats to rape the nation via health premiums in the pay check while the investment bankers were doing likewise via the 401K plan. However, you can take heart – I am quite sure that President Obama is aware of this. I think we are going to see some significant belt tightening in the health services industry. I am not talking so much the providers themselves, who haven’t benefitted a great deal (nurses, office staff, most physicians), but the monetizers (hospital adminstrators, HMOs etc..) are effectively the bond insurers of the health care industry. They have been having a big party, probably at the same resort as the AIG guys. The new government is going to make a lot of these non-productive money-shuffling parts of society bend over. Trench digging for these guys, if they are lucky. I have met them and they are the same scum as the finance and real estate people.
November 9th, 2008 at 7:12 pm
Why is it that almost nobody remember that these scums are of the same ilk of those who seized the opportunity of the 9/11 attack to backdate their options packages to enrich themselves while the nation was in total shock and mourning thousand of people?
Just search for “The perfect payday” on the WallStreet Journal online. Make sure you haven’t eat in the last 8 hours preceding the reading of this article.
Conscience? Decency? That won’t get anyone far in making the maximum amount of money/wealth they feel entitled too. However, It’s good for the poor and the insects (a.k.a. working stiffs) that they observe with a detached amusement from their corner offices.
November 9th, 2008 at 8:51 pm
AGG Says:
November 9th, 2008 at 4:49 pm
Patrick Neid,
Friend, this wasn’t annual budget request manipulation. There never was a “plan”. Kevin Phillips on Bill Moyers explained it fully. It was the culmination of “use a crisis to make MORE money” for the elite. There was NEVER any plan to help the common man. If you think there was, you were fooled.
I’m not going to get in the definition of what a plan is but I will use it as a term to describe what Paulson and Bernanke tossed before us a couple of months ago. Then as now I said that “no plan” was the best plan. While I find people like Moyers/Phillips useless at best I never buy into conspiracies about they did it for the elites. As to Cuomo and Congress sharpening their teeth that’s like acting surprised when hyenas show up at a kill. When large sums of money disappear you can be certain that lawyers will appear.
Perhaps Moyers will get off his sorry ass and do a show on all the payola that went from Fannie/Freddie to all the Ceo’s, directors and politicians for cooking the books yet cooking the books at Enron put people in jail. Now that would be some hope and change.
November 9th, 2008 at 8:58 pm
IMO the US Government should nationalize the SOB and send the whole crowd home for good with absolutely nothing! We’re only 20% away from that outcome anyway. At this point, it is obvious that AIG has become the FDIC for the Wall Street crowd. Now all of a sudden, no derivative is of any value and there is no end to pouring money down this rathole as BR has described.
This is moral hazard raised to the power of infinity! Nationalize the bastard!
Might as well go ahead and cross that bridge now and get it out of the way. Fuck those bastards!
November 9th, 2008 at 9:08 pm
Yves Smith over at Naked Capitalism has this story on her site as well. Here is a (paraphrase of) description of AIGs actions in lay mans terms;
This is like a guy going into a pawn shop where he had received 85 dollars on a watch. He now tells the guy he wants another 50 dollars and if he doesn’t get it, he’s going to blow his brains out right there in his shop. The cost of cleaning up the shop plus all the negative feedback from a death in his store is likely to cost more than 50 dollars.
Oh, and he pulled this same stunt last week as well and it worked.
November 9th, 2008 at 9:25 pm
I think that 2009 will be the year of the “Wall Street Perp Walk”. At least it had better be if we hope to get to the bottom of this mess and fix things so that any semblance of confidence in our so called “free markets” can be restored……..
Or is it too late for that?
November 9th, 2008 at 9:52 pm
Mannwich, I sure hope you are right and it’s about damn time.
It is now apparent that AIG far out-reached their ability to cover the amount of risk they took on. All the way from how the mortgages were given out, to the securitization, to the insurance. The whole thing was one big colluded scam.
If I didn’t know better, it appears to me they wanted all of this to happen for some reason. What rational person would ever wish such a terrible outcome as we have already gotten, let alone what is yet to come?
November 9th, 2008 at 10:42 pm
BG: They all knew what they were doing, but as long as the music kept on playing they kept on dancing..
November 10th, 2008 at 2:54 pm
Hi.
Today here in Spain one of the most important bank in Europe announce a capital increase by 7200 mill €.
Because It is having problems for sell his participations in Cepsa and Banco de Venezuela.
Sorry for the english.
You can read more on http://www.invertir-bolsa-info.com/blog/?p=57