Bailing Out AIG’s Counterparties
Gretchen Morgenson joins us in looking at the bailout of AIG as a bailout of their counterparties:
“A.I.G. nearly barreled off the cliff last September, when it couldn’t meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt. When A.I.G. couldn’t meet the wave of obligations it owed on the swaps last fall as Wall Street went into a tailspin, the Federal Reserve stepped in with an $85 billion loan to keep the hobbled insurer from going bankrupt; over all, the government has pledged a total of $160 billion to A.I.G. to help it meet its obligations and restructure operations…
Some $440 billion in credit default swaps sat on the company’s books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans. Because of the way A.I.G. wrote its swaps, and because the company had a double-A credit rating at the time, it did not have to put up collateral to assure its customers that it would be able to pay on the insurance if necessary. Collateral would be required only if A.I.G.’s credit rating were cut or if the debt underlying the swaps declined.
Both of these “unthinkable” events occurred in 2008. Suddenly, A.I.G. had to cough up collateral it didn’t have.
So, you see, the rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.” (emphasis added)
Let’s just call this part III of read it here first NYT edition.
>
Previously:
iBanks Grabbed $50 Billion in AIG Bailout Cash (March 7th, 2009)
http://www.ritholtz.com/blog/2009/03/ibanks-grabbed-50-billion-in-aig-bailout-cash/
Backdoor Bailouts for Goldman Sachs? (March 5, 2009)
http://www.ritholtz.com/blog/2009/03/backdoor-bailouts-for-goldman-sachs/
Solvent Insurer / Insolvent Insurer (March 4, 2009)
http://www.ritholtz.com/blog/2009/03/solvent-insurer-insolvent-insurer/
Source:
A.I.G., Where Taxpayers’ Dollars Go to Die
GRETCHEN MORGENSON
NYT, March 7, 2009
http://www.nytimes.com/2009/03/08/business/08gret.html
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March 8th, 2009 at 9:20 am
Forcing transparency on the Fed & Treasury and their bailouts will do much good. But it will be a cakewalk compared to the previous “NYT: Read It Here First NYT Edition” topic you raised, that I referred to as a Structural Economic Transformation, and the NYT referenced as a vast remaking of the economy.
Going back to reader comments posted in the Feb 28 ‘Great Recession’ TBP blog posting.
http://www.ritholtz.com/blog/2009/02/depression-vs-recession/#comment-149067
Last month, some readers at CalculatedRisk took my bait and picked up the discussion ball and along the way nicknamed it, SET (Structural Economic Transformation).
Getting the SET discussion started is the easy part, and greater Fed/Treasury transparency will help…but we as a nation still need to decide where we want our economy deposited…where do we want to arrive at once global Deleveraging has run its course? Given the death of these four multi-decade economic models and waves:
1. The 25-year Consumer Debt Model that was popularly labeled as a Consumer Spending Model (see #4 below). Lifespan: 1982-2007.
2. The 23-year Service Economy Model where Knowledge Workers and Service Jobs relied heavily on access to debt to finance the household budget gap caused by the shift away from manufacturing. Lifespan: 1984-2007
3. The 25-year Secular Bull Market on Wall Street. Lifespan: August 1982 to November 2007.
4. The 25-year ‘political economic experiment’ in operating an Economic Superpower (now of 300+ million people) off of a GDP model 70% driven by debt-enabled Consumer Consumption. Lifespan: 1982-2007.
I’m not saying a national discussion will ensure well-conceived methodical actions to deliver us the kind of financially sustainable and environmentally sound economy we may desire. But right now we’re simply being carried, kicking and screaming along the way, by a global de-leveraging process spiral-feeding on a global recession, away from the 4 afore-mentioned deceased (or terminally expired) models.
Where do we land?
March 8th, 2009 at 9:26 am
That the bailout of AIG was a backdoor to bailing out counterparties has been obvious for some time. What was not so obvious was that it also appears to have been a way to avoid a disorderly liquidation of AIG because the 2005 bankruptcy act apparently gives holders of certain derivatives precedence over all other asset claims.
That is, assuming the interpretations of the 2005 act I have read are correct, holders of AIG’s CDS’s could have demanded fulfillment of contract immediately without any need to wait for a bankruptcy proceeding and, since AIG could not meet even those obligations, a disorderly collapse would have occurred.
I am not expert in this area so FWIW
March 8th, 2009 at 9:33 am
Was the bailout of Bear Stearns a bailout of JP Morgan? Likely.
March 8th, 2009 at 9:59 am
I would just like someone in the present administration to admit this isn’t going to work, and go to plan B…you needn’t say anything except “this was started under the last administration, and it appears to us now that we need a change of policy”…neat and tidy, puts the blame on Bush, and lets us get out of the Swartzchild radius of the IB’s black hole…
…or we can keep throwing good money after bad as the NYT suggests…
March 8th, 2009 at 10:14 am
http://www.physicsbanter.com/theory-relativity/35344-frequency-light-photon-sphere.html
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Swartzchild+radius+
Bruce,
nice Physics reference, you haven’t been sneaking peeks into Fractal Economics, have you? (:
March 8th, 2009 at 10:28 am
Bruce in Tn:
Plan B? Tell me about Plan B.
It seems to me that Plan A was Glass/Stegall. Plan B was Gramm/Leach/Bliley.
On second thought, tell me about Plan C.
March 8th, 2009 at 10:36 am
Marcus:
Plan B admits that pain is going to happen..
Here under plan B you take the front-loaded pain..a deep long recession and you avoid back-loading pain…never ending higher taxes for all wage earners…
I read the other day that some here like the Swedish model…ok…let’s look a little deeper..
http://www.nationsencyclopedia.com/Europe/Sweden-TAXATION.html
“With so many social services in effect, and a virtual absence of poverty, Sweden’s personal income taxes are the highest in the world..”
Plan B assures we don’t follow the Swedish model…and I understand there are those of you who want Uncle to care for you cradle to grave…ok…but that would never be for me…Plan A will assure us that most of what we make we will owe to Uncle for bailing out Goldman and our other well connected friends..these bailout monies are still your money…I know you know…
March 8th, 2009 at 10:37 am
AIG was a just conduit of Federal funds to favorite counterparties. Why were there cash payments made initially when guarantees were sufficient?
Who were the counterparties, how much did they get and when did they get it? Leaking dribs & drabs to the financial press isn’t the answer. Those responsible for the AIG bailout should be compelled to testify and document these details to Congress.
March 8th, 2009 at 10:40 am
What are the odds that AIG was the only firm engaging in this risky, unregulated behavior. As time goes by we’ll see and then we’ll see if they are “systemic risk” like AIG or not like Lehman. We still have no ground rules ,everything ad-hoc.
March 8th, 2009 at 10:41 am
Time to claw back at the counterparties – RICO time!
March 8th, 2009 at 10:45 am
A well-fed, healthy, well-educated populace is the key to a stable society and a growing economy. That there are poor among us who need assistance should come as no surprise to anyone – look to the Bible for evidence of that (not that I’m thumping the Bible, but that the poor exist and what to do about them have been known and understood for a long, long time). Keep this in mind: genius (people who can really help a nation become and stay wealthy) is not determined by economic class – nor by attending the best schools. We owe it to our future to bring people along – within our means to do so.
I’m not looking for the “average Joe” to take a major tax hit. I’m looking for those who hold an inordinate share of wealth to pay an ordinate amount of tax.
You say:
“With so many social services in effect, and a virtual absence of poverty, Sweden’s personal income taxes are the highest in the world..”
I ask you to show me the victim in this scenario.
March 8th, 2009 at 10:57 am
From the January 19, 2009 issue of FORTUNE there is a good article on how the government came to the
plan of giving money to AIG.
Agree or not this is worth reading.
AIG: THE COMPANY THAT CAME TO DINNER
http://www.insurancenewsnet.com/article.asp?a=top_news&id=102152
Agree or not my take away is that the alternatives were much worse at least in all probability. Pension funds, municipal bonds, governments, money markets in fact the entire financial system would have been in grave danger. So like it or not we are in the shovel and hope mode.
Deleveraging is a bitch.
March 8th, 2009 at 10:59 am
Here’s a serious discussion of the problem from Josh Marshall:
How the Rules Were Rigged
03.06.09 — 12:22PM
By Josh Marshall
I’m sure the knowledgeable people already know this. But it turns out that one of the features of the 2005 Bankruptcy bill was to put derivative counter parties at the front of the line ahead of other creditors in bankruptcy proceedings. Actually, from what I can tell, they don’t just go to the head of the line. They got to skip the line entirely. As the Financial Times noted last fall, “the 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company’s assets until a court decides how to apportion them among creditors.” As the article notes, ironically, this provision which Wall Street pushed for and got to protect investment banks actually ended up hastening the collapse of Lehman and Bear Stearns last year.
Down in the article there are also the mentions of the entertainingly named “International Swaps and Derivatives Association”, one of the lobbies that helped get the change in place.
Along these lines, TPM Reader GG sent in this last night …
Respectfully, you guys are totally misunderstanding something crucial in the AIG bailout: Derivatives claims are not stayed in bankruptcy. (Yet another brilliant innovation from the 2005 bankruptcy reform legislation.)
If AIG were to go down, derivatives counterparties would be able to seize cash/collateral while other creditors and claimants would have to stand by and wait. Depending on how aggressive the insurance regulators in the hundreds of jurisdictions AIG operates have been, the subsidiaries might or might not have enough cash to stay afloat. If policyholders at AIG and other insurance companies started to cancel/cash in policies, there would definitely not be enough cash to pay them. Insurers would be forced to liquidate portfolios of equities and bonds into a collapsing market.
In other words, I don’t think the fear was so much about the counterparties as about the smoking heap of rubble they would leave in their wake.
Additionally, naming AIG’s counterparties without knowing/naming those counterparties’ counterparties and clients would be at best useless, and very likely dangerous. Let’s say Geithner acknowledges that Big French Bank is a significant AIG counterparty. (Likely, but I have no direct knowledge.) BFB then issues a statement confirming this, but stating it was structuring deals for its clients, who bear all the risk on the deals, and who it can’t name due to confidentiality clauses. Since everyone knows BFB specialized in setting up derivatives transactions for state-affiliated banks in Central and Eastern Europe, these already wobbly institutions start to face runs. In some cases this leads to actual riots in the streets, especially since the governments there don’t have the reserves to help out. If you’re Tim Geithner, do you risk it? Or do you grit your teeth and let a bunch of senators call you a scumbag for a few more hours?
I’d be curious to hear what other knowledgeable readers think about this. But separate from the immediate financial implications related to AIG, it does point us toward the larger political economy point: the self-reinforcing cycle in which financialization leads to vast sums of money concentrated in the hands of paper-jobbers, who then mobilize that money in Washington to rewrite the laws to privilege them for even greater profits.
A final question, I’d be curious to hear from people who work in this space what even the notional rationale would be for having derivative counter parties able to skip the line in a bankruptcy proceeding.
March 8th, 2009 at 11:00 am
The victim is loss of personal industry…why do you think so many ex-patriots come to the US to make their fortune? I have several Nordic friends who tell me they will never go back…they like working for themselves…and keeping more of what they make…
Ok, the US is still a free country..for socialists and capitalists…I will try to work a little harder to keep you in peanut butter next winter…
March 8th, 2009 at 11:02 am
Our average tax 28%
Swedish average tax 48%…
great for socialists…plus a VAT of 25%…
You really don’t see the victim of this socialism???
March 8th, 2009 at 11:06 am
Sweden’s Lowest tax rate to pay for all this utopia is 31%…read the article…gonna soak the rich?
not likely..
March 8th, 2009 at 11:07 am
In response to farmera1 Says: “the entire financial system would have been in grave danger…”
It’s still in very grave danger!
March 8th, 2009 at 11:13 am
Show me the victim.
March 8th, 2009 at 11:16 am
Are the the bond holders and creditors of Goldman Sachs, Société Générale, Deutsche Bank, Morgan Stanley etc… neighbors of Rick Santelli’s and his buddies on The Floor?
Are you listening Rick Santelli?!
March 8th, 2009 at 11:25 am
MA,
you ask: “show me the victim in this scenario.”
it, most certainly, isn’t anyone named Wallenberg, as you might like to see..
“Amazingly, per this Economist article the Wallenberg family is in its fifth generation and remains on top of Sweden Inc.–and in a socialist country no less. Investor AB, the Wallenberg’s investment holding company, is in its way one of the most successful family offices, with actively managed interests in listed companies, private equity, and hedge funds.
And if you’ll permit me to get personal, the family gets much extra credit for producing this man.”
http://seekingalpha.com/article/116392-family-wealth-protection-hall-of-fame-sweden-s-wallenbergs
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Wallenberg+family+sweden
GHWB, aka 41, told us the Truth, in ’92, while running for re-election, towit(paraphrasing): “They’ll tell you that they’re going to “soak the Rich”, but, watch your wallets; The “Rich” will move out of the way, and the Middle Class will take the Hit.”
how correct he was, and is, in that regard..
March 8th, 2009 at 11:28 am
MA,
to your Q:, it isn’t http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Wallenberg+family+sweden
as you may wisk/surmise
those that talk of “soaking the Rich”, drown the Middle Class..
March 8th, 2009 at 11:47 am
TPM was one of the sites that raised the alert about some of the lesser known provisions in the 2005 bankruptcy act. The larger point is valid too I think: Where you have concentrated wealth you have economic rent seeking; power seeks privilege like water seeks the sea.
De Tocqueville saw this a long time ago, but speculated that, unlike Europe and other countries with a strong feudal history, America could avoid the threats to democracy and capitalism posed by such concentrations of wealth because it refused to enshrine primogeniture (except in some of the Southern states) and entail (fee tail) or other mechanisms by which wealth and power could further accumulate as it was passed on from generation to generation. He accompanied this argument by pointing out that restricting the law of inheritance would result in the more rapid division of land and thus force landed people to seek wealth outside of the family estate in order to maintain their previous standard of living; a kind of creative destruction (he didn’t use that term of course) preventing social stagnation with a concomitant reduction in the possibility of violent revolution or external conquest.
De Tocqueville was all for individual property rights, in fact he couldn’t imagine a vital America without them, the threat he saw to both democracy and capitalism alike lay in undue respect for, and legal protection of, the inter-generational transfer and accumulation of that property.
The evolution of modern corporate and trust law would seem to support inter-generational entities similar to the regimes De Tocqueville feared suggesting a comparable threat under his logic. Not sure how strong that case is or how many Americans would appreciate it even if it were true. We like to keep things simple — property good, taking property (or taxes) bad; private business good, public government bad — but if ever there were a time for a somewhat more nuanced view then that time would seem to be now. The treasury is being legally looted and it is wealthy families, corporations and a complicit (or helpless) government doing it.
March 8th, 2009 at 11:55 am
The victim is in the mirror..
Even James Carville understands this…but argues that it is more important that none fail…
I say let me succeed or fail, but let me reap what I plant…
This is college student union drivel…the good/bad of socialism/capitalism known by even freshmen in high school…it depends on how you see yourself in the mirror..
March 8th, 2009 at 12:01 pm
RW,
that’s a great post, exactly on point.
SS,
you state: …it does point us toward the larger political economy point: the self-reinforcing cycle in which financialization leads to vast sums of money concentrated in the hands of paper-jobbers, who then mobilize that money in Washington to rewrite the laws to privilege them for even greater profits.
A final question, I’d be curious to hear from people who work in this space what even the notional rationale would be for having derivative counter parties able to skip the line in a bankruptcy proceeding.
to your Q: LSS: there isn’t one/any that bears the slightest semblance to Rationality, thus, like many other bon mots, was hidden in another 1000+ bill that, noone, but it crafters read, and the MSM gladly, for a fee, of course, ignored..
as you know, the provision you are querying, further feeds the loop you described..
further: http://thomas.loc.gov/cgi-bin/bdquery/z?d109:SN00256:
http://www.ll.georgetown.edu/guides/bankruptcy_act_2005.cfm
March 8th, 2009 at 12:06 pm
and, w/this: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
the ever more Orwellian titles of these Bills should be Klaxon, enough..
http://www.thefreedictionary.com/klaxon
–A trademark used for a loud electric horn.
as an aside, it’s funny, that, in this context, only ‘Kleenex’ gets much play..
March 8th, 2009 at 12:10 pm
Everyone states that a bankruptcy of AIG would spell disaster for the world’s financial markets, so I expect that there are several scholarly or semi-scholarly analyses of how this would unfold, perhaps by major institution. Could someone please suggest a few sources? Thanks!
March 8th, 2009 at 12:10 pm
“In response to farmera1 Says: “the entire financial system would have been in grave danger…”
It’s still in very grave danger!”
I agree, oh how I agree the financial system is in grave danger. And I don’t understand the whole issue of
bankruptcy/preprivatization/restructuring well enough to have an opinion that means much.
But I do believe the government did what they thought was right, or there is inbred corruption/chronyism/fear that is driving the ship. Let’s face it there are no good alternatives. That bridge was passed years ago, now we are in the whack a mole plan aka shovel and hope.
Add in the comments above about the 2005 bankruptcy laws that derivative counter party are first in line in the bankruptcy process,
and you can start to see (agree or not) the reason the government chose the option they did. I call the current “plan” the shovel (as in shoveling money) and hope (hope something good will happen) method.
March 8th, 2009 at 12:11 pm
The victim is you…”Nobody loses” when everyone does…
March 8th, 2009 at 12:20 pm
@SS Says: March 8th, 2009 at 10:59 am
It sounds like those that got the derivatives rules written into the bankruptcy act had reason to believe an economic gun was going to be put to the head of American leaders. I would guess then that this could be considered an act of treason or possibly a conspiracy to commit theft from the American public for those who had prior knowledge of the act or who did little to prevent it. The lobbyists are one group of people I’d go after as well as Greenspan who categorically refused to regulate derivatives when he had the chance in the late ’90′s. I’d also go after those derivative traders as well along with anybody who had a hand in writing that bill. Not all of them knew what was going on but I’ll be there are a few plea bargain in there that will help folks follow the money trail
March 8th, 2009 at 12:31 pm
Marcus:
There is an old poker adage..if you know there is a sucker in the game and you look around and don’t see him…chances are the sucker is you.
31% minimal tax rate and 25% VAT in Sweden…and you would trade your earning potential in the USA up to now for that? The sucker is you…
…and yes, that means if you make poor choices…alcoholism, didn’t finish high school, arrested for drugs, etc…it means you get a chance to fail based on your merits…there is no victim if you choose poor life alternatives…there are consequences…the victim is self-made…
Did you complain when times were good and you were keeping more than 50% more than Joe Six-pack in Sweden? Would you show me where you did your complaining?……..
March 8th, 2009 at 12:38 pm
The Titanic has sailed.The plutocrats,having looted the safe,are seated on their deckchairs,awaiting their lifeboats.The proletariat are locked in steerage.
March 8th, 2009 at 12:43 pm
Henry Paulson looted the treasury for his former (and again, future) firm, Goldman Sachs. It was in no way different than how Dick Cheney looted the public to engorge his firm, Haliburton, by sponsoring the war of choice in Iraq. They did it because they could.
Tim Geithner’s plans for keeping alive zombie banks by providing them an endless drip-feed of cash infusions from the treasury are of exactly the same cloth: looting the public purse to enrich wealthy shareholders and bond holders of banks that gambled and failed. They’re doing it because they can: the public has not protested so the heist goes on in broad daylight, unmolested.
The problem is that we have a schizophrenic cultural ethos about self enrichment. At one time, public service was exactly that: service to the public, to the nation. Since Reagan (“government is the problem”), the dominant ethos has become, “I’m getting mine, screw you.” And this includes those who commit to public “service.” Public service has become simply a steroid-pumped license to steal—from the public. In the culture that we have become, it is a perfectly legitimate, i.e., not to be condemned, expression of individual intent.
What we’re seeing now is what happens when this ethical schizophrenia is taken to its ultimate extreme: where socio-pathic greed by those who are already the wealthiest people on the planet grows to the extent of literally destroying the economy. And it becomes self-accelerating. Seeing the damage they inflict on the economy, they become over more desperate to clean out the treasury while there is still something to be pillaged.
The proof of our acceptance of this “I’m getting mine, screw you” ethic is that we have lost the vocabulary of shame and, therefore, the capacity to deter such predation. No self-enriching behavior is too egregious to be shamed. Bush lied the country into war in Iraq, costing us $3 trillion. He bankrupted the government, doubling the national debt in only eight years. He grievously damaged the Constitution with his warantless wiretapping, torture, renditions, and signing statements.
But where is the outrage? And why do the same culturally suicidal socio-pathic behaviors continue unchanged under Obama? We will be abused exactly so long as we accept our abuse.
March 8th, 2009 at 12:44 pm
@ Marcus Aurelius Says:
March 8th, 2009 at 11:13 am
“Show me the victim.”
AIG
Jun-2007 = $70.00+
Mar-2009 = $0.35
March 8th, 2009 at 12:48 pm
Let’s look at some other poor choices since it’s bitching and moaning day and capitalists are the new devil..
Majored in sociology? or—-(fill in the blank)..
Took a loan I knew I couldn’t afford….(Held a gun to your head?)
Just pay some on the credit card…of course, not the entire balance..
More on that student loan…( Work study? Two jobs in the summer? ) Damn, that looks like a lot of money, but I’ll pay it off when I graduate..
People often create victims, Marcus, through their own choices…
March 8th, 2009 at 12:53 pm
Post reminds me about the cock who thought the sun had risen to hear him crow
March 8th, 2009 at 12:56 pm
Bruce in Tn:
You write, “…and you would trade your earning potential in the USA up to now for that? The sucker is you…”
In fact, the real median incomes of American workers are below where they were in 1973. Meanwhile the incomes of the top 1% of income earners has grown 300%. Literally, ALL of the gains of the economy over the past 30 year have gone to those at the very top. EVERYbody else is poorer.
Personal debt as a percentage of median income has doubled. $10 trillion in wealth has been wiped out in the stock market collapse, another $8 trillion in the (still collapsing) housing bubble. This, at the moment 77 million baby boomers stand on the threshold of retirement. 20,000 people a day are losing their jobs. 10,000 homes go into foreclosure every day. And the American worker is being bound to generations of debt peonage to pay off the debts that are being committed in our name to enure wealthy bankers do not have to suffer a loss of equity.
So, your idea about “earning potential” is really all in potentia. In REALITY, it is meaningless. In REALITY, people are MUCH worse off than they ever imagined they would ever be. In REALITY, their children have been made debt slaves so that they might walk around with the heady fiction that their “earning potential” might make them the next Gordon Gekko.
The problem is, we have to wait for that recognition to catch up with our models of how the economy should be run: on a “hands-off” laissez faire basis (which really leaves it to be run by the wealthy insiders) or on an overt hands-on basis that makes transparent the real redistributions o wealth and income, i.e., upward, that have been going on for the past three decades.
March 8th, 2009 at 12:57 pm
Blurtman,
This short paper (pdf) by John Taylor may help. Among other things, it suggests the hiccups we saw in credit markets last fall stem largely from the realization in markets that counterparty risk is real.
It would be pure speculation to try to predict how a cascading multilateral counterparty failure scenario would unfold, but we’ve seen what happens when markets try to price in just the possibility.
March 8th, 2009 at 12:58 pm
Bruce in TN,
The real tax rate at the lowest level in the US is already about 25% – when you actually factor in all of the taxes including SS, etc – and depending on which state someone lives in, a sales tax can take another bite out. 31% isn’t that much to provide a social safety net if 25% as seen in the US provides just about none.
March 8th, 2009 at 1:05 pm
Dow:
We have a social safety net. Medicaid is the safety net in health care. Welfare is the safety net in unemployment. We have food banks. We have unemployment insurance. And the tax rate for those under the poverty line is not 25%. Stop it. We also have college funds for those too poor to afford college. The college funds that have really dried up are academic funds for the children of the middle and upper class. Those are quite uncommon now, as most funding is needs based.
People don’t move from the US to Sweden to “get ahead”…it still works the other way around…and we don’t have VAT (yet) and that is another 25% tax on the poor in Sweden..
I think I will still hold my applause..by the way 70% of millionaires in the US are self-made first generation…do they even have new millionaires in Sweden???
March 8th, 2009 at 1:12 pm
Guys,
When it gets down to it..do you really think someone else is going to work harder just so YOU will be taken care of?
Or do you think the Swedish model will dumb it down to the entire class?
There may be no poverty…but my point is…if you drop out of high school (as one of my examples…there are many more) shouldn’t you fail? Shouldn’t you live in poverty? Until it gets so bad you go back and try to improve your situation?
If your job didn’t pay you any raise for 5 years…didn’t you have enough sense to get more education, or go into business for yourself? Are you that helpless?
March 8th, 2009 at 1:14 pm
Bruce in Tn Says:
March 8th, 2009 at 12:11 pm
The victim is you…”Nobody loses” when everyone does…
_______
So, everybody in Sweden loses? A stable, educated society with the tallest (wasn’t always that way) people on the planet (height being one indicator of health via good nutrition)?
As for complaining, you don’t hear it from me. That’s your schtick – “Don’t let the tax man tax me for the society that allows my wealth.” (Assuming you have wealth to tax).
_______
Mark Hoffer:
Why do you link to BS?
____
going broke:
AIG is a victim of the Swedish system of taxation and social accountability? I don’t think so.
March 8th, 2009 at 1:14 pm
Bruce in Tn:
You say to Marcus Aurelius, “People often create victims, Marcus, through their own choices…”
This is the fallacy of misplaced concreteness, i.e., while undoubtedly true, it does not address the real point.
The real point is that there are tens of millions of people who have worked hard, played fair, paid their taxes and bills, didn’t run up their credit cards, didn’t buy houses they couldn’t afford…and those people are getting screwed by the system that makes them pay for the criminality and licensious greed of a few.
I am one of those and I’m sick of being milked so that the most pharoically rich can make themselve still richer. The heist is not enriching the poor and middle class, Bruce, it is enriching the already most-wealthy.
March 8th, 2009 at 1:17 pm
do they even have new millionaires in Sweden???
Hockey players…..but they have to come to the US or Canada to get that
March 8th, 2009 at 1:22 pm
robertf:
Oh, I understand your point…and I agree with much of it…however, I will play devil’s advocate when people don’t think things through entirely…
Much of my point of view is for an individual’s rights…to succeed, to fail…and not for the average of society…for those of us who care…this is more reason to run for elected office ala Ron Paul, than to just bitch and gripe.
My wife’s mother was a career politician, and politics wouldn’t be for me….but for many, this could bring lasting change without the problems that socialism will bring…
March 8th, 2009 at 1:24 pm
If anything, there should be much better and tighter regulation of business…I would be in favor of that.
March 8th, 2009 at 1:25 pm
Yes, Marcus, everybody in Sweden loses…yes, yes, yes….
March 8th, 2009 at 1:26 pm
Bruce in Tn Says:
March 8th, 2009 at 1:05 pm
People don’t move from the US to Sweden to “get ahead”…it still works the other way around…and we don’t have VAT (yet) and that is another 25% tax on the poor in Sweden..
______
People CAN’T move from here to Sweden.
http://www.migrationinformation.org/Profiles/display.cfm?ID=406
And we have sales tax.
March 8th, 2009 at 1:27 pm
Because no INDIVIDUAL wins…you see that, I know, but just want to argue with me…
Utopias are not free…and again, I wouldn’t trade my ability to fail or win in the US for the mediocrity of Sweden…
We just see the world differently..
March 8th, 2009 at 1:28 pm
A million bucks isn’t a very good gauge of wealth any more; I became one fairly recently and figure it will just cover my retirement if I’m lucky enough to avoid an illness that requires expensive treatment(s) and/or chronic health care.
But, FWIW, based on a longitudinal study by CapGemeni and Merrill Lynch, the growth rate of new millionaires in Sweden in dollar terms was 3.5% as of last year which made it the lowest of the Nordic countries in that regard. For comparison the US had a growth rate of about 4.5% but on a per capita basis has fewer millionaires than Sweden. Fastest growth rate in new (dollar) millionaires are China, Brazil and Korea but, of course, the per capita wealth accumulation picture in all those countries, the former two in particular, doesn’t even invite comparison with the USA much less the Nordic countries.
The silly notion that the only way for Swedes to get ahead is to come to the USA is simply a canard.
March 8th, 2009 at 1:28 pm
Bruce in Tn Says:
March 8th, 2009 at 1:25 pm
Yes, Marcus, everybody in Sweden loses…yes, yes, yes….
____
You’re full of shit on that point. Insisting doesn’t make it so – that’s a wingnut mental disease.
http://www.mapsofworld.com/world-top-ten/world-top-ten-quality-of-life-map.html
March 8th, 2009 at 1:29 pm
robertf,
While you’re at it, could you also explain to me why every time some establishment ass-kisser says something like …”the top 5% already pay 40% of the taxes”…they always leave out the part about…”after garnering 90% of the income”? Maybe it’s just a coincidence.
March 8th, 2009 at 1:30 pm
Bruce in Tn Says:
March 8th, 2009 at 1:27 pm
Because no INDIVIDUAL wins…you see that, I know, but just want to argue with me…
Utopias are not free…and again, I wouldn’t trade my ability to fail or win in the US for the mediocrity of Sweden…
We just see the world differently..
________
No individual in Sweden wins? By what source did you come up with this? It’s your opinion – and it doesn’t hold water.
March 8th, 2009 at 1:30 pm
You can dress up Socialism in a pretty dress…but I still don’t want to kiss her…she just ain’t my type..
March 8th, 2009 at 1:31 pm
Common Man,
Have you ever been to Sweden? I have. It is an absolutely beautiful place, with almost none of of the inner city squalor, hollowed out rustbowls, collapsing suburbia, or rural trailer trash that we mistake for “success” here. People are very well educated, have secure, well paying jobs, a rich network of social services, and a vibrant culture where the good of the whole is at least as important as the good of “me.”
It’s amazing. Our insecurity compels us to invent a would-be superiority so as to prevent us from dealing honestly with our own manifest failure to deliver the very society we once held as our ideal.
Makes you feel big to mock others, doesn’t it. Even when it’s demonstrably vacuous.
March 8th, 2009 at 1:31 pm
It is not too late to emmigrate Mark…
March 8th, 2009 at 1:32 pm
Swedish millionaires:
http://www.thelocal.se/5376/20061101/
March 8th, 2009 at 1:32 pm
Marcus Aurelius,
MA,
to which, pray tell, link are you referring?
March 8th, 2009 at 1:34 pm
How the Common Man Sees It Says:
March 8th, 2009 at 1:17 pm
do they even have new millionaires in Sweden???
Hockey players…..but they have to come to the US or Canada to get that
______
got a link, or just blowing smoke (again)?
March 8th, 2009 at 1:34 pm
People can’t move to Sweden?
Utopia won’t take more unwashed souls?
Hmm…imagine that..
March 8th, 2009 at 1:34 pm
I found a link at Jesse’s Cafe Americain http://jessescrossroadscafe.blogspot.com/ to a GREAT report by WallStWatch.org, http://www.wallstreetwatch.org/soldoutreport.htm – that “chronicles in gruesome detail, over the last decade, Wall Street showered Washington with over $1.7 billion in what are prettily described as ‘campaign contributions.’ This money went into the political coffers of everyone from the lowliest member of Congress to the President of the United States. The Money Industry spent another $3.4 billion on lobbyists whose job it was to press for deregulation – Wall Street’s license to steal from every American.”
March 8th, 2009 at 1:34 pm
Bruce,
I hear you, though I’m not thinking Northward..
March 8th, 2009 at 1:39 pm
Notice that Bruce in Tn blows lots of wind but never has any data.
Glandular secretions are not intelligence, Bruce. Mocking is not argument. Name calling is not logic. Vituperation is not persuasion.
March 8th, 2009 at 1:40 pm
Well, won’t matter, in 4 years we’ll all be Swedish…I guess that means we won’t allow immigration (who knew?) and our lowest tax rate will be 31% and we’ll have a VAT of 25%…and I know that we’ll all work harder even if we don’t get to keep as much of what we made as we did in the past..we’ll do it because we’ll want everyone in society to do well…
And Santa will bring me the Porsche I’ve been wanting…nuts to my Ford..
March 8th, 2009 at 1:41 pm
robertf,
you shant worry about yo’ ‘retirement’ any, at all, you could always pick up a job at the movie theater, as a projectionist..
March 8th, 2009 at 1:44 pm
Copy you, Mark, on my 1:39 comment to Bruce.
March 8th, 2009 at 1:45 pm
funny, though, how after their early ’90s brush w/ Economic flat-lining, the Swedes have changed their tune: Sweden to Saab: Merge to Wind Power or Shut Down
Swedish car company Saab received a tough message from the Swedish Minister of Trade: change your business and start producing wind power towers and turbines.
http://www.greentechmedia.com/articles/merge-to-wind-power-systems-or-shut-down-5828.html
March 8th, 2009 at 1:46 pm
Sweden’s Take on Private Pensions
Sweden, long known for its cradle-to-grave welfare state, has already embraced a pension system that partly resembles White House proposals for Social Security.
February 12, 2005
http://sknworldwide.net/library/social/folder.2004-12-09.6332091374/news_item.2005-02-12.7232465967
March 8th, 2009 at 1:49 pm
Wind power instead of cars?
In a world where oil is running out and automobile production capacity exceeds demand by a factor of three, that makes pretty good sense to me.
And we? Transfer trillions of dollars of public wealth to failed banks so failed bankers don’t have to bear the consequences of their failure.
Is this a great country or what?
March 8th, 2009 at 1:50 pm
> I am one of those and I’m sick of being milked so that the most pharoically rich can make themselve still richer. The heist is not enriching the poor and middle class, Bruce, it is enriching the already most-wealthy.
“I gained a clear perception of who I was not. I began to sense that the transient nature of events extended far beyond the ego and focused on the recognition that taking oneself seriously was nothing but a cosmic joke. Once you realize how illusory man’s concepts of his own importance are, you can no longer take the goals, achievements and pecking order of society seriously. It doesn’t make any difference whether you win one of the crowns or sleep on the street: these are all just different costumes on one soul. Assuming that through material achievement you can improve your level in the cosmos is like assuming that a particle of sand can become any more than a particle of sand when it resides in the wall of a sand castle. Anything you happen to collect stays here when you go. There are no armored cars in a funeral procession.”
- Grace Slick
The Biography published in 1980, Grace described her reaction to the psychedelic experience
http://hubpages.com/hub/Grace-Slick-First-Lady-of-Acid-Rock
March 8th, 2009 at 1:51 pm
“I gained a clear perception of who I was not. I began to sense that the transient nature of events extended far beyond the ego and focused on the recognition that taking oneself seriously was nothing but a cosmic joke. Once you realize how illusory man’s concepts of his own importance are, you can no longer take the goals, achievements and pecking order of society seriously. It doesn’t make any difference whether you win one of the crowns or sleep on the street: these are all just different costumes on one soul. Assuming that through material achievement you can improve your level in the cosmos is like assuming that a particle of sand can become any more than a particle of sand when it resides in the wall of a sand castle. Anything you happen to collect stays here when you go. There are no armored cars in a funeral procession.”
- Grace Slick
March 8th, 2009 at 1:52 pm
We reach six major conclusions: 1. Sweden achieved its egalitarian income distribution and eliminated poverty largely because of its system of earnings and income determination. In support of this conclusion, we note that the narrow income distribution in Swe- den cannot be attributed to an exceptionally homogeneous population: the descendants of Swedes in the United States exhibit as much inequality and poverty as do other Americans, while people of foreign ancestry in Sweden have an income distribution comparable to those of Swedish parentage. The narrow income distribution also cannot be attributed to an exceptionally low return to skills due to market forces: Sweden has a less-educated workforce than the United States, which, all else the same, should have yielded high returns to labor skills, contrary to fact. By contrast, changes in earnings inequality in Sweden over time mirror changes in wage-setting policies, and taxes and transfers massively affect the income distribution. While a market-driven system of wage and income determination might not produce as much inequality in Sweden as in the United States, the high level of inequality found among people of Swedish descent in the United States suggests that the increase in inequality would be considerable. 2. Sweden’s distinct record of labor outcomes has historically gone beyond compression of earnings differentials. Compared to other advanced European countries, what was unusual, prior to the 1992 recession, was not Sweden’s low inequality in earnings but its high rate of employment. Compared to the United States, another high-employment-rate country, Sweden is distinguished by a relatively egalitarian distribution of hours of work among those employed as well as by a compressed wage structure. Indeed, the egalitarian distribution of hours of work-work sharing of sorts-contributes as much to Sweden’s …
http://cc.msnscache.com/cache.aspx?q=changes+in+%22sweden+s%22+social+safety+net&d=75629665538209&mkt=en-US&setlang=en-US&w=3cee2f03,f24e6a3d
dreaded facts, dreary research, such nettlesome things..
March 8th, 2009 at 1:53 pm
What about the poor Katrina victims?
http://www.consumeraffairs.com/news04/2005/katrina_aig.html
March 8th, 2009 at 1:57 pm
Pray tell? Wisk/surmise? Okay – this BS:
Mark E Hoffer Says:
March 8th, 2009 at 11:28 am
MA,
to your Q:, it isn’t http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Wallenberg+family+sweden
as you may wisk/surmise
those that talk of “soaking the Rich”, drown the Middle Class..
____
The link is to many subjects, none of which seem to support your point. The Swedish middle-class does not seem drowned, to me.
You should drop the airs you take – stop talking down to people
March 8th, 2009 at 1:57 pm
Mark Hoffer,
Are you seriously suggesting Bush’s proposal for privatizing Social Security was a good thing? Can you imagine the destruction of retirement standards of living if 77 million boomers’ retirement security had been invested in the stock market, now down 57% and declining.
I presume you like cat food for dinner?
March 8th, 2009 at 1:59 pm
You guys are too sensitive
March 8th, 2009 at 1:59 pm
http://www.thelocal.se/blog/20090211/389/
Your neighbour’s income is none of your business
2 Responses to “Your neighbour’s income is none of your business”
HairySwede Says:
February 21st, 2009 at 5:11 pm
in a country where no one is allowed to be better than anyone else though, what better way to see how valuable people are than to take a look at their income?
its disgusting. and frightening.
Ernest Says:
February 27th, 2009 at 3:17 pm
It is good to know income of people in the various types of jobs that will help to negotiate better wages incase, an employer want to play smart. It will also be important to evaluate the income disparity among people of which a huge gap in income is not desirable in an egalitarian society like Sweden.
…apparently even those stuck in Socialist Utopia can’t make up their minds…
March 8th, 2009 at 2:00 pm
Lots of things going on in here that are dreaded, dreary research, and nettlesome – but it ain’t the facts.
March 8th, 2009 at 2:00 pm
Correction:
Lots of things going on in here that are dreaded, dreary, and nettlesome – but it ain’t the facts.
March 8th, 2009 at 2:01 pm
km4,
while I think Grace is a rather ‘with-it’ chick, I’d, highly, doubt that Bruce is supporting what she is speaking to..
actually, I’d be sure that he’s more into making his own choices, for himself, those he cares about, and others that he chooses to help, rather than running, state-directed, on a state-owned treadmill, receiving rations, approved by the state..
I’m sure he’s way more into the meta-physical idea of Liberty, and its Fruits, than into any facade of being a ‘fuedal-lord’
March 8th, 2009 at 2:06 pm
Mark E Hoffer Says:
March 8th, 2009 at 1:46 pm
Sweden’s Take on Private Pensions
Sweden, long known for its cradle-to-grave welfare state, has already embraced a pension system that partly resembles White House proposals for Social Security
____
See my link, above the the world’s wealthiest nations. Why do you have a problem with a successful system?
______
Mark E Hoffer Says:
March 8th, 2009 at 1:41 pm
robertf,
you shant worry about yo’ ‘retirement’ any, at all, you could always pick up a job at the movie theater, as a projectionist..
Shant? Shant? Did you pick that up on your last visit to the Hamptons with Muffy? Good lord, dude – give it up, already. Talk about projecting.
March 8th, 2009 at 2:09 pm
Mark E Hoffer Says:
March 8th, 2009 at 2:01 pm
km4,
“actually, I’d be sure that he’s more into making his own choices, for himself, those he cares about, and others that he chooses to help, rather than running, state-directed, on a state-owned treadmill, receiving rations, approved by the state…”
______
I haven’t heard anyone – including Obama – suggest anything like what you’re suggesting. Straw man much?
March 8th, 2009 at 2:11 pm
MA,
from that link: http://en.wikipedia.org/wiki/Wallenberg
The Wallenberg family is one of the most influential and wealthy families in Sweden, renowned as bankers and industrialists. They are considered to be the wealthiest family in Sweden. [1] In 1990, it was estimated that the family indirectly controlled one-third of the Swedish Gross National Product. [2]
~~
Family Wealth Protection Hall of Fame: Sweden’s Wallenbergs
Amazingly, per this Economist article the Wallenberg family is in its fifth generation and remains on top of Sweden Inc.–and in a socialist country no less. Investor AB, the Wallenberg’s investment holding company, is in its way one of the most successful family offices, with actively managed interests in listed companies, private equity, and hedge funds.
the ‘seeking al-pha’ link from that page of links
responsive, to this: “I’m not looking for the “average Joe” to take a major tax hit. I’m looking for those who hold an inordinate share of wealth to pay an ordinate amount of tax. ” from you, above..
contra, quite, to this: “The link is to many subjects, none of which seem to support your point.”–MA
~~
robertf,
actually, what that said was that Sweden DID do it..ask them that stupid ‘cat food’ question. btw, get programmed, much?
March 8th, 2009 at 2:14 pm
@Bruce in Tn
Bruce,
You make your point well and you truly appear to have thought through your ideal model of society. My experience is different. Those who contribute the most to society: dedicated doctors, teachers, innovators and honest business men are happy to make the same contribution whether taxes are at 50% or 30%. In fact most would rather see others get a fair chance to have a better qualified and healthy society with less crime and a richer social life. Those whose biggest concern is the 50% tax rate, the Bernie Madoffs, Skillings and Sanders of the world are the ones our system attracts and promotes. As for the U.S. being a haven for Europeans seeking to creatively to structure their lives, I don’t think that you have ever lived in Sweden or Europe nor do I think you have visited that much. From what I observed both in Sweden and continental Europe there are many more Americans in both Sweden and the rest of Europe than here. They enjoy among other things the sense of social solidarity and more peaceful and stable environment with plenty of room for self-expression. Life is not all black and white but capitalism has clearly gone too far here resulting in our near destruction – stay tuned.
SS
March 8th, 2009 at 2:14 pm
MA,
you’re walking proof that you command ‘n control wannabes are humourless..if you’ve yet to avail yourself to the Arts, here’s a clue: Literalism can kill..
March 8th, 2009 at 2:17 pm
Mark Hoffer,
So I read the link in your post above at 1:52 pm about the welfare system in Sweden. Funny thing. It actually says the exact opposite of what you implied it said. Here’s the part in the introduction that you carefully cut-and-pasted around:
“Sweden has a remarkably egalitarian distribution of income and low rate of poverty. The living standards of the poor are closer to those of median citizens than in other advanced countries. ..the country maintained a low rate of poverty and avoided the growth of an underclass and the homelessness that developed in the United States and the United Kingdom. Indeed, so successful has been Sweden’s “war on poverty” that the statistical concept of a poverty rate is not part of Swedish public discussion. What explains Sweden’s egalitarian income distribution and success in eliminating poverty?
Amazing, the distortion of meaning that you tried to slip into this discussion. I will ignore your posts from now on.
March 8th, 2009 at 2:22 pm
MA,
from the wholesale clusty link I posted:
The Wallenberg family is one of the most influential and wealthy families in Sweden, renowned as bankers and industrialists. They are considered to be the wealthiest family in Sweden. [1] In 1990, it was estimated that the family indirectly controlled one-third of the Swedish Gross National Product. [2]
http://en.wikipedia.org/wiki/Wallenberg
please, don’t ask: works well for whom?
The Ties That Bind
Sweden’s business dynasty is weathering the financial crisis pretty well. Does this demonstrate the superiority of old-fashioned family capitalism?
Economist Staff – The Economist
January 28, 2009
http://www.cfo.com/article.cfm/13012161/?f=rsspage
~~
robert,
don’t flatter yourself, it was the intro, w/ the link
March 8th, 2009 at 2:24 pm
Damn…the wingnuts seem awful nervous that Joe Sixpack might find out about Sweden.
March 8th, 2009 at 2:27 pm
SS:
I agree with your point in part…certainly.
I would disagree with your statement that capitalism has gone too far…but better and more regulation will cure this…and I wholeheartedly agree with that. But I am an individualist…
Unfettered capitalism is NOT good….and we need more fetters…but that doesn’t mean I’ll ever join the Government knows better than you crowd…
I thought Bush was stupid…and I think Obama is in deeper water than he was prepared for…
We’ll see how she shakes out…
March 8th, 2009 at 2:31 pm
Mark E Hoffer Says:
March 8th, 2009 at 2:22 pm
Your original comment was that the taxation of the upper class “drowned” Sweden’s middle class. Clusty? WTF does that mean?
I’m not humorless, neither are my peers. Command and control? So, now you’re an anarchist?
This is funny:
http://www.youtube.com/watch?v=2tuSjXmCpUM
March 8th, 2009 at 2:35 pm
Bruce in Tn Says:
March 8th, 2009 at 2:27 pm
“I would disagree with your statement that capitalism has gone too far…”
Bruce, according to the World Economic Forum, the current financial crisis has wiped out 40% of the entire world’s wealth! The capitalist-dominated world economy is boiling the planet to death in its carbon effluent. The United States no longer controls its own financial sovereignty, but must rely on China (its greatest strategic adversary) to fund the deficits that will keep it from plunging into complete collapse.
Tell, me. Just how much devastation do you thing the capitalist system should be permitted to inflict on the United States and the rest of the planet before you deign to acknowledge that it “has gone too far”?
March 8th, 2009 at 2:39 pm
Marcus,
Looks like you blew a seal. That was hilarious. Thank you. Gotta go.
Robertf
March 8th, 2009 at 2:42 pm
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Wallenberg+family+sweden
is what ‘clusty’ means, you know the link you said was ‘irrelevant’, or some such..
and, this, now that it showed up, was the context: “GHWB, aka 41, told us the Truth, in ‘92, while running for re-election, towit(paraphrasing): “They’ll tell you that they’re going to “soak the Rich”, but, watch your wallets; The “Rich” will move out of the way, and the Middle Class will take the Hit.”
how correct he was, and is, in that regard..”
March 8th, 2009 at 11:25 am
March 8th, 2009 at 2:44 pm
Aren’t we going to talk about guns, torches and pitchforks again today? That was fun.
One thing left me puzzled though. Apparently, if we’d had that conversation last year, the assumption would have been that it’s the lefties marching on Washington and Wall Street (since numbnuts was still the prez). Now, since Obama’s the man, it seems the lefties assume it’s the redneck right that’d be taking it to the streets.
Wait a minute.
Same corrupt congress, same vampire bankers, same Goldman mole (different name) in Treasury…but the White House changes hands and that changes the entire composition of the Rebel Forces?
That can’t be right.
March 8th, 2009 at 2:46 pm
10 cc,
know you know why the (R)’s ran the wrinkly dude and ‘hot pants’, shades of ’96
March 8th, 2009 at 3:41 pm
robertf understands:
“They did it because they could. ”
The why’s are not nearly as important as the fact that they simply could. It’s amazing to hear the upper middle professional class incessantly whine about what’s going on. Content with the crumbs thrown your way for so many years, and with nearly full knowledge of the levels of ubiquitous corruption, we are now deluged by your sorrows as half your crumbs have been taken back by the same masters that hung them out there to control your every move. The grand illusion is over, my friends. Fess up to the parts you played within your own professions and have a bit of compassion for the tens of millions absolutely trashed over the past several decades while you were enjoying your German luxury cars and granite countertops.
March 8th, 2009 at 3:45 pm
Mark E Hoffer Says:
March 8th, 2009 at 2:46 pm
10 cc,
know you know why the (R)’s ran the wrinkly dude and ‘hot pants’, shades of ‘96
________
So, in effect, you’re saying that the Republicans KNEW their policies would lead to our current predicament AND that there would be no workable solution – regardless who the next President was. Yet knowing this, you still complain when attempts are made to fix our system. In fact, not only do you complain, you blame the people who inherited a problem that can’t be fixed. Says a lot about you. Why do you hate America?
March 8th, 2009 at 3:52 pm
Amen, impermanence. Amen. Time to face reality and the fact that in some way we’re all complicit in this mess, especially those who reaped the benefits of this rotten system over time.
March 8th, 2009 at 4:04 pm
SS: So we borrow hundreds of millions from the Chinese to give to AIG to funnel to western European banks to funnel to eastern European banks to prevent disturbances in Budapest, Bratislava and Riga, whoops we were late with Riga!
Thats not bad as a US taxpayer I don’t mind paying the Chinese interest to maintain domestic tranquility in Eastern Europe. Maybe we can pay Ukraine’s gas bills to the Russians too, why not!
March 8th, 2009 at 4:05 pm
You know thinking about this a little bit more. This whole change in the bankruptcy laws in interesting….
“If” the counterparties were going to have first grabs at the cash anyway, due to the change in the BK laws, then the counterparties are not the ones getting a backdoor bailout. Once again, it is the bondholders of AIG debt who are being saved in a Big Way. Because, as Gretchen points out, their CDS exposure was massive..400+bn. If 50% of the CDS goes to down the toilet, then there would really not be much left for ANY debtholders of AIG, including the super senior stuff held probably by the likes of Pimco, etc….
Can’t ever have Pimco take a hit…what would happen to America if that occurred?!?
I still have not read anything definitive about the accuracy of the new BK laws and their effect on these issues….we really need to find out what the real story is there before we know who was really getting the bailout….
March 8th, 2009 at 4:19 pm
Marcus,
file it under: Ripley’s, if need be, but, contrary to appearances, my Mother did teach me, well, to, among other things, 1. consider the source, 2. don’t waste your time with people intent on wasting theirs, 3. some people choose to be deceived..
well, contrary to that fine counsel, to your assertions: it has nothing to do w/ what the “Republicans” knew, or, even, what the “Democrats” knew.
10cc laid out the context to which I was responding, namely: “One thing left me puzzled though. Apparently, if we’d had that conversation last year, the assumption would have been that it’s the lefties marching on Washington and Wall Street (since numbnuts was still the prez). Now, since Obama’s the man, it seems the lefties assume it’s the redneck right that’d be taking it to the streets.
Wait a minute.
Same corrupt congress, same vampire bankers, same Goldman mole (different name) in Treasury…but the White House changes hands and that changes the entire composition of the Rebel Forces?
That can’t be right.”
he’s correct, ‘it can’t be right’.
the whole of it is a stage-show, off-Broadway, if you’d like..
we, yet again, fall for the same, tired, left-right, left-right paradigm/scene change..
we get ‘more of the same’, and then some..
I imagine, if you’re a f***ing Sadist, it’s an amusing Show, but, sadly, not really, I’m not, nor am I masochist..
you talk of my “complain(-ing) when attempts are made to fix our system”
you, my friend, have taken leave of your senses. I’m complaining that our ‘system’ is fixin’ to be fixed, once and for all, never to be repaired..
to this: “you blame the people who inherited a problem” I did no such thing..
and, to your temerity to ask: “Why do you hate America?” Simply, Fuck You. and, with that, as Olberman likes to channel from Murrow: “Good Night, and Good Luck.”
March 8th, 2009 at 4:41 pm
Yeah, but at least Obama might make the cops/troops use rubber bullets (at first anyway).
Wouldn’t get that from ol’ man Cheney.
March 8th, 2009 at 5:21 pm
Barry, can you help me. Assets can go up or down, but derivatives are a zero sum game! So if a CDS is like a fire insurance on a home. And for one home you have 47 insurances. At the end if the home (the asset) burns, the value of one home is lost, BUT all the rest is a zero sum game NOT? So someone lost money and has to pay but someone received the money. Who is profiting from all those writedowns on derivatives? Thx
March 8th, 2009 at 8:24 pm
DUH!!! I can’t believe that people fail to see the interconnectedness of the financial system. This is why what we’re experiencing is call “systemic”…This is why the govt stepped in to prop up AIG–to prevent a domino like failure of the whole financial system. That is systemic risk. Of course money is going to flow to the counter-parties, and of course some of the counter-parties are investment banks. You may not like them now, but they were in these contracts with AIG to mitigate risk. It wasn’t to screw anyone, or to take advantage of anyone, but to hedge risk. If you don’t want to honor the investment bank’s contract’s with AIG, then you can’t honor anyone’s.
Everyone needs to put away their pitchforks and torches so we can move on…
March 8th, 2009 at 8:58 pm
Not so fast. Derivatives (financial WMDs) don’t mitigate risk, derivatives just move risk around. And since the risk gets concentrated in a few banks hands, the failure (as in systemic failure) of the financial WMDs was inevitable. Buffett talked six years ago about the systemic risk derivatives were causing.
The $500 trillion in derivatives floating around in most cases weren’t there to mitigate risk even on the surface, they were there for speculation. Those Ibanks CEOs dealing in those things were personally making hundreds of millions in gambling and playing games with other people’s money. They lost, don’t expect anyone including this small tax payer and retired person to be happy about bailing out these millionaire thugs, thieves and extortionists.
Move on isn’t going to happen, the numbers are just too big, they swamp the world’s economy. Don’t expect people to be happy about getting raped.
OLD JOKE: Remember to put two stamps on your tax returns, after all the money has to go all the way to IRAQ.
NEW JOKE: Remember to put two stamps on your tax returns, after all the money has to go all the way to the Ibanks.
March 8th, 2009 at 9:00 pm
On taxes…
7.65% for Social Security and Medicare, 10% for first $7,800, most states have an income tax so 3% for state, subtotal = 21.65% before counting city, county, and sales taxes not to mention taxes on telephone, gas, etc.
By the time you add it up using real expenditures, 25% is pretty much the effective rate at the bottom.
March 8th, 2009 at 9:59 pm
AT wrote:
“Can’t ever have Pimco take a hit…what would happen to America if that occurred”.
Hmm, I’ll bite– Retirees with the majority of their portfolio allocated to “conservative’ fixed income funds would get their faces ripped off?
March 9th, 2009 at 12:05 am
Kudos to this site, this writer (Barry), and all who have left comments here. My first time visiting (got a link from a thoughtful poster over at TPM) and…wow. Incredible depth and insight. I’m learning a lot…and am especially grateful to those who, even with the trauma and drama of this lastest fiasco are daring to move beyond it and ask: So, what kind of new economic system might we next want to create?
I really do sense that’s where we’re heading, as this old (and fairly corrupt) system just ain’t gonna be fixed no matter how many billions we throw in the soup. (Nor, to be honest, would I want it to be; time for something grand, something beautiful, something utterly breathtaking…)
Granted, getting from “here” to “there”…well, a little scary. However, let me suggest…
…it could also be supremely exhilarating.
Thanks again to all of you – a treat to read.
March 9th, 2009 at 12:44 pm
So fears of a financial armageddon if AIG is not bailed out are unsubstantiated.
“Financial armageddon” does not equal extreme upset on not geting paid on a bet that is worth billions and billions.
We know that some of the CDS that AIG wrote were naked.
Why should US taxpayers bail out gamblers who were not hedging exposure of CDOs that they actually held?
How is failing to do that going to bring down the world economies?
See:
AIG’s Speculative CDS Bets
http://seekingalpha.com/article/110186-aig-s-speculative-cds-bets