What happened to...

@TDrag "I have a hard time believing this will turn out to be a folly of honest mistakes." No doubt. An insurance company should never, ever have taken on such high risk investments. But they wanted to be #1 and get there quickly....rise fast, fall faster. Good to see you blogging again btw. Taxi, thanks for the mad props.

TRUE

And the crowd roars !!!!!!!!!!

Just smack the pinata and all will be right with the world sooner or later. That or GoW 2 will come out and no one will see the light of day, but me.

or worst socialists!!!

I am already #2 of those three choices. What do I win?

My only response to this........ You're HOT! :D

The rewards of big government.

+10 bazillion

You want change vote democrat this election

Oh sorry I meant the three choices in your final sentence :)

kashi damn it !!!! its to friggin early to be talking about anything of substance! hows your moth drops doing lmfao

BUT... no one bails us out, the tax payer. Our wallets are the bail out option.

AIG is to important to fall. Nobody wanted to bail them out with a loan. Freddie and Fanny bail out was imminent since they lobby congress like no one else. They had a huge bail out and then the government took over. I wonder what happened to that bail out money since there were no-strings attached claus to it. Now the Fed needs to print more money, this will make the dollar even weaker. Alan Greenspan is a very smart person, bailing out a year before disaster strikes, like a captain jumping ship. The US can do 2 things. Cut spending, and regulate the Fed. The Federal Reserve has no one to answer to, no regulating body oversees the Fed. Then quit spending, sending billions to Georgia? Come on, I don't even want to get started. Don't forget the trillions spent in Iraq. Print, print, print....

after seeing the news here with lehman employees crying and walking out of their building in SF - I'm curious as to how they choose who gets bailed-out and who doesn't... lehman stock = $0 .18 per share. So much for retiring...

I tell ya, with the way things are going with this crap, it's 1 step away from Comunism. Much more of this and we're moving to NewZealand.

I think they took AIG over Lehman just for the amount of money that is tied up not only here in the US, but overseas. They do some major business in well over 50 countries. While I don't think that we should bail out companies in general...especially because of worldwide influence on business. It seems like this was the smarter of the two choices to save.

I need to get one of those signs for my desk like Truman had that reads "The Buck Stops Here" Only he was President. This economy is like being in the back of a Las Vegas cab... drunk. You look out the window and see many strange things, and wonder just who is at the wheel.

Great points ekattan. There are hundreds of thousands of financial transactions across multiple nations that are backed by insurance policies through AIG. If they go, there is no backbone to support those transactions and starts a cascade when those deals fail. It greatly increases the risk of estabilshed deals without including the additional cost for that risk in the original deal. Its going to be hard enough to get a loan over the next 4-8 years as is.

Tara, referring to point 1, would you have let AIG fall apart? Keep in mind that this is a loan, not a gift. AIG is going to be dismantled in order to pay back the loan. This allows the policyholders to remain confidant that their claims will be compensible. If nothing was done, and no money came in, AIG falls apart and defaults on it's insurance claims. Some of these types of claims are federally and state mandated coverage (think Workers Compensation and Disability insurance in some states). So, that means other carriers would be forced to take on that liability whether they wanted to or not. Worst case, AIG goes down, and there is a run on the insurance system. Very bad news. Finally, AIG does business with so many other companies and countries. If they went down, all of sudden revenue streams and assets for thousands of companies would suddenly dissapear. I am not for government intervention excelt in extreme cases. To me, this looked like an extreme case. We can talk about what the causes were and how we got here, but from what I am hearing, the gov did not have much of a choice on this one.

I still like creamed corn.

Jmarps = winner. Here's a few clips from WSJ: http://online.wsj.com/article/SB122165238916347677.html?mod=testMod "...AIG's financial crisis intensified Monday night when its credit rating was downgraded, forcing it to post $14.5 billion in collateral. The insurer has far more than that in assets that it could sell, but it could not get the cash quickly enough to satisfy the collateral demands. That explains the interest in obtaining a bridge loan to carry it through. AIG's board approved the rescue Tuesday night...." This a loan that they can more than pay back, without having an adverse effect on foreign and domestic insurance policy obligations, as well as on all their credit swaps and AIG-backed money market funds. Historically, the mm's are one of the safest investments available - no fund has lost money except an Orange County, Cali fund in 1994 that went bankrupt. (again, per WSJ article). Hell, they weren't even losing money because of insurance shortfalls; it was their financial arm that cause their cash squeeze. A financial arm that was funded largely by....wait for it.....SUBPRIME MORTGAGES!! They let Lehman fall, but there are other IB's out there that will keep the financials going. Letting AIG fall would be catastrophic. Last quote from same article: "That the government would prop up AIG financially offers a stark indication of the breadth of the insurer's role in the global economy. If it were to have trouble meeting its obligations, the potential domino effect could reach around the world." Jmarps says this is a loan, not a gift. Jmarps says this is extreme case. Jmarps is wise, yo.

Lehman's case is much different since they are not an insurnace company, but an investment bank. They bet the farm that the value of their mortgage backed securities could fall regionally, but not nation/world wide. So they diversified their investment local, but not the type. Its a result of the deregulation of the mortgage lending industry. Banks ended up carrying none of the risk themselves. Instead, mortgages would be instantly bought up and securitized by investment banks such as Lehman. As those bundled and securitized mortgages pass from hand to hand, people cease to know or care about the degree of risk represented by the underlying mortgages. As a bank, you don't care whether your loans are risky if there's another investment bank out there willing to instantly buy and securitize 95% of your loans without regard to risk, which is what was actually happening in many cases. Everything was fine they could no longer just trade and actually needed to examine their holdings. Once investors began to examine how much those morgages were actually worth the stock tanked.

Good to see you blogging again. The AIG example may not have been a good one, but I agree with the sentiment that folks are losing their sense of personal responsability. I understand that there were (are) predatory lending practices, and that this situation was made possible by a combination of greed and stupidity from the government, lenders AND homeowners... but really. AN ARM????? Why the hell did all these folks (really only a small % of mortgages, I think) decide to go with an ARM? (and then not bother to, or not be in a position to refinance) Is it really that important for a family of 3 to have a huge McMansion house? Really... live within your means folks. Spend some time in a cardboard box and learn to appreciate the modest house you could have afforded if you hadn't been greedy and stupid. (simplified argument using absolute terms, I know, but I don't want to put in a million caveats and list the exceptions to the rules) .