naked capitalism

Anonymous says:

Is it becoming the new policy of America to bailout all organizations that make bad financial decisions at taxpayers expense? And at the same time punish individuals that do the same?

This is not the America they teach in school.

We keep digging down. When will it stop?

psychohistorian

Anonymous says:

So, if I understand well, the bailout was necessary so that the big counterparties (the French Banks, Deutsche and Barclays, and, of course, eventually Goldman etc) would get their money back, ahead of a proper bankrupcy?

Martin, the Netherlands says:

@ Anonymous: That’s about rigt, I think. It would seem to me that there were three options: (a) Supply AIG with enough money to honour its contractual obligations. (b) Let AIG go bankrupt. (c) Supply AIG with enough money to pay its American counterparties, and tell the rest of the world that the American taxpayer has enough worries of his own. Option B would have been equally damaging to a lot of American counterparties, I’m not able to even guess how bad it would be, but probably pretty bad. Option C would have been quite possible. But the downside would have been that the rest of the world might become just a tiny but worried about the safety if its American investments -like the Chinese PM. So it had to be option A. And it is quite likely that when the next chunk of CDS contracts have to be paid -for instance, when GM and Chrysler go into a nice pre-packaged bankruptcy- and AIG is going to foot the bill ance again, the American taxpayer is going to find his tax dollars, again, being put to good work. Viz, ensuring that the continuous flow of money towards the U.S. does not get interrupted. I’m sorry, but I’m afraid that this how things are.

Bernanke is not a lawyer! says:

Connecticut’s attorney general on Tuesday also disputed Federal Reserve Chairman Ben Bernanke’s assertion that blocking AIG’s controversial bonus payments would violate state law.

AIG has become a lightning rod for populist anger after giving out $220 million in bonuses, including $55 million paid in December, to some executives after receiving a $180 billion government bailout to prevent its collapse.

A letter to AIG’s lawyers from Connecticut Attorney General Richard Blumenthal and state lawmakers expressed “deep concern and frustration” over AIG’s “lack of cooperation.”

Blumenthal also criticized Bernanke for testifying in Congress that Connecticut’s wage law posed a barrier to any lawsuit seeking to block AIG’s bonus payments.

Bernanke told the House Financial Services Committee that he supported such a lawsuit but that his legal counsel advised him not to pursue one because of Connecticut’s laws.

“The Federal Reserve never contacted me or my office concerning the applicability of the Connecticut wage law to the AIG bonuses. If the Fed had called, we would have given the green light for litigation blocking these unconscionable bonuses,” Blumenthal, a Democrat, said in a statement.

In a telephone interview with Reuters, Blumenthal added that he would write to Bernanke urging him to go through with a lawsuit against AIG.

“Clearly there is nothing in our wage protection statutes that prevents a lawsuit blocking bonuses,” he said.

Blumenthal disputes that assessment. “They are not wages under our law,” he said in a telephone interview. “AIG used this joke of a justification to squander $218 million of taxpayer money, rewarding monumental failure.”

Bob Duff, a Democratic state senator who is co-chair of the Legislature’s General Assembly Banks Committee, also disputed Bernanke’s assertion that state law would derail a lawsuit.

“Mr Bernanke may be an economist but he is no lawyer,” he said. “I will take the state attorney general’s opinion that he could have sued to get the bonus money back.”

1 quadrillion and counting says:

From May of last year:

Derivatives, including those based on debt, currencies, commodities, stocks and interest rates, expanded 44 percent from the previous year to $596 trillion, the Basel, Switzerland-based bank said in a report today. The amount of credit-default swaps protecting investors against losses on bonds and loans more than doubled to cover a notional $58 trillion of debt.

>> Now the story is: Toxic Assets Were Hidden Assets

http://online.wsj.com/article/SB123793811398132049.html

Today's global crisis — a loss on paper of more than $50 trillion in stocks, real estate, commodities and operational earnings within 15 months — cannot be explained only by the default on a meager 7% of subprime mortgages (worth probably no more than $1 trillion) that triggered it. The real villain is the lack of trust in the paper on which they — and all other assets — are printed. If we don't restore trust in paper, the next default — on credit cards or student loans — will trigger another collapse in paper and bring the world economy to its knees.

If you think about it, everything of value we own travels on property paper. At the beginning of the decade there was about $100 trillion worth of property paper representing tangible goods such as land, buildings, and patents world-wide, and some $170 trillion representing ownership over such semiliquid assets as mortgages, stocks and bonds. Since then, however, aggressive financiers have manufactured what the Bank for International Settlements estimates to be $1 quadrillion worth of new derivatives (mortgage-backed securities, collateralized debt obligations, and credit default swaps) that have flooded the market.

Anonymous says:

A link not related to this AIG chapter but its about AIG. Its from Clusterstock, found while reading Links of 03/24:

http://www.businessinsider.com/henry-blodget-why-im-quitting-aig-2009-3

Anonymous says:

Just merge the division with GM and see if that flies.

D