iBanks Grabbed $50 Billion in AIG Bailout Cash
Yesterday, in Backdoor Bailouts for Goldman Sachs?, we noted that GS, as well as Morgan Stanley, Merrill Lynch, and Deutsche Bank, were all made whole on their bad bets with AIG.
That’s right, what was misleadingly described as systemic risk turned out to be in large part little more than a counter-party bailout — money for the very same people who helped cause the problem.
Only the $25 billion figure I mentioned was off by 100% — the WSJ is reporting this morning it was $50 billion dollars, almost a third of $173 billion total AIG loot:
“The beneficiaries of the government’s bailout of American International Group Inc. include at least two dozen U.S. and foreign financial institutions that have been paid roughly $50 billion since the Federal Reserve first extended aid to the insurance giant.
Among those institutions are Goldman Sachs Group Inc. and Germany’s Deutsche Bank AG, each of which received roughly $6 billion in payments between mid-September and December 2008, according to a confidential document and people familiar with the matter.
Other banks that received large payouts from AIG late last year include Merrill Lynch, now part of Bank of America Corp., and French bank Société Générale SA.
More than a dozen firms with smaller exposures to AIG also received payouts, including Morgan Stanley, Royal Bank of Scotland Group PLC and HSBC Holdings PLC, according to the confidential document.”
Now you know why the Fed was so reluctant to reveal who the coutnerparties were.
This is a giant FUCK YOU to the American taxpayer. Isn’t there some Congressmen (besides Ron Paul) who are morally offended by the Paulson plan, which is slowly becoming the Geithner plan? Isn’t there anything that can be done?
According to the WSJ, these are the counter-party banks paid by AIG with bailout money:
Covered Counterparties
Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group
This is simply unconscionable . . .
>
Previously:
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/
Top U.S., European Banks Got $50 Billion in AIG Aid
SERENA NG and CARRICK MOLLENK
WSJ, MARCH 7, 2009
http://online.wsj.com/article/SB123638394500958141.html
March 7th, 2009 at 8:17 am
while not advocating it, I am beginning to think it will take violence to correct the situation
March 7th, 2009 at 9:09 am
The reason for the total lack of disclosure, despite the promises of a new Democratic Administration, is that Pitch forks and peasants on Wall St not only block the way to the nice restaurants but also don’t look good in the media. Let them eat cake.
Second revolution anyone?
March 7th, 2009 at 9:09 am
I am not sure what is exactly so surprising. The amount? This is well within the parameters of the bailout. Is it the fact that foreign banks are bailed out as well?
The Bank oligarchs are protected from the consequences of their failures by their political class which they own. What is exactly so special in this latest development? In truth, it is a leak rather than a development. It was well within what was imaginable given all that “we know we don’t know”.
March 7th, 2009 at 9:15 am
This is just as scary as HR 1955 (Violent Radicalization and Homegrown Terrorism Prevention Act of 2007) passed in Oct 2007 … aka “Thought Crimes”.
worthwhile 5 min clip:
http://www.youtube.com/watch?v=4Op3×154z2I
March 7th, 2009 at 9:18 am
“It was well within what was imaginable given all that “we know we don’t know”.”
Ah yes, but what about what we don’t know we don’t know?
March 7th, 2009 at 9:20 am
Barry,
While we all know the counterbparties are fleecing us, it was worth the read. In the simplest terms, it has been a “GIANT Fuck You” The Fed and US Treasury, and it is about time mainstream media let’s them know we know it.
March 7th, 2009 at 9:20 am
Continuing criminal enterprise. RICO Act violations. Systemic fraud. Political Party-independent, Government involvement. Fascism.
Of, for, and by the people?
March 7th, 2009 at 9:22 am
philipat Says:
March 7th, 2009 at 9:18 am
“It was well within what was imaginable given all that “we know we don’t know”.”
Ah yes, but what about what we don’t know we don’t know?
________
The problem is that we DO know.
March 7th, 2009 at 9:27 am
“The problem is that we DO know.”
Sorry, just qouting Rummy. Doesn’t seem like much has changed?!
March 7th, 2009 at 9:28 am
Now that the counter-party mystery solved “Credit Default Swaps” (CDS) should be renamed “Taxpayer to Casino-Banker Swaps” (TCBS).
March 7th, 2009 at 9:33 am
philipat:
No dig at you, and you’re right – nothing has changed.
March 7th, 2009 at 9:40 am
Of, for, and by the people?
And that truly does need revisiting, doesn’t it. It’s a fine and correct sentiment but it has been systematically corrupted, not only in the US. It requires we the people to get back to fundamentals and find change.
What’s for sure now is that US living standards are on a downward trend mainly because of the corruption within the US system, Government, Banks, Corporations in general. But I suppose that we the people are also complicit, having taken the pill and lived high on credit for so long.
So where next?
March 7th, 2009 at 9:48 am
I own a small business that has been around since 1976. In the non to far distant past I had 16 employees, now there are five (not counting myself). Those much missed employees who are gone can thank our leadership and Congress for their inept and/or corrupt servitude.
I have a good friend in PA that owns a company that has a couple hundred employees; he had to lay off a quarter of his workers in December (he does not own a seasonal business). He called me a couple weeks ago, after E-mailing me some documents he had received pertaining to COBRA coverage for the laid off (or released) workers. He was sick to his stomach. He was telling me that now, due to one part of this stimulus package, the company is in jeopardy of closing due to mandatory COBRA payouts for the 1/4 of the employees he “had” to let go in order to save 3/4 their jobs. This is insanity.
I bring all this up because many people who do not own businesses do not realize all that we as business owners are subjected to; not that I am discounting all the other people who do have a working knowledge or understanding even if they don’t own a business.
Business has been hard enough to keep going with all the laws, restraints, taxes and such that have been piled upon us for years… but now it is as if they are planning on how to make the majority of us fail.
What on God’s green earth do we need to do to wake up people to what is going on?
Thanks for listening to me vent.
March 7th, 2009 at 9:49 am
Agreed: “what we do know” is ground in itself for some extreme house cleaning (revamping really((revolution in truth))).
I was just pointing out that this particular WSJ leak has no impact whatsoever on what I think about the all thing.
March 7th, 2009 at 10:00 am
A piece should be added on this site or in the comments section that would send a generic article like this to our local congressmen to the tune of 5mm, 10mm, 50mm votes, similar to favoring or opposing a bill. Something needs to drastically changed or shareholders and taxpayers will get continually slapped in the face. These high profile decision makers treat us exactly like some war scenario, “wipe out X amount of pawns in order to become better positioned and much stronger”, unreal. Shareholders and hard working taxpayers are taking all the risk in this market while these greed driven companies continue to move forward and getting all their drastic mistakes corrected, sounds more and more like the fall of an empire. Pull back the curtain, I wanna see the wizard.
March 7th, 2009 at 10:02 am
Armed revolt. Assemble my fellow citizens with your arms in Boston, the cradle of our our Republic, and March by Foote to the Capital – and we shall process to dismantle this cursed and perverted Congress, the executive, and shall leave the Judiciary for now to redeem the remains.
March! We shall strike in the Ides of March.
General AW
I voted for Obama and I am sorely nonplussed.
March 7th, 2009 at 10:04 am
I want a total clawback of all bailout funds.
March 7th, 2009 at 10:05 am
None of these bailout plans has ever been anything but a giant FU to the society in general. They have all been quite clearly, right out in plain sight, been giveaways to the big players in the financial industry with a ‘hope that this will stimulate new lending’. 1) you don’t give away 10% of your GNP on a hope — if you are serious, you make it legal binding. Conversely not invoking federal legal powers means… not serious about stated aims. 2) As everyone here knows well, ‘new lending’ is not what’s needed, but the banks sure would like to get that profit making enterprise going again. Ergo the bailouts real purpose is… get the profits going at the banks. Which benefits? Corporate personel and owners of bank stock and debt. 3) Unfettered bonus payouts, and no attempts to claw back ill gotten gains means? This is all about making sure that corporate insiders at major finance and PE firms continue to enjoy a huge revenue stream.
All of the proposals to date have as their clear outcome (not verbal spin associated with selling these ‘plans’) continued massive economic benefit to a small number of individuals. All of the plans to date offer ‘hope’ that the plans will benefit ‘the economy’, meaning us. Real plans to benefit ‘the economy’ would do so directly — we need to find meaningful use for the labor that is being wasted, and we need to direct cash to the places where value comes from, not to those who are best able to swindle, lie, cheat, and steal. Small parts of the current plan do move in that direction, but they are very small compared to the amounts being spent to create a two-tiered society.
Regulatory capture is really not even the half of it. The reality is that Washington (the executive, the legislature, and the judiciary) has been entirely captured by high flying wall st. manipulators. Perhaps all those ’smart’ business types who were so enthralled with the grandeur of the Republican spin machine are starting to wake up. Perhaps they realize now that the Republican party never had their interests in mind, but rather represented a power grab of the highest order.
Unfortunately for our new owners they are about to discover that the economy is more like an eco-system than a chess game. When the predators gain too much advantage, and become too succesful, they destroy so much of the prey that their own lives become at first threatened, and then ended, as the food they depend on slowly at first, and then more rapidly as the competition becomes more fierce, disappears.
Bailouts that support the prey only hasten the end game.
March 7th, 2009 at 10:07 am
@Degarmo
Welcome to the world. In Europe we call this socialism and it seems to be catching on in the US?
Why should that poor neighbour who bought a home he could never afford be thrown out on the street? Poor him, give hime a break paid for by the taxpayer?!
The US HAD the most flexible economy in the world, allowing rapid adjustment to change. Get it over with, adjust and move on. And now? Socialism? But starting with the rich and perhaps with a little trickle down? Is that the US?
March 7th, 2009 at 10:07 am
wups, should read: “Bailouts that support the predators only hasten the end game”
March 7th, 2009 at 10:12 am
Barry,
I am in a state of FFF (financially fucked & fatigued). I, really am. I am sick and tired of all of this stuff and just worn-out.
It pisses me off to no end recalling in years past how the public sat idly by and let the banks buy each other up continually getting bigger and bigger and no one considered this might not be a good idea for creating all of these too-big-fail institutions.
I remember well way back when, it was rationalized as absolutely necessary if the US financial institutions were remain competitive with other global financial institutions. Remember that? Well, that worked out just fucking great didn’t it? Remove Glass-Steagal and here we are.
The public in general (while much more informed thanks to the internet from decades ago) is still basically a bunch of sheep. The Wall Street crowd over-reached and as a result has exposed the greed and criminality that has always exists there just beneath the surface.
In regard to the Bank Nationalization (of the largest of the too-big-to-fail) issue….I don’t think the Government wants any part of it. Their thinking is you “fucks” created this mess and you SOBs are going to clean-up your own mess.
I don’t think the Government feels it has the required expertise (sorry for the terrible absurdity here) to manage all of the derivatives that are blowing up on a daily basis. In short, I think the government feels it simply can’t manage the complexity of this stuff. And I must agree…I don’t think they can either.
They have instead resorted to just giving them money when necessary and letting each institution manage its own mess. In essence, the US Government is hiring all of these folks to continue to manage their own stuff as best they can. They are the people closet to the raging fire so-to-speak.
Lastly, I think the US Government basically only knows what they are told by this crowd anyway. Normally, the Government would nationalize these banks to show their disapproval; but, these are extraordinary circumstances where the Government is already over-its-head in managing what they are already involved in i.e. Freddie, Fannie and all the banks they have taken over. They don’t have the staff to manage any more of this stuff; but, the “fucks” do. So, here we are.
March 7th, 2009 at 10:12 am
We are all truly “the forgotten man”, the Tax payer who has no vote, no say inn the matter, and will have our pockets empties by the people we elected. I am expecting nothing now from the President that I helped elect. His team? The worst.
If not a violent overthrow, then how about a national tax revolt?
March 7th, 2009 at 10:17 am
I rest easy knowing that the U.S.Federal Reserve and the Treasury Department are working as hard as they can to make global banking interests as whole as possible. Wouldn’t want to see the porkers man-up and actually have to take a loss. That’s for the too-small-to-bails.
Wouldn’t want to risk any “systemic collapse” now would we, children?
March 7th, 2009 at 10:19 am
Barry,
The reduction of complex problems to rhetoric is the clearest sign of a society in trouble and given your background one would have hoped that you would be more sensitive to it.
Quite clearly the argument for this bailout is that pushing still more major international banks into receivership, including foreign banks with substantial U.S. presence, would hardly be stimulative to the economy. I presume, with out much risk of being contradicted by the facts, that this is the argument prevailing in the Obama circles and not some hidden Freudian desire to impoverish one of its principal constituencies, the U.S. tax payer. which it is otherwise trying to court through a more balanced tax structure.
One can question whether this bailout will have the desired effect but the rhetoric and nonsensical accusations of intent can not further that argument. On the other hand it mistakenly incites public anger. We have a long history in this country of political assinations, lynchings and other manifestations of misplaced public wrath gone out of control. As a member of a minority which has experienced this not infrequently I would have thought you more sensitive to the problem and restrained in your public pronouncements. Try again we need your reasoned voice on these issues.
SS
March 7th, 2009 at 10:23 am
It may be worse than described.
It has been reported that the ratio of CDS insuring GM bonds to GM bonds is 100:1. That means that 99% of GM CDS holders are not hedging risk exposure, but purely speculating, i.e. placing bets on the downfall of GM.
It has been reported that much of the CDS that AIG wrote was for insuring CDO’s, much of it mortgage derived. I have not seen reports of CDS ratios to these securites, but it is possible that the taxpayer is bailing out pure speculators, investors placing bets on the decline of mortgage backed securities. Sounds like an obvious bet now. But these securities were rated as Triple A at one time.
Now when you consider that the very same institutions, Goldman Sachs, Morgan Stanley, etc. profited very greatly by creating and selling these CDO’s, which conveniently were “incorrectly” rated by the agencies that the issuing institutions paid to rate them, and that the issuing institutions, as well as the rating agencies, knew how really bad these securites actually were, well then you have quite a situation here.
You create and sell toxic garbage that appears to be Triple A securities. You make billlions.
And as you know how truly bad this stuff is, you take on CDS insurance on it, even if you do not own it, and multiple CDS per security, and wait unti the securities that you know are crap and unmasked as being just that.
This is wonderful arbitrage. But it is arbitrage based upon fraud.
And now one more troubling detail – the architect of the AIG bailouts, the architect of the transfer of billions of taxpayer dollars to Goldman Sachs, Merrill Lynch, etc via AIG, is Tim Geithner. Obama chose this fellow to be his Treasury Secretary, after the fact.
March 7th, 2009 at 10:24 am
The talk that one hears on even these quite intelligent blogs about ‘pitchforks’ is quite frankly sad, and foolish. The US military has been doing training excercises on ‘civil unrest’ for 10 years now. They are so far ahead of you people it’s laughable. The right wing loving, republican voting, NRA is about to find out just how much freedom their shot guns and colt-45’s can do against a modern military. Those of us with calmer heads already know the answer: Absolutely Nothing.
Any ‘civil unrest’ will only hasten the rise of the empire, providing the excuse needed to convert the police to a military force. The only people that will be harmed by such an action are the general populous, and of course ‘the real economy’. In fact, the Bush administration made plans to even use a medical crisis, such as a flu epidemic, to convert the civilian infrastructure to a military infrastructure.
Quite honestly, the plethora of foolish beliefs about a) the real state of affairs, and b) ’solutions’ to it IS the problem.
March 7th, 2009 at 10:28 am
Steiny,
though your point is a good one, e|mail is highly ineffective..
you’d have to tie it to a print/envelope stuffer like this:
http://www.martinyalepaperfolder.com//EnvelopeFolderstuffers.html?gclid=CMG8j4SQkZkCFQETGgodDX1GZw
BR may want to form a 501(c)(3), or similiar, the reduce frankage rates are an additional +
http://www.thefreedictionary.com/Franking
yes, def. #3
March 7th, 2009 at 10:30 am
Blurtman,
What you say is very consistent with the way Wall Street thinks and acts. I think You are on the money with your post. Even when the thief has been cornered, he still continues to innovate in order to create his escape.
March 7th, 2009 at 10:33 am
75% are foreign banks. We will not get that money back. Its a taxpayer bailout of foreign banks.
March 7th, 2009 at 10:35 am
Any of these funds received by the criminal enterprises that got direct TARP funds should be treated exactly the same. That is they owe it back under the same terms. These MF’ers have no bounds.
March 7th, 2009 at 10:37 am
The information was leaked out on Friday evening. A typical PR tactic when you want to bury a story.
March 7th, 2009 at 10:38 am
VoiceFromTheWilderness Says: March 7th, 2009 at 10:24 am
all, too, readily, verifiable..
as I’ve mentioned previously, Paul Revere had it easy. He, merely, had to alert that ‘they’ were coming..
much more difficult, this go ’round..
b. A turning or rotational motion about an axis.
B, may be a good grade, but, also denotes the inclusion of incorrect answers..
IOW, being ‘above average’, isn’t what’s called for, nor will it suffice..
March 7th, 2009 at 10:38 am
The underlying belief of entitlement that is at work here goes something like this:
We gamed the system, making money both ways, ad we demand to be paid.
If AIG cannot pay, then dammit, the taxpayer will.
March 7th, 2009 at 10:39 am
And unfortunately for the US Federal Reserve and Treasury Department, thanks to their bad bets, the bailout money pit of the global banking interests is probably bottomless, but the patience of US taxpayers is probably not.
March 7th, 2009 at 10:44 am
awilensky Says:
March 7th, 2009 at 10:02 am
Armed revolt.
_______
Peaceful revolt is possible (see Vaclav Havel and the Czechoslovakian revolution). Violence invites suppression, tyranny and even worse government (see Milošević and the Yugoslavian revolution).
March 7th, 2009 at 10:46 am
The thing is, this money comes out of the Federal Reserve, the taxpayers and Congress don’t have a say on it. Paulson conned Bernanke and Bush and the foreign governments are putting pressure on the US to keep sending money.
March 7th, 2009 at 10:46 am
Not only FUCK YOU to the taxpayer, it’s as Fed vice-chair Donald Kohn put it, ” With all due respect, FUCK YOU Mr. Senator.” I mean, what did you expect from the Fed which is owned by the banking industry (that now includes GS and MS?) What did you expect from Hank Paulson? He doesn’t know the world outside of Palm Beach mansion, Dartmouth campus and Wall St. For them it’s their job, their duty and their worldview that they have to save the industry.
Can Senate subpoena Fed officials to testify? If the got Karl Rove to testify, is Fed so far outside of the laws of this Nation? If it Fed (like Dick Chaney) doesn’t fall under any jurisdiction, can in be ABOLISHED?
March 7th, 2009 at 10:55 am
If your Senator voted to approve the architect of the AIG bailouts, he or she has to go.
Double that if he or she voted for TARP I.
Never again.
March 7th, 2009 at 10:59 am
“Peaceful revolt is possible (see Vaclav Havel and the Czechoslovakian revolution). Violence invites suppression, tyranny and even worse government (see Milošević and the Yugoslavian revolution).”
–Marcus Aurelius
If we, merely, change our consumption/investment patterns we’ll find, quickly, contra to the best designs of Mad Ave., what “new&improved” can really mean..
March 7th, 2009 at 11:07 am
Echos from the past…
“Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action.”
- George Washington
March 7th, 2009 at 11:08 am
Oh please, gag me with all this faux outrage.
Everyone was told by the few voices, that the original Plan, the plans since and the plans coming will ALL look like this. Stop with the I’m shocked bullshit. What you should be shocked by is your own stupidity if you were a Plan supporter under the pretense that something had to be done because the free market had run amuck and only, only the GOVERNMENT could fix it..
There were a few of us that warned all plans are doomed to failure. Sitting around now picking through the entrails and crying the blues is a little rich.
This disbursement of public funds is minor compared to what is coming with the previously passed stimulus bill, the foreclosure bill and countless spending yet to be announced. The government is graft, payoffs, featherbedding and the mob for all intents and purposes. They run bust outs for sport. At least we know where the money went in the AIG fiasco. The trillions to be wasted will have no trail to speak of.
Just think , we can now have another congressional committee look into this with the same results they had looking into Fannie and Freddie years ago. Call Maxine Waters, she’ll get to the bottom of it.
March 7th, 2009 at 11:09 am
“the architect of the transfer of billions of taxpayer dollars to Goldman Sachs, Merrill Lynch, etc via AIG, is Tim Geithner”
we could hope .. that the Presidents choice was “fix it or jail” … besides the “helleva job Timmy .. carry on”
SS (some name) good call for peace in the streets …. riots really won’t help
unless the end game is to destroy the FDR inspired social structures …. and get a global civil war going because the system believes me when I said “to many people making to many problems”
and the Degarmo post …. moving . troubling ….. my mind pulled up the Wal*Mart lawsuits for insurance infractions .. we the people don’t wanna be taking on more and more insurance needs of business do we ………… so all we are posting here .. gotta wonder if the government is doing what governments do .. follow the law for the benefit of the most as they see it .. until they see the light from a different prism …………. a rainbow prism one could hope
March 7th, 2009 at 11:13 am
Barry, I’m curious if you’ve read or have any comment on this:
http://www.talkingpointsmemo.com/archives/2009/03/im_sure_the_knowledgeable_people.php
They’ve been reporting that under a provision of the most recent 2005 Bankruptcy Bill, the I-Banks would HAVE to be paid out first if AIG went under. The I-Banks were going to get their payout one way or another.
~~~
BR>: Yes, I’ve been researching the specifics of the law — I think its overstated, but I am getting the low down from, the pros.
See this for some more info on it . . .
http://www.isda.org/speeches/pdf/TBR-CP-Final-Response05-27-05.pdf
March 7th, 2009 at 11:22 am
It is good to think of a leader like Václav Havel these days. I voted for Obama in the hope he might become a leader like that and still have not completely abandoned that belief despite disappointing signs. But leaping to conclusions in search of certitude seems a greater threat and so I continue to watch, read, talk and (re)consider, keeping in mind another Václav Havel quotation in the process: “Keep the company of those who seek the truth, and run from those who have found it.”
March 7th, 2009 at 11:28 am
When sheep vote to be led by wolves, why are they surprised when they get eaten?
When people elect Nero, why are they surprised that Rome is burning down again?
March 7th, 2009 at 11:38 am
Did we sign a Foreign Asset Relief Treaty(F.A.R.T.)?
March 7th, 2009 at 11:40 am
@ Philipat:
“Trickle-down Socialism”
I love it.
March 7th, 2009 at 11:46 am
“This is a giant FUCK YOU to the American taxpayer. Isn’t there some Congressmen (besides Ron Paul) who are morally offended by the Paulson plan, which is slowly becoming the Geithner plan? Isn’t there anything that can be done?”
SOmetimes the only way to truly express one’s feeling is using the vernacular. Well done BArry.
Nice to see a ‘mainstream’ blogger tell it like it is.
I am CAnadian, and certainly no Republican, but is this change we can believe in?
The lobbyists and tentacles of the banks and financiers run so deep that there is no acting without consulting them. Isn’t it obvious that it is they who run the country?
While some of Ron Paul’s views may be off-putting to some, I hope that more and more people are realizing that the US is a ONE party system with 2 different colors/logos. Read The Revolution by Ron Paul – he has some ideas that don’t seem as off base after all that has transpired.
This country needs another Andrew JAckson to Kick ASS, destroy the FED, restore money creation to elected (accountable? much debate there!) officials and make the tough decisions, force everyone to suffer a little for the betterment of the country.
Again I suggest you listen to the 40 minute interview with the author of The Creature From Jekyll Island: A Second Look at the Federal Reserve. It is a well-researched, in-depth, non-hysterical book. HE outlines where all of these baillouts are taking us. SACRY.
The interview is on MArch 7th, and there is an mp3 link.
http://www.financialsense.com/fsn/main.html
March 7th, 2009 at 11:49 am
If you like Ron Paul’s economic ideas, but can’t stand his social agenda, Kucinich may be worth a look.
March 7th, 2009 at 11:52 am
You can’t make this stuff up.
March 7th, 2009 at 12:06 pm
Marcus,
do us a favor, delineate the “social aganda”, of Rep. Paul’s, that one “can’t stand”– would find objectionable..
I ask, b/c I doubt many could even begin to articulate his positions, wholesale, let alone his ’social aganda’..
March 7th, 2009 at 12:06 pm
A rotten corrupt system will destroy itself… from the inside out. What market bottom? Given what we know (to say nothing of what we don’t know yet), we’re on a long ride (or maybe not so long ride) to zero or something in that proximity. Sigh!
March 7th, 2009 at 12:11 pm
Enjoy this blog immensely – at least we can express ourselves here…
March 7th, 2009 at 12:18 pm
Barry,
This is a MASSIVE FUCK YOU…all this talk about transparency is total BS. The financial giants are getting all the bailout money to help their friends and family. Let the whole damn thing collapse and then like a phoenix let it rise from the ashes.
March 7th, 2009 at 12:22 pm
I don’t think they will get away with it, as main street is so pissed off, they will shun equities for a very long time, thus destroying the business models of the offenders. Personally, I am getting my share by being short this f’ed up system.
March 7th, 2009 at 12:38 pm
@Degarmo
Thanks for that post on changes to COBRA. I appreciate the opportunity to learn something about that.
WRT more theft by GS et al
The outrage that this provokes has to become fuel for action. In reply to Awilensky, the big boys are threatening the Federal govt with a cash flow choke off. As such, a national tax revolt would be a form of beating them to the punch. That is, force their hands, tilt the machine. The only problem is that the Feds would drop like a ton of bricks on any one or group that seriously organized and promoted a tax revolt. Only Ronald Reagan was allowed to do that.
March 7th, 2009 at 12:48 pm
I wonder if this is what Gordon Brown had in mind with his grand global rescue. If so, no wonder Obama treated him badly.
There needs to be a tax on the American I-Banks that originated these CDS’s that expires only when the US taxpayer is made whole from all the money that flowed to the foreign banks and Goldman Saches and Morgan Stanley as a result of this inside rigging.
March 7th, 2009 at 12:55 pm
MRegan,
More detailed info regarding the COBRA changes can be found at:
http://www.hrstndassociates.com/
March 7th, 2009 at 12:57 pm
haven’t read the comments but:
I guess now you know why they felt they were deserving those ridiculous bonuses
March 7th, 2009 at 12:59 pm
BR:…Er……were these legal contracts?………Or is the abrogation of contracts now part of the standard shtick here…..And if these contracts had not been honored what would have been the effect……to make a lots of American and European banks with ops here more fragile……I’m bound to say Barry given your sophistication I find this original posting very superficial to put it mildly…….Needless to say we then have the usual Greek chorus of protesters who don’t get it, but I expected more of you.
March 7th, 2009 at 1:06 pm
@ ottovbvs
Goldman Sachs states that their exposure to AIG is immaterial so what are you talking about?
March 7th, 2009 at 1:08 pm
People are either outraged and have no outlet in which to vent (calling congresspeople is like masterbating with a cheese grater for all the good it does), or they simply have no connected the dots yet.
How can someone not connect the dots? Well, if you read Krugman or a handful of the other rightfully pissed off writers you’d have a clue, but if you watch FOX, CNBC, or read one of the other 85% of America’s papers you’d think Obama was crashing the market via his desire to take our guns away.
We are in the destruction phase where anything that doesn’t work gets burned away (and takes some of that which does work with it unfortunately.) CNBC, Jim Cramer, FOX, Limbaugh, corporate newspapers, everything will burn away before things get better. The newer parts that work (like blogs provide news info) don’t quite fill the gap yet as the old status-quo apparatus is in the way. Sort of a “the king is dead, long live the king” scenario.
Obama is a vision of the new way for America, he is also the last of the old guard. I suspect he’ll be 50/50 by the end, bold and visionary in some venues and just as blind as GWB in others (Afghanistan, Pakistan anyone?)
March 7th, 2009 at 1:09 pm
Otto — I must be missing your point. So what that the “contracts” were legal? Doesn’t mean that the taxpayers have to see to their fullfillment. And what are the protesters missing? Why aren’t you outraged?
March 7th, 2009 at 1:15 pm
DeGarmo,
When I read the page that you referenced in your post, it states that the portion paid by the employer for Cobra is then deducted from your payroll tax deposits. Other than bookkeeping, it doesn’t seem to cost the employer any more money.
You said that you were disturbed at having to layoff your employees. Wouldn’t it be helpful to know that they could still have some medical coverage even while unemployed?
March 7th, 2009 at 1:18 pm
What’s missing from this discussion?
1. The intent was to allow AIG to continue operations as a going concern, not to put it through a normal bankruptcy. Paying out on offside derivatives would be a part of that.
2. Derivatives are often hedged. Are the figures above netted to reflect the hedges, or are they only the offside portion?
3. Isn’t it possible that the counterparties listed above are nominees or agents for client counterparties, and not the ultimate recipent of the settled transactions?
4. Probably most important, NOBODY knows what would have happened had this (counterparty default) been allowed to go critical. We’ve talked about this on this blog before. Counterparty default could be defined and limited (through netting) reasonably well in bilateral derivatives, but real derivatives books are hedged multilaterally. Netting would be extremely complex, derivatives books worldwide would suddenly show huge increases in apparent values at risk, and the result would be impossible to predict, define, or control.
What should really get us mad is just how close we came to the end of the world as we know it. This was predictable and predicted.
March 7th, 2009 at 1:22 pm
What is with all this outrage? Can anyone tell me what else AIG should have been spending their money on, than its obligations to CDS counter-parties? Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt? Where the hell did all of you expect this money to go? AFAIK Mom and pop grocery stores don’t hold CDS’s,?
What am I missing that has all of you in an uproar?
March 7th, 2009 at 1:35 pm
Estragon Says:
Estragon,
Please tell us, even, more tales of Phantoms..
I’ll bet you’re a real hoot on Camping Trips..
“What should really get us mad is just how close we came to the end of the world as we know it.”
sure, Oct. ‘87 shouldn’t be included in that column either, right?
what’s ending is the supply, necessary, to fuel the bubble of delusion that most choose to live in..
Can’t have that, now, can we?
as I’ve mentioned, previously: “Asymptotes are a tough customer..”
March 7th, 2009 at 1:36 pm
derivatives books worldwide would suddenly show huge increases in apparent values at risk
****************************
I believe you may be dodging at least one point. The risk offsetting through the purchase of AIG CDS had been a fantasy from the get go. Somewhere in the calculation had to be the probability of the honoring of the CDS by the counterparty. It was a fantasy to assume that probablity at 100%. Taxpayers should not be liable to support the consequences of very bad due diligence on the part of the AIG counterparties, who likely did know quite well that AIG could not possibly pay under all likely scenarios, but were partying like it was 1995 anyway.
March 7th, 2009 at 1:38 pm
Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt?
*****************
Speculators. i.e., those that are not hedging the underlying security.
March 7th, 2009 at 1:43 pm
C’mon people, connect the fucking dots…….
Of the list of 15 above, 8 are primary dealers of the Federal reserve (there’s only 16 of them)
http://www.newyorkfed.org/markets/pridealers_listing.html
Goldman Sachs
Deutsche Bank
Merrill Lynch (BAC)
Barclays
HSBC
Royal Bank of Scotland (Greenwich Capital)
Morgan Stanley
Bank of America
This isn’t even a conspiracy, it’s an “in your face” money grab.
March 7th, 2009 at 1:55 pm
Anitamcb:
Good question and easily explained as to how devastating this is on an employer that it applies to.
Under the new law, the employer is to pay 65% of COBRA plan (many of which are family plans that can run up to $2000+ a month.
For example sake, let’s pretend the employer has a payroll tax of $1000 per payroll. 65% of one ex-employees monthly COBRA policy of $2000 would equate out to $1,300. So, with this example, with just one employee the out-of-pocket expense to the employer would be $300. That’s just one employee. The government isn’t going to reimburse the employer for anything over and above what got negated via the payroll taxes once a 0% payroll tax liability has been met.
In regards to you second question. I don’t believe I said I was disturbed at having to layoff my employees. You must have read that somewhere else, as that wasn’t in my post. Regardless, it disturb me that I had to let people go? Yes, without any doubt.
This law doesn’t even affect my business. But it does affect many others, such as my friend’s I spoke about in my earlier post. This only applies to business with 20 or more employees where insurance insurance options were provided for during their employ. Many businesses could go bankrupt paying for 65% of past employees insurance plans.
March 7th, 2009 at 2:01 pm
Blurtman
I agree completely that counterparty risk should have been priced into contracts, but the point is it wasn’t. Taxpayers should have seen the systemic risks building and taken action to prevent a blowup, but didn’t.
As for who, other than a bank, might be a counterparty, it could be a speculator, or it could also be a business with an economic interest in (eg.) hedging interest rate risk.
March 7th, 2009 at 2:20 pm
Honest question, then, to followup: Do we know definitively that the status of any of those listed counterparties, like Goldman Sachs, Deutsche Bank, etc. etc. is objectionable? If they are banks, and they went to AIG for CDS’s, and AIG uses bailout money to pay back the CDS obligations, that doesn’t strike me as objectionable, especially if repaying helps filter liquidity through the financial system in such a way as to make lending possible again.
So are any of Merrill Lynch, Société Générale, Calyon, Barclays in the role of nefarious hedging, speculating or other kinds of money manipulating such that this outrage is actually legitimate?
Also, who could have been listed as counterparties that would not have met with outrage?
I ask in part because I really don’t know, and also in part because I think a few of the commenters above who are outraged also probably don’t know.
March 7th, 2009 at 2:23 pm
Degarmo,
You just scared me so I went to the IRS website for more info. As an employer, you DO get a refund if your payroll taxes are less than your COBRA payments. It is not an expense to you.
This is an important issue for me. As a small business owner, I am in a quandary as to how to weather this financial storm without laying off employees. I have cut everything else I can, and now I have to make the awful decision to layoff people who have been with me for twenty years or more. Some of my employees would be able to get individual policies because they are perfectly healthy. Other employees, however, will be completely screwed because they have ongoing or pre-existing medical concerns. I would be pleased if the government would help with their COBRA payments because I don’t think that they should have to burn through what little is left of their 401k’s or their savings accounts on order to get medical care. If I put my employees on part time status, then they no longer will qualify for health benefits, according to our insurer. So I can’t even solve this problem by reducing hours.
In California Blue Shield and Blue Cross have been charging higher premiums for COBRA than the state mandated rates allow. So in addition to paying our ridiculously high premium amounts, laid off workers can expect to pay even more just to keep their existing coverage. Any help that the government can provide to these employees that I must let go in order to stay viable, well, I’m grateful.
March 7th, 2009 at 2:29 pm
rww Says:
March 7th, 2009 at 1:09 pm
Otto — I must be missing your point. So what that the “contracts” were legal? Doesn’t mean that the taxpayers have to see to their fullfillment. And what are the protesters missing? Why aren’t you outraged?
……….Well you see I have this touching attachment to the law of contract……..We’ll see how happy you are when someone breaches a contract with you……. Quite apart from the abrogation there were as a practical matter immense financial consequences for the banking counterparties when we’re trying to prop up the banking system…….And I’m not outraged because I’m over 21.
March 7th, 2009 at 2:37 pm
“The right wing loving, republican voting, NRA is about to find out just how much freedom their shot guns and colt-45’s can do against a modern military. Those of us with calmer heads already know the answer: Absolutely Nothing.”
Well, I am most assuredly none of the above but I’d say …
Tell that to the Vietnamese.
March 7th, 2009 at 2:41 pm
glenstein Says:
March 7th, 2009 at 1:22 pm
What is with all this outrage? Can anyone tell me what else AIG should have been spending their money on, than its obligations to CDS counter-parties? Who else could possibly be a counter party in a CDS besides a bank or organization that holds debt? Where the hell did all of you expect this money to go? AFAIK Mom and pop grocery stores don’t hold CDS’s,?
What am I missing that has all of you in an uproar?
Glenstein………What you’re missing is that most of the posters here are suffering from either a surfeit of moral outrage or they don’t know their ass from their elbow…….Somewhat amazingly to me BR seems to have joined the guys with tar and feathers…..Perhaps he thought all the counterparties to these swaps were The Salvation Army and the Knights of Columbus (actually the latter could be since they own a large insurance company).
March 7th, 2009 at 2:44 pm
For all of you out there who believe that representative government works, I’ve got news for you, it doesn’t. How could it? It never has, it never will. Human nature just isn’t that way.
The reason everybody has just been standing around doing nothing for the past several decades (it has been fairly apparent to anybody paying just a little attention that things have been seriously wrong for years and years) is that they believe that if they work hard enough, or are lucky enough, that they too, can be part of this grand “something for nothing” scam. Deep down inside, I have to believe that the majority of people realize that this wonderful economic system of ours (whatever you wish to call it) is horribly exploitative, as well as being absurdly corrupt.
So folks, you bought it, you wear it.
March 7th, 2009 at 3:02 pm
The sad part of all this is, in terms of opportunity, this is probably the best we’ve had in 100 years to throw off the shackles of the banking vampires…and it will probably be squandered. So close and yet so far.
March 7th, 2009 at 3:07 pm
Folks,
What’s the outrage? In 1980 Ronald Reagan ran on a platform that he would cut taxes for the wealthy, in the process transfering a significant share of the nation’s wealth to those who were already the most wealthy. It worked.
Real median incomes are lower today than they were in 1973, yet income for the top 1% is more than 300% higher. ALL of the gains of the past 30 years have gone to the richest people in the country. I suspect that is not most of you reading these comments.
In wealth terms, the effect has been even greater. The top 1% now own more than 60% of all the nation’s assets while the bottom 40% have a net worth of zero.
This is Republican economics in action. We’ve known about it for 30 years. All we’re seeing now is its logical conclusion: an even more frantic stripping of assets from the public to the plutocratic–looting–on a scale never seen in the history of the world.
This is what most of you have been celebrating in Republicanism. Congratulations. You’ve gotten what you asked for.
March 7th, 2009 at 3:24 pm
“……….Well you see I have this touching attachment to the law of contract……..”
Yeah, I’m kinda’ fond of it too. Makes for a more civilized society. Problem is…for the life of me, I can’t remember personally signing any contracts with AIG or its’ counterparties. I’ll go through all my papers if you like but… I’m pretty sure.
Now I’m no lawyer but, silly me, I always thought that if there are only two parties in a contract and one can’t fulfill, then the other is just shit outta’ luck.
March 7th, 2009 at 3:41 pm
10 cc Says:
March 7th, 2009 at 3:24 pm
Now I’m no lawyer but, silly me….for the life of me, I can’t remember personally signing any contracts with AIG or its’ counterparties
…….I can see that………Your agents did.
March 7th, 2009 at 4:04 pm
Estragon Says:
March 7th, 2009 at 2:01 pm
Blurtman
I agree completely that counterparty risk should have been priced into contracts, but the point is it wasn’t. Taxpayers should have seen the systemic risks building and taken action to prevent a blowup, but didn’t.
As for who, other than a bank, might be a counterparty, it could be a speculator, or it could also be a business with an economic interest in (eg.) hedging interest rate risk.
***********************
Estragon,
I am not certain I understand your statement that taxpayers should have seen the systemic risk that was building and acted on it.
I don’t believe you mean to say that taxpayers should have been involved in the business of a corporation like AIG. There are free market rules about how this situation should play out that are not being adhered to. Whether speculator, bank of other business, if you did not perform proper due diligence, that is regrettable, but don’t go reaching into the pocket of Joe taxpayer to cover your losses.
And by “taxpayer” certainly you mean a representative of the interests of the taxpayer, such as a regulator. I think all agree that regulatory oversight was abyssmal.
That being said, the CDS contracts were written by AIG, a public corporation, and not by the taxpayer. Everyone knows the rules.
March 7th, 2009 at 4:38 pm
Wow, robertf, that is quite a leap of logic you try to pull off. A big decrease in tax rates equals a transfer to the wealthy. Really? People keeping more of their own money equals a transfer to themselves? Wonder how that works…
Here is reality: in 2006, the top 1% (those with an AGI over $364,657) made 21% of all income that year, yet paid 40% of all income taxes. The dollar amount they paid in income taxes is equal to the dollar amount paid by the bottom 95% of taxpayers. A progressive tax system in action. The top 25% earned 67% of all income that year, and paid 86% of all income taxes. Quit yer bitchin’.
Source: http://taxprof.typepad.com/taxprof_blog/2007/10/top-1-pay-more-.html
March 7th, 2009 at 4:41 pm
@Voice: I hear you and think for most “pitchforks” is a metaphor for SOME form of civil disobedience and protest. For me that would be mostly large, nonviolent protest, civil disobedience, which is usually far more effective than violent ones. I still think it’s going to come but things have to be truly in the tank for that to happen. Unfortunately I am worried it won’t be nonviolent but very violent as the anger is channeled in an unproductive manner.
March 7th, 2009 at 4:41 pm
“Isn’t there anything that can be done?”
Oh, it’s coming….
March 7th, 2009 at 4:49 pm
@Blurtman:
>That being said, the CDS contracts were written by AIG, a public corporation, and not by the taxpayer. Everyone knows the rules.
The argument goes, if we were to let AIG collapse, a whole host of financial instituitions that depend on AIG’s fulfilling its CDS obligations go down with it, which would entail the collapse of some large portion of the financial world that is associated with the counterparties to those CDS’s. And then any business that needs access to capital to balance its budget, meet payroll, and any form of accounting whatsoever that involves the accumulation of debt becomes impossible.
I don’t know if that’s worse than the great depression because I can’t know the extent of the shockwaves of the collapse of AIG or others, but that seems to be the standard argument. If that is the gist of it, I don’t think outrage against financial institutions for getting us to this point and supporting bailing out AIG are mutually exclusive positions.
March 7th, 2009 at 5:12 pm
A word to the wise.
Do not say anything on the internet you would not tattoo on your forehead and walk down main st. USA, while screaming like a banshee.
Mr, Orwell was an optimist.
March 7th, 2009 at 5:19 pm
I’m with WiseSnake — what exactly did all of you think all that was for? Of course it was to payout on some of the “free money” contracts AIG wrote. Wax indignant about how opaque is being about the amount, not the too-big-too-fale money.
March 7th, 2009 at 5:19 pm
@Voice:
History has a tendency to repeat itself.
Wikipedia: “The American Revolution refers to the political upheaval during the last half of the 18th century in which the Thirteen Colonies of North America overthrew the governance of the British Empire and then rejected the British monarchy. In this period the colonies first rejected the authority of the Parliament of Great Britain (U.S. government) to govern them without (with pseudo) representation.” (My insertions).
While the U.S. military would obviously have an advantage in training and hardware, the American public has an advantage in numbers. In addition, there are many average citizens who have ample military experience through serving in our military. Look at the military casualties in the Mideast and realize that of all the different types of wars to fight, the ones fought in urban areas (or door to door) are by far the most deadly. Besides, do you really think that those in the military would just blindly follow orders to kill their own countrymen? Let us hope that our government can get it’s shit together before any of this becomes a reality. You can provoke the American people but you would be best advised to back away before you get to the point of really pissing them off. That goes for Uncle Sam too.
March 7th, 2009 at 5:33 pm
Foghorn,
they called this thing the World Wide Wiretap, while it was still ARPANet
http://www.dei.isep.ipp.pt/~acc/docs/arpa–1.html
March 7th, 2009 at 5:44 pm
@Pat G
Barry,
I hope you’re proud of yourself. In order to get some publicity and traffic on the site and promote your media credentials you’ve stirred public outrage without adding any intelligent light to the discussion.
I applaud those above @Voice, @RobertF shedding some light on the situation and @antiamcb apparently trying to sincerely come to grips with the problems of his now unemployed workers.
Yo’ Barry why the silence? One can only offer you a Bronx cheer for the effort and wonder what your good mother thinks of all this rabble rousing!
SS
March 7th, 2009 at 5:58 pm
We’ll be fighting in the streets
With our children at our feet
And the morals when they worship will be gone
And the men who spurred us on
Sit in judgement of all wrong
They decide and the shotgun sings the song
Who…..
When we are all in line for Government bread, and Federal guns are at our head, we will not vote with a ballot but with a gun. Slipping into darkness of a D.C. night, we are cloaked in black to fight, and burn down the capitol just for fun.
March 7th, 2009 at 6:09 pm
SS,
a little further South from here, one might, still, hear: “Iffin’ you don’t shake bushes, you’ll flush no Quail.”
and, to RobertF’s point, to think it’s “Republicanism”, is to have you’re thinking done for you..
March 7th, 2009 at 6:12 pm
@glenstein:
While I appreciate your attempt to bring reason to bear on an emotional issue, I think your questioning why people are outraged misses the obvious. There is actually not the slightest mystery as to why people are outraged.
Really, I think the rational question is the validity of the domino theory of economic collapse: what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?
March 7th, 2009 at 6:42 pm
The market will squeeze the corruption out, since the government are beholding to the banksters. The best money government can buy.
March 7th, 2009 at 6:45 pm
I am really getting sick of these rants about “taxpayers”. The Right rants the “taxpayers” shouldn’t pay for irresponsible homeowners, The Left complains the “taxpayers” shouldn’t pay for greedy bankers.
Suddenly we have become a nation of innocent “taxpayers” that had nothing to do with what happened. While just a few years ago these same “taxpayers” were reaping the benefits of the bubble directly and indirectly. If you believe all these ranters, our nation collectively has been a frugal, living by the means icon of the world. Our national debt and zero savings rate tells a different story. This whole “I had nothing to do with it” scenario reminds me a little of Germany after World War II almost. The Daily Show should really do a segment on this.
So taxpayers, we lived large collectively and elected governments that lived large on our behalf. Now suck up and pay for it! And accept that some money will go to the less deserving.
March 7th, 2009 at 7:16 pm
Where is Rick Santelli on this? Where are his trader buddies who don’t want to pay for their neighbor’s slip ups? If homeowners didn’t know house prices were going down, don’t tell my you don’t think Goldman Sachs didn’t know AIG could, that’s why you buy a CDS on THEM when they’re your counter party, right?
Are you listening Rick Santelli?
March 7th, 2009 at 7:19 pm
@formershrink:
>There is actually not the slightest mystery as to why people are outraged.
That’s absolutely true of the issue as a whole, but my question is whether the revealing of counterparties counts an appropriate object of outrage. To me, this hasn’t actually been settled one way or the other.
>what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?
Well for me, it’s largely that Paul Krugman says so, as well as other financial experts predicting doom and gloom; which has been corroborated by job losses and a general sense of panic amongst lawmakers. Also, the first full paragraph of this comment.
Also noteworthy is that it seems that none of us really know (and among them, commenters who have expressed outrage)- we come here, as I do, asking for evidence of the case contrary to the one we subscribe to rather than affirmatively presenting some argument.
While I’m here I’ll reiterate to anyone listening- what is so bad about the fact that AIG’s counter-parties were big banks?
March 7th, 2009 at 7:37 pm
Me to the Pheds who arrest me for fomentation:
Me: “I want to Kill Kill Kill Kill …etc.”
Phed:”You’re our kind of Boy, want to come work for us?”
March 7th, 2009 at 7:52 pm
@formershrink:
In the way of supplementary evidence, a Media Matters article showing economists who felt, not only that AIG and others needed to be bailout out, but that the stimulus bill was far too small.
So, in response to…
>what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?
It’s the presence of that community of economists that I subjectively judge as being worth listening to.
March 7th, 2009 at 8:01 pm
For me the outrage is not so much that they were bailing out counter-parties here, because we already knew that. That’s the concept of stopping a sytemic breakdown, right? The real outrage is not being straightforward and honest about the whole thing.
Secretive dealings with bankers is the sort of thing that incites crowds….
There have been two political phenomena that have surprised me in the last two years. The first was the Ron Paul “revolution” raising so much cash last year, especially that one day event on Guy Fawkes day. If that wasn’t a little “warning” of a growing tide of frustration from the populace, then the election of a progressive liberal with Kenyan roots who’s name was Barack Hussein should have been your hammer of the head “warning” of frustration from the ‘masses.’
Should be an “interesting” year….
March 7th, 2009 at 8:07 pm
formershrink Says:
March 7th, 2009 at 6:12 pm
@glenstein:
While I appreciate your attempt to bring reason to bear on an emotional issue, I think your questioning why people are outraged misses the obvious. There is actually not the slightest mystery as to why people are outraged.
Really, I think the rational question is the validity of the domino theory of economic collapse: what is the evidence that allowing AIG to go bankrupt will injure taxpayers more than paying for it to remain in business?
…….Well the possessors of the evidence and the guys who’ll be held responsible (ie. Bernanke, Geithner and Summers) unlike you who can sound off with impunity have decided the evidence is compelling…..So why don’t you tell us why keeping AIG afloat makes less sense than letting it collapse…….and your qualifications for being able to make this assessment…….In the absence of a response I’ll draw the appropriate conclusions.
March 7th, 2009 at 8:33 pm
@ SS = Schutzstaffel so what banks(s) do you lamely protecting or are you just a lowlife working for Tim Geithner ?
http://en.wikipedia.org/wiki/SS
March 7th, 2009 at 8:34 pm
I’m not sure I understand the point of the article. Who else could be receiving the payments from AIG?
I think it was obvious that those CDS had not been acquired by Joe Six Pack, when they said that AIG was too interconnected they meant that too many other financial firms would go under.
This may be wrong or right, but honestly I don’t see any novelty in the list of recipient from the WSJ.
What was the list you had in mind, why does this one surprise you?
March 7th, 2009 at 8:41 pm
@cix why should the US tax payers bail out former nazi banks? Let the Germans do that. Deutsche Bank should be bankrupt.
March 7th, 2009 at 8:43 pm
Getting F&*ked as a taxpayer hasn’t felt this good, and I’m expecting more, much more. Makes you want to pay more, doesn’t it?
March 7th, 2009 at 9:12 pm
What I boil out of this is a simple question. Where is the systemic risk if you owe the money to yourself? Is that the message you are trying to get across to us Barry?
March 7th, 2009 at 9:43 pm
@How the Common Man Sees It:
Yes, you do owe the money to yourself, but its more like your jugalar, which is gushing blood, owes money to your hands. So your hands refuse to hold the wound closed long enough for things to get better.
March 7th, 2009 at 9:59 pm
These Pigmen MUST be stopped. They are looting the public purse which already cannot afford it. How long is the public going to allow their futures to be raped like this. ENOUGH!! It’s time for Pitchforks and Torches.
March 7th, 2009 at 10:09 pm
Well, I for one, welcome our Chinese overlords.
March 7th, 2009 at 10:12 pm
Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group
This is simply unconscionable . . .
…and actionable?
Instead of pitchforks (do they still stock those at Home Depot?) How ’bout a boycott?
What say ye?
March 7th, 2009 at 10:57 pm
@glenstein Says:March 7th, 2009 at 9:43 pm
Yes, you do owe the money to yourself, but its more like your jugalar, which is gushing blood, owes money to your hands. So your hands refuse to hold the wound closed long enough for things to get better.
Actually, I think it is more clearly explained as owing $650 billion that is needed to settle systemic risk contracts and having 50 billion of contracts that can cancel each other out. Instead, your agents at the Fed get you the whole 700 billion in taxpayer’s dollars of which you don’t cancel those contracts out but rather pay it to yourselves anyway….probably in the form of either bonuses or little brown bags stuffed with cash.
It is 50 billion so far of course. Where the other 650 billion – or trillion or whatever it is tomorrow – needs to go has yet to be revealed.
And I suppose that is why they are working so hard to keep the revelations from happening. You would think if this were on the up and up they wouldn’t have a problem with full disclosure
Do you realize that if they keep this up the mafia are going to become jealous?
March 7th, 2009 at 11:05 pm
@McHugh: ” In your face money grab.” CORRECT.
Once again many are grappling with the Acceptance stage.
For myself, I find it unconscionable that tax dollars are going to foreign interests that encouraged us into this mess. I mean, come on, there is the remote possibility we might have found happiness driving Saturns and not BMWs.
March 7th, 2009 at 11:20 pm
If the redneck element wishes to shoot it out with the US military, I strongly encourage them to do so. You know, for cathartic reasons and all. For the rest of us, it will free us of such voters. I’ve been for taking the warning labels off things for some time now, and letting nature take its course. Again, we’d be freed of dragging along a number of unuseful idiots.
Now, if memory serves, the one thing that seemed to focus the minds of Paulson, Congress, et al, was when a few folks panicked a bit and began a $500bln run on the banks.
Sounds like we need to repeat that performance, except on a larger scale. Taking our cash money away is legal, moral, and doesn’t invite military retribution. In fact, it would likely hamstring the military something fierce. Kicking down our doors over an ordinary withdrawal will probably not get them what they want. (Unless they’re looking for being internationally blackballed due to War Crimes charges).
I have done my share. I have removed my deposits from the Federal Reserve System. I have borrowed my 401k (because our plan allows it, some don’t). They still have about $12K of my cash, because I cannot borrow it all at once. That’s a material drop, trust me. Perhaps we should do this slowly to avoid having the gate slammed shut.
But if you are angry, take your money away from them. There’s little they can do about it. And we won’t have to listen to all that “we will not be intimidated” nonsense. You WILL TOO be intimidated if you’re standing there holding nothing but liabilities, Sheriff. So give your pistol a twirl if that’s your bent, but simply take their money away. Convert it to something they have no authority over (gold, silver, pesos, whatever), so it cannot be declared worthless.
This can be dealt with without burning all that gas to drive to DC, only to have your head bashed in by riot police.
Incidentally, why isn’t the transfer to foreign banks considered fraudulent conveyance?
k
March 7th, 2009 at 11:34 pm
It may be too late They may not need us any more) but maybe now people will seriously consider boycotting debt
Starve the beast
March 7th, 2009 at 11:40 pm
@Common,
I can’t imagine they don’t need us. (I wonder who would lead us now, if none of us would vote).
Who will buy their bonds? Gross? Blankfein? We have $4 trillion bucks. Add insult to injury. Move it to Switzerland (and pay every dime you owe in taxes). I don’t believe a single crime, not even speeding, should be committed here. Just take the money and we’ll be able to change the name to American Idle.
As you say, starve the beast.
March 8th, 2009 at 12:08 am
kstoaks,
IOW, “Defund to Defend”
boycotts work, it is the primary reason the MSM rails against them so..
March 8th, 2009 at 12:31 am
@kstoaks Says:March 7th, 2009 at 11:40 pm
They may not. Their money circle may be self perpetuating now to the point that they no longer need the serfs to feed it with their interest payments on the debts on their houses and credit cards
Taking your money out definitely is a way to fight back. I have done my utmost to keep as little money in cash in banks as possible for years. I am probably an enemy of the state that way. You can’t lend to debt slaves what isn’t in the account. That is actually what made me a trader. I saw that putting my money in shares was a way to keep it in the economy while at the same time earning a return and keeping it from banksters
March 8th, 2009 at 12:33 am
Mark,
I’m not sure my approach is even helpful, but its remarkably cathartic. I’m not a moron, its not in the mattress — but its not in the Federal Reserve System, either. There are alternatives, even here in Hooterville (OK, its a little bigger than that, but not much).
As far as the MSM, I’ve counted 5 dead newspapers in a week. If they’re so damn smart, why are they joining the tent cities? I only buy a newspaper when I want to spraypaint something.
I’m for focusing minds, not undermining the country. I’m sure Deutche Bank is a very nice bank, but it doesn’t need our capital as much as the folks in Peoria need jobs. We’ve lost track of what matters, and another massive run might panic them into doing the right thing.
k
March 8th, 2009 at 12:40 am
Common,
If I were competent to trade the current environment, I certainly would because the volatility is very, very juicy. The options premiums must be ginormous. But this man knows his limitations, so I have no opportunity costs here.
My retirement fund selection is a standard fare of long-only “invest for the long run” stuff. It worked like a set of twins in bull markets, but its literally useless here, so I’m in cash. I have no choice but to borrow it out and buy XOM and other inflation hedges. True, I have to pay it back, but I can borrow it faster than the paybacks. Hell, I could pay my mortgage off (but I won’t — its another inflation hedge).
I’ve encouraged family members to spread it around in case of an FDIC screw-up (shit happens) and the ATMs go dark. But full-on panic is not my bag aim here. Just a little Come To Jesus…
k
March 8th, 2009 at 12:43 am
@How the Common Man Sees It
Maybe my analogy was inept. In any case I don’t think your comment responded adequately to what I (attempted) to point out: the fact of “owing money to ourselves” is only really true in an extremely abstracted sense- its unmistakably clear, for instance, that AIG’s obligations are not the government’s obligations. There is additionally the non-trivial argument that, in abscence of a bailout, there could be a pretty damaging collapse in demand.
It’s also at odds with a fact being raised by other commenters- that several of these counter-parties are non-US banks. That really stretches the “owe money to ourselves” metaphor, to the extent that it lacks any real explanatory power.
March 8th, 2009 at 12:45 am
>AIG’s obligations are not the government’s obligations
or rather, when AIG took them on, they as an entity were quite distinct from the government- and the counter-parties to which AIG owes money are not the U.S. government.
March 8th, 2009 at 1:00 am
glenstein,
w/this: “There is, additionally, the non-trivial argument that, in absence of a bailout, there could be a pretty damaging collapse in demand.”
we’ve been having ‘bailouts’ since ‘007, at least, yet we’ve seen a ‘pretty damaging collapse in demand’..
care to rethink your Keynesianism?
~~
kstoaks,
to your point: the World is filled w/ non-Financial assets, always has been, always will be. Often, they’re the best kind..
and, yes, SH, is a broad category, one, unfortunately, or not, missing from too many algorithms..
March 8th, 2009 at 1:09 am
Since its obvious the traders of the flock are still awake, anyone know of a decent book, blog or whatever that can explain Elliot in English?
March 8th, 2009 at 1:10 am
@Mark E Hoffer:
this is just on the virge of being too easy to be worth rebutting- the financial crisis is unique in both scale in precedent, as is the corresponding possibility for halt in demand.
March 8th, 2009 at 1:19 am
sorry mark, I think I mistook your statement for a different one. I’ll modify by saying that the bottom is much deeper than where we presently sit, and you’ve done nothing to address the current scenario, wherein we experience economic downturns but stave off still worse via government intervention. But I’ll keep the part about this scratching the lower limits of what is worth rebuttal.
March 8th, 2009 at 1:40 am
Kstoaks,
AT is the one to ask..
glenstein,
to unpack it some: if Debt, too much of it, is the current problem, how does more Debt begin to solve it?
as I was alluding to, we’ve been on this road for quite awhile, how’s it been working out, thus far?
are you, really, going to tell us that the magic # of indebtedness hasn’t, yet, been reached? and, with just a little more, things turn pink, again?
if we’re interested in ’staving off still worse’, serious people, or people elected to serious positions, or positions that were once thought to be serious, wouldn’t be talking about band-aids and gauze pads, they’d be acting out a whole different level of triage..
March 8th, 2009 at 1:43 am
Ks,
this: http://www.elliottwave.com/ezine/independent/ewi_independent_online_030509.html
comes from one of the main fonts..
March 8th, 2009 at 3:25 am
@glenstein Says:March 8th, 2009 at 12:43 am
When referring to ‘owing money to ourselves’ I was talking from the banker’s perspective.
How is there a problem of potential systemic collapse when they owe money to themselves? I think this was Barry’s original point and what I was reiterating. Should they be paying themselves 50 billion dollars or doing the creative accounting they seem to be able to do so well, do some constructive work for once, and cancel out some of the debt they owe to themselves in return for the government stemming the mess they created? If they can’t do that then maybe that 50 biliion needs to be clawed back and some auditors can do it for them
If that is not what he meant I stand to be corrected
March 8th, 2009 at 3:35 am
Mark,
Cool link — thank you! That’ll work.
I’m a swing trader when I trade, but this environment is not my cup o’ tea. I’m a little short on trading brains, so I do it the easy way, and lean on the bull market. Only now, not so much, for obvious reasons.
If it wasn’t for serious people making a serious dog’s breakfast of their elected positions, we’d likely still be in this mess. This is a banking mess that’s fast became a political mess, too. It smells like an evil cross between 1907 and 1929, in a way. The banks lent too much, grinning into their shirtsleeves thinking they had off-loaded the risk to one set of dunces, while another set of dunces were about to hand them a huge pile of assets via default, all while those assets were appreciating to moon. Rinse and repeat.
Except the huge pile of assets morphed into a huge burning pile of margin call.
Oops.
k
March 8th, 2009 at 3:54 am
As a computer guy that’s been hanging out around the Oil & Gas bidness down here in Tejas, banks are not the only dudes that traded their assets back and forth. The independent O&G guys seem to do this too. I see the same properties turn up in different sets of books every boom cycle, except this time they’re owned by XYZ for $40 million, rather than The Disreputable Company at $10 million. They will be written down to $1 million like they were last time.
I guess it was real estate’s (and by default, banks) turn in the confessional. But so much capital has been destroyed in this particular cycle, my neighbors and those not fortunate enough to hear Barry’s cry of “We’ve Big Honkin’ Hit Rocks, Into Cashboats, Boys!!” are financially obliterated.
Those high $ acquisitions are just killing some of the O&G outfits (happens every boom/bust, natch), but the ones that didn’t do anything idiotic are priced for Armageddon, so there’s (black) gold in them thar hills somewhere. Someday.
That’s part of the reason I’m interested in the Elliot stuff. It seems to be a pretty good tool for my “hold overnight” style. I consider the markets temporary closed for trading, so I might as well hunt for the Next Great Arrow for the timing quiver. I’m itchy-fingered, but I have a deep, abiding respect for avoiding buys at the tops of Bollinger Bands (no danger of that now). Elliot seems to be able to see farther into the future than Bollinger, and help me better tell when Someday might actually occur.
k
March 8th, 2009 at 3:03 am
@Ottob. Glenstein………What you’re missing is that most of the posters here are suffering from either a surfeit of moral outrage or they don’t know their ass from their elbow…….Somewhat amazingly to me BR seems to have joined the guys with tar and feathers…..Perhaps he thought all the counterparties to these swaps were The Salvation Army and the Knights of Columbus (actually the latter could be since they own a large insurance company).
The point being, Nationalise AIG and let the Hedge Fund side of AIG go. Then the CDS’s all get netted out OR defaulted on. Shame GS, FU, you created the problem. Why should the taxpayer pay GS?
March 8th, 2009 at 3:09 am
Ks,
re: link no prob..
re: erudition of some these actors on the Poli-Sci-Fi stage? big problem..
as to allude to: The key to wisdom is knowing what you don’t know.
with that, never hurts to understand more than one perspective, whether it’s Trading, Digging Wells, or just plain gettin’ on w/ things..
it is interesting that you mention ’swing trading’, from this vantage point, I’d doubt, highly, we’ve, yet, seen the Highs in Volatility..should be a swingin’ time, let’s hope not too many innocents get knocked out..
and, as you were saying, a huge diff. ‘tween Price and Value can be found in many Markets..
also, remember when there’s not much to Buy, there’s, usually, lots left to Sell..
March 8th, 2009 at 3:15 am
philipat,
some things are too simple..\
and, you remember the ol’ adage: “One of the most difficult things to do is to get a man to see what his Paycheck tells him not to..”
also, remember, whether its Water, Oil, or Opinions, consider the Source..
March 8th, 2009 at 6:26 am
@MEH
True, BUT if we carry on like this, there won’t BE any paychecks. Anyway, I don’t need one and in any case have been short for over a year so, whilst it might be a case of preaching to the converted, I’m certainly not making new investment decisions on heresay, if that’s what you mean!
March 8th, 2009 at 8:41 am
driven by the CBS SundayMorn piece on Multiple Personality Disorder …..
doctor A it exists .. doctor B its a planted notion .. HercshelW dont tell me . dope . I had/have it
I wonder what the landscape would look like in a world not driven by the need for cash ….?
and another
worth a minute of your time “Long Now Foundation”
would Rap have flouirshed?
March 8th, 2009 at 8:45 am
philipat,
Well, I was alluding to those who don’t get: “The point being, Nationalise AIG and let the Hedge Fund side of AIG go. Then the CDS’s all get netted out OR defaulted on. Shame GS, FU, you created the problem. Why should the taxpayer pay GS?”
or
“What you’re missing is that most of the posters here are suffering from either a surfeit of moral outrage or they don’t know their ass from their elbow”
but, this “I’m certainly not making new investment decisions on heresay”, never hurts, either !~
and, this: “if we carry on like this, there won’t BE any paychecks.” is w/o question.
March 8th, 2009 at 8:46 am
Barry, there is a great article in the January 19, 2009 FORTUNE magazine that is well worth reading about
AIG. After reading it would be interesting to hear your comments.
AIG: THE COMPANY THAT CAME TO DINNER
http://www.insurancenewsnet.com/article.asp?a=top_news&id=102152
My take away from the article (agree or not) is that the government had no choice but to funnel money to AIG. The article is a little dated but still very much on track IMHO.
March 8th, 2009 at 9:54 am
next in tube lineup .. Face t’ Nation .. GOP John Boehner seems to have lost his color sense .. blue tie and no flag pin
I’m guessing ya can’t wear the WTO rgb pin colors just yet and red ties are out this year (camo is out too) … I like the technicolor ties myself
March 8th, 2009 at 10:22 am
Doug, violence will not, unfortunately, resolve the situation. Americans are too damned stupid to do anything. Politicians do not fear the voters, nor do they respect them. They feel that it is their sovereign right to stay in office as long as they please, and screw us over as much as they want. I thought Bush had gotten way out of control with spending. Obama comes in and deliveres the change he promised, over DOUBLE the budget Bush had, even in war.