naked capitalism

Andrew Foland says:

Goldman at the top of the list?

Shocked, gambling, establishment, etc, etc.

I’m fighting the numbness, but I think I’m losing.

Agi says:

It’s time for everyone to put down their ipods and video games, get pissed off and protest the offices of this company.

The money is supposed to help this company survive and stimulate the economy, not pay for a few people’s second home, vacations, etc.

This unethical distribution of tax payer money cannot go unanswered by the public. This is all happening on our watch.

Some AIG office addresses at:

http://agilog.blogspot.com/

robbiadams says:

I think an important question is whether the CDSs purchased, e.g., by GS were actually to cover existing notes held by GS, or were naked bets that against all reason we’re now paying off. Yves, any idea? Rob Kane

Anonymous says:

the money will be paid one way or the other since its purpose is not for outstanding performance, but for not saying anything to anyone. So far AIG did a decent job, why can’t they get what they were promised?

the really question is what they promised not to say. How many of these losing bets were made after officials and the industries decided AIG was the best vehicle to transfer huge amount of money?

until someone tries to ask the right question, there is nothing special. move along

Anonymous says:

If it is hush money, what would thye be keeping quiet about?

Anonymous says:

I stilll…….. do NOT understand

1. None of those banks are making money. In fact almost all banks in that list are about to go under.

2. The money every government has injected amount to $2-300B! Where does the money go? I mean really… that’s a LOT of money. Even bunch of bogus transactions should finally ends up in some sort of hard asset right? It couldn’t possibly be all in real estate.

My basic question. if global banking system is a black box. Money goes into the box, mysterious process inside, then we have output. The total output couldn’t possibly valued at $400-600B injections!

What’s going on? I want to know where those money went? What type of real world loan did the banks created in the past 5 years or so?

The size of money these top 10-15 banks are about the size of Japanese or chinese reserve. ~$700B ish.

… I mean, the size is beyond staggering. This is like somebody misplace Japan or entire west coast on the map.

Where did the money go?

Anonymous says:

I think the Puritan treatment of suspected witches ought be emulated here but with one alteration: To the dunking stool with Bernacke, and the earned environment, fetid horse ca-ca, not water. One will then hardly avoid seeing the justice attendant in the charge that ours is a fascist system and its leaders brownshirts.

Anonymous says:

Sheep are for shearing.Learn to like it.

Anonymous says:

So AIG had the City of New Orleans pension funds. Do they have the federal pension fund as a customer?

AIG officials, including Chief Executive Officer Robert Willumstad and lead independent director Stephen Bollenbach, “utterly failed'' to monitor operations, according to the complaint. Directors allowed AIG to market and extend subprime loans and insure subprime-related assets without considering borrowers' ability to pay and with unreasonably high risk of default, the pension fund said.

Federal Violations

Directors also allowed the company to misrepresent its business prospects and financial results, exposing AIG to liability for federal law violations, according to the complaint. AIG shares have plunged 96 percent this year on the New York Stock Exchange.

“Defendants were ill-prepared to monitor AIG's submersion into the subprime market and unduly heavy investments in credit derivatives, a business strategy that blew up in their faces,'' the complaint said.

The retirement fund is asking a judge to order the directors and senior officers sued to return to AIG all compensation paid to them, in addition to unspecified monetary damages sustained by the company.

The case is City of New Orleans Employees' Retirement System v. Steven J. Bensinger, CA4042, Delaware Chancery Court (Wilmington).
http://www.bloomberg.com/apps/news?pid=20601087&sid=adXJ4l5Zs33s&refer=home

Anonymous says:

Wouldn’t tearing up all these CDS contracts and guaranteeing the bonds that were backed by these CDS would have been a more prudent approach. Most of these bonds are anyway AAA rated (Whatever that means…) but, atleast we wouldn’t have to put up $180 billion right now.

Can anone explain why this course of action was not taken? I mean what is this collateral for? In the cogressional hearing the powers that be that are testifying say that there are very few losses on the bonds themselves and the losses are due to mark to market accounting. Thanks

mr. blissett says:

likewise brilliant & worth repeating:

"But fear not in a few weeks the politicians at the request of their Wall Street masters, will have pressured the regulators to modify the rules of mark to market that will enable the banks to make those imaginary wealth real."

EXACTAMUNDO

lesson #1a on how to pull a bank heist in broad daylight — run the bank.

p.s. read the initial figures last night from a room in kowloon overlooking victoria harbor — funny how the only building on HK island with all its lights on still at 3 a.m. on a sunday night was the AIG building.

perfect metaphor methinks.

and if you do some digging, you will find that the AIG black box is titled pandora and leads down a rabbit hole far deeper than you can ever imagine.

see Knoll / Marsh & McLennan for instance.

one may eventually come to a realization that all the secrets & sheninangans over the last 8 years can be found in there…just make sure you don't fall in never to be found again.

Anonymous says:

Anon. @10:58 pm :

I believe you have it exactly right. I guess I’m educated, I work in the trading business and have five years experience at one of those big banks.

The only possible error is that perhaps we’re nowhere close to making the banks whole, the CDS contracts are truly a black hole of tens or hundreds of trillions of dollars.

Amounts far more unimaginable even than those bandied about so far.

Anonymous says:

@Tyler 11:45 pm

AIG should do what any other CORPORATION should do when it cannot pay its continuing obligations: it should go bankrupt.

Please explain why not. And not from the perspective of their counterparties, because we don’t owe those counterparties anything.

Anonymous says:

Tyler,

I don’t buy it. At a minimum, if there was any political will, all CDS could be declared void (for instance, as illegal insurance or gambling products) or voided if the counterparty did not hold the underlying bond.

The ONLY reason I have read that seems convincing for not doing that is that a lot of European banks evaded statutory capital requirement with the help of AIG CDS.

I’d rather wipe out the market, see where the dead bodies and and figure out what to do than keep pumping money at a problem with no sign of the end.

And all these armageddon stories are not very specific, and don’t strike me as any worse than what we are seeing now. The insurers are looking for bailouts as we speak, for instance.

Anonymous says:

I believe that a fuse has been lit.

The rage does not have a name yet but it is becoming visceral.

Even if the process of investment banking displayed before us is not criminal, as currently defined, the results are beyond war crimes.

Selective enforcement of rule of law is the chink in the armor that is causing enough cognitive dissonance that it is shattering the social fabric.

Truly interesting times.

psychohistorian

Anonymous says:

Tyler,
How much would it cost to backstop the whole industry?
What would happen if they abolished MTM? What’s the main deterrent to abolition, negative economic repercussion or lack of political will?

tom a taxpayer says:

O.K. Now I’m really scared!
I think I’ll have nightmares.
Maybe some warm milk will help.
Can we all just count whatever marbles we have left, and go home, and play another day?

Tyler Durden says:

if you read my guest post below you will see why the fdic has its work cut out for it in the status quo, let alone having to provide a trillion + DIP

Tyler Durden says:

i wish i knew. at this point any “action” is just stall tactics. sure, you can tax them to hell and back, you can nationalize their property ala Eastern Block in 1945, but it won’t fix the root problem. what will? honestly, i have no idea.

Anonymous says:

A nice little 90% windfall profit tax on all these thieves seems in order.

Anonymous says:

This is rich and I do mean RICH, the best and brightest in the land and some from overseas, with the Bush Uberments blessing, have built the first global DOOMS DAY BOMB, even the incoming administration is hostage to it.

It is, an I.E.D of global proportions with infinite trip wires to blow us all up if we F*#K with it. In fact we can not FLAG IT as a no go zone and run away, we instead must feed it more explosive monies to delay the inevitable combustion to come some day.

We don’t need these people in control of any thing, I would not trust them to clean a public toilet and do a good job, let alone have access to the leavers of the world economy. If I may suggest we can re-educate them to the benefits of communal thinking by handing them a AR-15 and having them do guard duty, traffic stops, stretcher bearers, FO duty and the like in Iraq and Afghanistan. Then they may realize the the SH*T they carry on about in their lives, pales in comparison to the sacrifice others are experiencing for and in their name.

If I was coming back from the sand box after watching good friends and people have their life extinguished, and find out it was so pathological lairs and sociopaths could and had, permanently brought more destruction to my Country than all the terrorists Bush and Co said were out there. I would in my post traumatic depressive state, may become a loose cannon on the deck. These people better watch their backs from now on, hope it won’t happen but history says different.

Grosse Pointe…how many people have died on a wild goose chase, when the real enemy was with in.

Anonymous says:

A CDS sounds like a bet to me so I am confused. Gamblers can bet as much as they want, but when they lose, someone else gets that money.

So if there is 1,000 trillion in derivatives out there, and let’s say someone could write a check for that much, then who ends up holding all that money?

Who’s sitting there hoping this all defaults because they’ll then be owed billions to a trillion dollars.

If the CDS market is threatening to destroy the world economy what would happen if the governments just made the things illegal and unenforceable retroactively.

Anonymous says:

So…

What prevent a bank to create fictive lost and charge it on government bail out?

I mean, is not like anybody can check how much of those CDS has been created. I know if I was BofA or Citi, I would make sure I report gigantillion worth of lost so I get maximum bail out. (hey, it’s free money. Print some more equity and future IOU, who cares.)

so, what stops bank to create semi fictive lost transaction to maximize bail out money?

Justin says:

I don’t want blood, but I’d love to see some public shaming by posting names and retention bonuses. I’m sure I’ve met a few of those folks, probably last time I was vacationing at the Grand Wailea in Maui and I’d love to ask how they feel being pariahs to 99% of the US.

I find fascinating the debate whether we should break private contracts for the good of the global economic system. Morbidly fascinating, but fascinating nonetheless.

This whole situation with AIG reminds me of a movie called Speed, where there was a bus wired to blow if the bus was stopped or even if it slowed under 50 (my memory is a little hazy on the details).

Anonymous says:

So the smartest minds in finance have devised a system that is entirely based on the proposition that markets must always go up and if they don’t then all the intertwined indexed ponzified unregulated, untracked financial (not insurance) instruments will blow up and the world will end.

I call bull shit! Unmitigated self serving bull shit!!!

psychohistorian

PappaHippo says:

Worth pointing out that KfW and Landesbank Baden-Wuertemberg are German state owned banks so in the end the US government sponsored the Germany…

cap vandal says:

What a mess.

Regarding the credit default swaps — the transactions between AIG and the counter parties between September 16 and now represents the amount paid for multi sector CDO's. These ended up in Maiden Lane III and are currently valued in the high $20 billion range. That is the so called market value when the credit default swaps were terminated. I think it misses the amounts booked by AIG prior to September 16th on these.

The net gain for the banks on these will equal the total cash they received minus the total cash thrown off by the CDO's as they amortize. This is a "bad bank" situation where the toxic assets are now sitting in an entity and will simply amortize. No one will know the final amounts until Maiden Lane III is done. The cash payments are the maximum cost assuming Maiden Lane III assets generate no cash.

These were real CDO's that the banks sold to AIG to extinguish the CDS.

There is still a relatively smaller chunk of CDO's where the banks don't hold the underlying that haven't been settled ($10 billion range).

I would like to see a complete reconciliation, on a CDO/bank level of detail. First a cash reconciliation by quarter and payment type. Then an accrual reconciliation showing the amounts booked by quarter. This should be continued until the final dollar is collected on the CDO's.

After the cash reconciliation, an accrual based reconciliation showing what was booked each quarter on the CDO's.

As long as this is a wish list, I would also like a series of quarterly estimates of future CDO cash flows used in AIG's financial statements compared with the actual cash flows.

Just showing the cash transactions Since September 16th is misleading and overstates the gain by the banks during this time frame. It also leaves out cash payments to the banks prior to September 16th. Finally it leaves out all cash thrown off by the CDO's.

Once they start breaking out the data, they need to go all the way.

As far as what the government will have to eat, once again, it depends on how much they get back on their loans and preferred stock, as well as the final results of the Maiden Lane entities.

They are also going to need to break out the P&L's of all their businesses. 90% of these problems were in the capital markets and securities lending areas.

Unfortunately, the taxpayers own AIG. The entire enterprise needs to be managed to minimize taxpayer losses. Secondarily, viable businesses need to be sold off as soon as possible, even if it hurts overall recovery, simply because the government can't run a business in a politically acceptable manner. This will result in windfalls for vulture buyers, but they got over profits made by vultures buying from the RTC.

People that are hot to have Citi nationalized need to take a close look at AIG. The only gain is wiping out the residue of value in the common and a big chunk of the debt. After that one time gain, the taxpayers will own something that will make them very unhappy.

M.G. says:

Mr. Liddy emphasized that AIG’s disclosure of the counterparties does not change AIG’s commitment to maintaining the confidentiality of its business transactions. “Our decision to disclose these transactions was made following conversations with the counterparties and the recognition of the extraordinary nature of these transactions,” Mr. Liddy said.
I think here we need to know more about the nature of this entanglement which created systemic risk. Two questions: a) what kind of contracts and obligations were exactly honored with these payments to counterparties ? b) were counterparties managing risky positions or simply betting (that is gambling)?

killben says:

While on AIG … see this

http://www.reuters.com/article/ousiv/idUSN1548789520090316

These bailout bandits including Larry Summers are singing a song “We are legally bound”.

The dumb suckers (tax-payers) may be should sing a new tune “File bankruptcy and untie the knot, No more alms, No more alms for slimy bailout bandits”

Anonymous says:

Worse than we think, possibly? Hedge funds, too?
“Two Hedge Funds Among Recipients Of AIG’s Bailout Bucks”

http://www.finalternatives.com/node/7249

Jmd says:

The hedge funds were huge purchasers/sellers of protection from/to AIG. Would not be surprised to see some big ‘troubled’ ones on the bailout list.

Anonymous says:

meanwhile the media is spending all of time on the bonus issue instead of the billions paid to Goldman and friends

Do not underestimate Obama’s power over the media

Anonymous says:

yep, we can’t let another lehman fail or it will pose too high a risk to the system. well, all the lehman CDS and derivatives were settled in the maket. ITS ALL A LIE TO STEAL PUBLIC MONEY AND STICK ALL AMERICANS WITH THE BILL! this system is so corrupt! THE BANKS CONTROL THE WHOLE SYSTEM.every american should stick the banks and not pay their debts! AIG could have gone chapter 11 and stuck all the counterparties with their losses. this company should have its doors closed as it is a bigger fraud then enron. and, no who is going to jail at AIG??