Comments on: AIG: $105 Billion to Counterparties http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 20:08:08 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: John Slater http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-154133 John Slater Tue, 17 Mar 2009 10:45:33 +0000 http://www.ritholtz.com/blog/?p=21837#comment-154133 John Slater | jslater@mergers.com | IP: 75.65.2.157 Most likely you will remember the following: Mario Puzo’s The Godfather begins with the following epigram: “Behind every great fortune is a great crime” -Balzac In doing a little research I found that other translations of the quote including: “The secret of a great success for which you are at a loss to account is a crime that has never been discovered, because it was properly executed.” “The secret of a great fortune made without apparent cause is soon forgotten, if the crime is committed in a respectful way” A relevant quote which has received currency recently is Mark Twain’s prescient observation: “It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress.” Under the rubric of “systemic risk” a political decision has been made to loot the federal treasury to protect the unsecured creditors of major U. S. financial institutions. Call it what you will: oligarchy, crony capitalism, national socialism; it has not ended well in other times and places and it will not end well here. John Slater | jslater@mergers.com | IP: 75.65.2.157

Most likely you will remember the following:

Mario Puzo’s The Godfather begins with the following epigram:

“Behind every great fortune is a great crime”

-Balzac

In doing a little research I found that other translations of the quote including:

“The secret of a great success for which you are at a loss to account is a crime that has never been discovered, because it was properly executed.”

“The secret of a great fortune made without apparent cause is soon forgotten, if the crime is committed in a respectful way”

A relevant quote which has received currency recently is Mark Twain’s prescient observation:

“It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress.”

Under the rubric of “systemic risk” a political decision has been made to loot the federal treasury to protect the unsecured creditors of major U. S. financial institutions. Call it what you will: oligarchy, crony capitalism, national socialism; it has not ended well in other times and places and it will not end well here.

]]> By: jus7tme http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-154061 jus7tme Mon, 16 Mar 2009 21:57:25 +0000 http://www.ritholtz.com/blog/?p=21837#comment-154061 Someone please explain the "securities lending" aspect of the transactions described: Did AIG lend out $43.7B worth of stock so that Goldman et al could short the stock, and now Goldman et al have done the buyback in the open market and want to exchange the stock for cash again (at full price)? Someone please explain the “securities lending” aspect of the transactions described:

Did AIG lend out $43.7B worth of stock so that Goldman et al could short the stock, and now Goldman et al have done the buyback in the open market and want to exchange the stock for cash again (at full price)?

]]> By: jenslapinski http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-154047 jenslapinski Mon, 16 Mar 2009 21:28:24 +0000 http://www.ritholtz.com/blog/?p=21837#comment-154047 Barry, I am a huge fan of this blog, this is one of the least insightful posts you have ever made. What do you think all the 'bailout money' is for? Of course it is for buying out the people who lend AIG money. Essentially, the US state is swapping out all the investors in/lenders to AIG. And of course, the US being the largest debtor nations in the world, the vast majority of the 3rd parties will be based abroad. Sorry, but what did you expect? Barry,

I am a huge fan of this blog, this is one of the least insightful posts you have ever made.

What do you think all the ‘bailout money’ is for?

Of course it is for buying out the people who lend AIG money. Essentially, the US state is swapping out all the investors in/lenders to AIG. And of course, the US being the largest debtor nations in the world, the vast majority of the 3rd parties will be based abroad.

Sorry, but what did you expect?

]]> By: E http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-153940 E Mon, 16 Mar 2009 17:44:50 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153940 $2 trillion is nothing in the face of $50 trillion in wealth destruction that has occurred the past 18 months. $2 trillion is nothing in the face of $50 trillion in wealth destruction that has occurred the past 18 months.

]]> By: usphoenix http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-153889 usphoenix Mon, 16 Mar 2009 15:21:43 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153889 Inflation is the only potential solution. The only problem if the disenfranchised middle class is not included in the printing press delivery, things could get ugly fast. Inflation is the only potential solution. The only problem if the disenfranchised middle class is not included in the printing press delivery, things could get ugly fast.

]]> By: farmera1 http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-2/#comment-153888 farmera1 Mon, 16 Mar 2009 15:21:00 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153888 When Bernanke said deflation was no problem because the FED could drop money from helicopters, he was serious. HE may be using electronic transfers, but he effectively is dropping money on everything. The FED balance sheet is some where near $2 trillion (mostly all the junk no body will buy) up from $800 billion or so. Big difference was the $800 billion was mostly treasury bills. Lots of the toxic junk is now owned by the....... FED. Numbers may not be exactly right but you get the idea. When Bernanke said deflation was no problem because the FED could drop money from helicopters, he was serious. HE may be using electronic transfers, but he effectively is dropping money on everything. The FED balance sheet is some where near $2 trillion (mostly all the junk no body will buy) up from $800 billion or so. Big difference was the $800 billion was mostly treasury bills.

Lots of the toxic junk is now owned by the……. FED.

Numbers may not be exactly right but you get the idea.

]]> By: farmera1 http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-1/#comment-153886 farmera1 Mon, 16 Mar 2009 15:16:48 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153886 I seem to recall that there is legislation that says CDS (and derivatives in general) are at the front of the line for any money. They don't go through bankruptcy process because they get the money. They are first in line. That makes bankruptcy a moot point, if I am remembering correctly. Anyone out there can clarify this for me. I seem to recall that there is legislation that says CDS (and derivatives in general) are at the front of the line for any money. They don’t go through bankruptcy process because they get the money. They are first in line.

That makes bankruptcy a moot point, if I am remembering correctly.

Anyone out there can clarify this for me.

]]> By: Myr http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-1/#comment-153882 Myr Mon, 16 Mar 2009 15:11:36 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153882 The "bailout everyone no matter the cost" crowd has won...for now. Now we get to see the consequences of these actions and hear endless cries of "the alternative was unthinkable...we had no choice." Those who didn't see this calamity coming are the ones who want to bailout everyone. When this policy fails they'll turn around and say that we failed because we didn't have the "political will" to fully carry out their policy prescriptions. The age of no accountability lives on. The “bailout everyone no matter the cost” crowd has won…for now. Now we get to see the consequences of these actions and hear endless cries of “the alternative was unthinkable…we had no choice.”

Those who didn’t see this calamity coming are the ones who want to bailout everyone. When this policy fails they’ll turn around and say that we failed because we didn’t have the “political will” to fully carry out their policy prescriptions. The age of no accountability lives on.

]]> By: danm http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-1/#comment-153880 danm Mon, 16 Mar 2009 15:07:26 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153880 HCF: I believe the only way out is for the US to deflate its debt via inflation and everything will go in that direction. Everything else is noise. HCF:

I believe the only way out is for the US to deflate its debt via inflation and everything will go in that direction.

Everything else is noise.

]]> By: HCF http://www.ritholtz.com/blog/2009/03/aig-105-billion-to-counterparties/comment-page-1/#comment-153877 HCF Mon, 16 Mar 2009 14:58:10 +0000 http://www.ritholtz.com/blog/?p=21837#comment-153877 @danm: I agree that the pre-package bankruptcy might still be in the cards. I sure as heck wouldn't put anything past the powers that be, but unfortunately, I think it's unlikely. I believe what's being done is performing major surgery on a patient with duct tape and a baby pin, a la MacGyver (but with MacGruber type results?). The best example is the U.S. trying to get the rest of the G20 to stimulate their economies with 2+% GDP on the idea that if everyone else is jumping off the bridge, then it's perfectly ok. The real reason, imho, is to be able to stave off our own creditors (i.e. China as the 900 lb gorilla) for long enough for the power of duct tape, voodoo economics, and copious amounts of prayer to work! HCF @danm:

I agree that the pre-package bankruptcy might still be in the cards. I sure as heck wouldn’t put anything past the powers that be, but unfortunately, I think it’s unlikely. I believe what’s being done is performing major surgery on a patient with duct tape and a baby pin, a la MacGyver (but with MacGruber type results?). The best example is the U.S. trying to get the rest of the G20 to stimulate their economies with 2+% GDP on the idea that if everyone else is jumping off the bridge, then it’s perfectly ok. The real reason, imho, is to be able to stave off our own creditors (i.e. China as the 900 lb gorilla) for long enough for the power of duct tape, voodoo economics, and copious amounts of prayer to work!

HCF

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