…oh wait. We kinda knew that.
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 September and December 2008, according to a confidential document and people familiar with the matter.
Goldman, Deutsche Bank and Others Got AIG Aid [The Wall Street Journal]
HOLY COLLATERAL
$6B, that’s it? Weren’t there rumors of a $20B Goldman exposure to AIG?
Oh I am sure more payments are on the way.
I wouldn’t want the fools who are on the other end of these swaps to actually lose money.
This is just an appetizer. Wait for more details. Message to the fed is, you can’t hide this info much longer. So cough it up.
Is Paulson around? Or is he bird watching in Namibia?
Covered Counterparties
Some banks that were paid by AIG after it was bailed out by the government
* 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
Source: WSJ research
Wow EP
I’ve only been screaming about this for months. I write you all the time about this. I was to the point where I considered that you worked for them.
FUCK AIG
Oh and the Goldman take was USD37bn the first fucking day of conservatorship!!!!
Still yet, FUCK AIG. They got their 40 acres and a mules 13 billion times over.
@ 4 I am going to guess that he is far far away.
He and the $700m tax free proceeds from the sale of his GS stock are long gone.
We are officially fucked!
Dear Tim,
When you had your derivatives party some years ago you forgot to invite THE major counter-party. We all knew. Duh; but we had you over a barrel and knew you’d make the bets good for the most important of us. Improved efficiency, just as we promised you.
Thanks.
Your derivatives team
http://www.newyorkfed.org/newsevents/news/markets/2007/FedLetter0507.pdf
Fuck AIG and fuck their counterparties. I’m sick of bailing out these black holes.
Goldman Sachs is a criminal enterprise that is destroying America! Close down these crooks!
@11 As is Morgan Stanley! Scumbags have destroyed a great nation!
this is news?
Most of america has no idea that the majority of the bailout went to bank counterparties (hedge funds, other bankers, etc)
I am a Treasury Secretary. What is a government bailout?
Anyone who isn’t a complete moron knew that AIG was posting large amounts of collateral.
Did you think that the collateral got posted to….nowhere?
ahhhh, the friday night news dump!
@15- You’re damn right this is news and it’s outrageous! Where have you been? Under a rock that was next to another rock near a road?
We gave AIG 100 billion dollars just so they can turn around and give our money to the very banks that put us in this mess. Now these criminals are using our money for huge bonuses and private jets to Las Vegas for business development meetings at five star hotels. Their robbing Peter to pay Paul with a layaway plan because he doesn’t have the money. And Peter pays his taxes every year and never took out a loan he could not afford. Did you get all that Phobos?
I can’t believe this is happening. When will this insanity end?
WHEN!?
SPODE
@16- LIES! LIES! LIES!
Give me my money back you filthy dirty crook!
After we give them all this money the banks increase their credit card fees and start foreclosing on the homes of the very people who just gave them money.
@11 and 12: Please navigate to finance.yahoo.com to socialize with your ignorant kind.
The Fed’s moral hazard maximising strategy
http://blogs.ft.com/maverecon/2009/03/the-feds-moral-hazard-maximising-strategy/
Rick Santelli -
Any plans on having a rant about what an outrage and disgrace this is? Or is it fine since its a bailout of Wall Street? Hardworking Americans paying their tax dollars getting f&#ked. Money going to Goldman Sachs? Deutsche Bank? What the fuck? Without these funds, the banks would have seen their equity, prefs and unsecured get wiped. Instead, the hardworking person gets their tax dollars transferred to Lloyd? I know I’ve rambled but I am shocked, saddened and angered by this outrage. For fuck’s sake at least have them take a haircut or offer the gov’t common stock for the amount. If GS got $6bn and collateral was only worth 50c, then give the taxpayer $3bn of GS common.
-Jon Stewart
Now isn’t it interesting how Citibank is not on the list? I thought they were a big issuer of CDOs,SIVs, etc… and invented the stuff. Are they not a recipient because as an issuer of the stuff that would be off-balance sheet rather than a buyer of the stuff going on balance sheet, they didn’t need to buy protection, believing the stuff would never make it back on their books?
So maybe the Feds are bailing out Citi too by avoiding a reversion to their books?
And secondly, are the amounts an aggregate of proprietary and client positions? Like, because Morgan Stanley was a big prime broker, would part of the money they received be going towards contracts bought by their hedge fund clients because I don’t see any mention of hedge funds, whom I would suspect to have significant activity in CDSs as well.
Lastly, why isn’t JP Morgan on the list either? Is it a conspiracy theory similar to Citi?
Can I cut out the middle man and just pay over a percentage of my income to Goldman directly?
How much will they get when GE is downgraded?
I love the “yahoo finance” comment whenever someone bashes GS.
I wonder if the same makes it everytime and I wonder who his employer is.
85 Broad makes me sick everytime I go there.
Bunch of sycophants running around telling each other how smart they are. You feel like you need a shower when you walk out the door to get off the sticky residue of greed and corruption that permeates the air.
$6b is only $13 per GS share.
$20b is only $43 per GS share.
$37b is only $80 per GS share.
Nothing to see here folks, just move along.
The next step is to parade Bernanke, Geithner and Paulson in front of crazy Sen. Bunning because these folks have some splaining to do. That might save of from “saving” GE Capital. I see tens of billions in savings. Also, is there a criminal angle to this? Let them sweat it out in front of the cameras.
Finally, WSJ hasn’t got the full list. I really expect that Goldman Sachs got more than $6 bn and that a bunch of hedge funds got a piece of the action here. Just wait and see.
jon stewart . . .people, i mean really. what has he ever traded or risked. what does he know about living with a book. . . spare me.
Not a surprise. Just an end around to direct capital injections into banks without getting any equity in return (unless you count the AIG stock).
How many of these banks would have declared AIG in default anyways if AIG hadn’t received the money? Knowing the systemic risk in declaring it, the Fed should have called the counterparties’ bluff.
Of course, this should make it abundantly clear that we are far from done shoveling money into the AIG pit.
Jon Stewart has risked – making fun of Bush! Wow, that’s really dangerous in Manhattan! That could get you run out of Tribeca!
So AIG is being used as a conduit for the gov’t to funnel cash back into the finance sector? Good thing we’re didn’t nationalize those banks. That would have been terrible. Good thing we didn’t sell weapons to Iran or fund/train the Contras or deal drugs with Noreiga.
Is Obama going to say he didn’t know about this? Is he going to pull a Ronald Regan?
Interesting that BoA and Citi are the only big banks on there not smart enough to take advantage of AIG. No wonder they’re being bailed out.
I run a hedge fund. Is there market turmoil I should know about?
thanks,
Ken
@23 – Rick Santelli has been against ALL bailouts for months now, including bailouts for the banks. I think people need to give the guy a break — he is in favor of a free-market system. You may disagree with that ideology, but Rick Santelli didn’t come up with it. Again, he has been against all bailouts, the TARP, etc.. Check CNBC for some videos, here’s one (not the best)
http://www.cnbc.com/id/15840232?video=926264009&play=1
And no, this is not Rick Santelli.
@36
Did you attend a tea party? How was it? I guess he didn’t come up with that idea after all. How many rants about GE’s situation, and that one looks like it will become another AIG?
Don’t worry. I have this one under control. I have a lot of experience looking over situations like this. Back in my community organizing days, well we had this….
…..woops, was choking on the leftovers from my Wed night party with the guys…great night, great band…
the Prez
Well, let’s see, Michelle had all that experience at U of Chicago hospital as a community relations officer…maybe she could look this over…hmmm, no, she’s at the gym working on those great arms…
Then, hmmm, maybe Joe Biden, he has a lot of experience in all things finance….hmmmm, no, he is down in Florida with the union boys not letting the press observe his speech….
Hmmmm…then there is Timmy…hmmm,no, he can’t seem to get a staff together…
Jeremiah Wright, hmmmm, hmmmm, just maybe…
It bothers me that people are outraged by this…why do you all think AIG needed bailing out in the first place? It was precisely to make payments like this. The fact that people don’t understand this to the degree that they’re screaming about AIG paying banks is horrifying. This is why Plato argued against democracy.
@40 – you’re an idiot. we bailed out AIG to protect policyholders and everyday people who had relied on a solvent, solid insurance company. We did not seek to bail out a hedge fund masked as an insurance company. Why should my tax dollars go to bail out proprietary trading profits at Goldman Sachs. It just doesn’t make sense – its an outrage. Use my tax dollars to capitalize the insurance subs and make them more solvent but to pay par for toxic CDOs, etc. that Goldman and these other banks got without getting anything in return – well that’s just unacceptable.
@36 – who the fuck are you? rick santelli’s lackey? all of those morons on CNBC are partially responsible by calling fire in a crowded room. santelli and his colleagues do not come up with solutions – just pointless negativity and rants based on half truths. i wish they would promote a constructive dialogue on what to do, not just sit there and criticize every attempt that has been made.
Santelli is only marginally competent – but that is an improvement over the rest of CNBC, which is a bunch of useless jounralism majors and “money honey” casting couch girls.
Santelli at least used to be a trader and executive. He’s also been in major right-wing shill mode since his contract is up and he probably figures he can get more $ if he can get CNBC and Fox “Business” into a bidding war.
He’s not stupid, he’s just blatantly compromised and unethical.
@42: So it’s wrong to yell fire in a crowded room when there actually is a fire? Better to keep quiet and let everyone burn?
AIG is an insurance company. they are paid to insure against certain events.
if AIG ended up in financial distress because of hurricane katrina, would we be pissed if they used government bailout money to pay their obligations to displaced homeowners?
This is the business of an insurance company. just because the payouts now are to banks doesn’t mean that money shouldn’t be paid. maybe aig wrote stupid contracts with the banks, but that doesn’t mean the banks should be penalized. they hold the policies and deserve to be paid.
where did we think the money was going? maybe we should just take the bailout money and give it to Feed the Children. maybe that would make everyone feel better. oh, but then, you couldn’t get a mortgage to buy a house or a loan to go to school.
@45 – I think Ben Bernanke made a clear distinction between the state regulated insurance subsidiaries and AIGFP – “AIG Financial Products”, the counterparty who, in my opinion, shouldn’t have received bailout funds. Using your logic, AMBAC, FGIC, MBIA, etc. should all receive your tax dollars.
@42 – There is a difference between responsible journalism and sensational journalism. CNBC is guilty of the latter, they want a reaction, much less an actual solution. The more appropriate analogy is a media black out in a hostage situation – you know its happening, but reporting it live could endanger the lives of the hostages. What should you do? CNBC would say “Who cares about the hostages, we want to report it so our ratings go up.”
at least Goldman, Merrill are “our” banks. How would the US taxpayer respond if directly asked by the Treasury / Fed to pony up $40bn+ in payments to Deutsche, SocGen, Calyon, RBS etc via AIG? No wonder they all want to keep this on the down low.
We purportedly continue to bailout AIG so they can continue to make good on their obligations to everyone else. That this might come as a surprise to people only points to the utter lack of journalism of any kind in this arena sensationalist or otherwise. Bailout is the bread, the media the circuses; rest assured the barbarians lie just outside the gates.
@48 – Welcome to our global village – These banks know no boundaries- they will take your food or Japanese’s or Chinese or other jews without any problems.They may be your banks but they are not mine – Any bank that robs our nation and our people is not OUR bank.
@42 – who is yelling fire in a crowded room?
can you say, definitively, that bailing out AIG, goldman sachs, and those who have mortgages underwater is the right thing to do to get the economy on track?
yes, some people think so.
but others, from santelli (who you may not think is the smartest person out there), to joseph stiglitz (a nobel prize winning economist) think that these policies are just plain wrong.
and not just wrong like “ok we screwed up let’s try something else,” but that the current policies are so wrong that we are going to be WORSE OFF.
i believe they are legitimate arguments and worth having before it’s too late (which it’s not yet).
@41 – No. You are wrong. We bailed out AIG because they weren’t going to be able to make payments they were required by law to make, such as these payments. The AIG bailout was a direct result of their inability to make good on CDS contracts.
@52: There are hundreds if not thousands of companies every year that can’t make good on their contracts. Quite frankly that’s a matter between the parties to the contract, to be sorted out in court if they can’t settle things on their own.
@53 – I agree. However, in the government’s judgment the potential effects of an AIG default on these contracts was so catastrophic that they stepped in. Had nothing to do with average joes holding policies.
@54
Catastrophic for whom? Really, it’s not in the US public interest to bailout Douche Bank, Lloyds, the French, and all sorts of cowboys running hedge funds. Plus, was so critical about Goldman and Morgan Stanley that couldn’t be dismantled before it explodes? Because that’s really how see this crisis.
All these institutions “too big to fail” are bombs that need to be either detonated safely, or disarmed. But that’s radical thinking, I guess.
The Fed has to come clean on this stuff. Lets have transparency so at least people understand how their money is used. And if people don’t like what they see, let the government face the consequences.
GE is next, just wait. They are going to be used as cash funnel for all sorts of gamblers who lost, but don’t want to take the losses.
It’s payback time, bitches!
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638
Goldman, Citi, JP Morgan…It’s not like these guys were giving money because they liked his smile.
Yeah, we knew this was gonna happen when we saw how Thain paid all his Merrill buddies before B of A. AIG is paying (or the gov’t is paying via AIG) all of it’s buddies while it can.
@41
AIG’s standard insurance businesses were never the problem. Saving AIG has nothing to do with protecting Joe Blow’s AIG auto policy. Those units are fine.
And so much bank hatred, despite the fact that no capitalist system works without a banking system.
It’s like saying, “Fuck cows” and yet wanting a glass of milk with your oreo cookies. You want AIG, and Wall Street, and the banks to take the their punishment, and yet, probably want them to loan to you too.
Given that a capitalist economy needs a functioning banking system to supply business loans and grease the wheels of everyday commerce, helping AIG pay off its counterparties is in fact a good thing.
To the extent our major banks are made whole on their contracts, that strengthens them. Which means that you won’t have to wait a decade till 2019 when you go to Citi to get a loan all because some idiot circa 2009 thought “screw AIG and their counterparties” was the height of rationality.
Let all BURN into one gigantic awsome beutiful fire storm that engulfs all these assholes, and mean HOT till their ashes turn white. Then we can start over with less assholes around.
@58: You can call what we have today many things, but don’t call it capitalism. Back in the days when words actually meant something, the economic system where the state props up favored businesses was called fascism.
@55 Catastrophic for the Global Economy. It is obvious at this point that you do not work in finance or in any job that requires even a basic understanding of our economy.
The complete lack of understanding of circumstances surrounding AIG on the post is amazing. If ignorance is bliss 98% of you are quite happy. A little study of AIG Financial Produts, CDS, collateral, ISDA agreements and market conventions would be a start.
@58, @62 – Glass Steagall should be reinstated. Commercial banking should be kept viable with strict regulatory oversight and investment banks allowed to fail if they dig a hole too deep. I don’t have an issue with injecting tax dollars to prevent a systemic failure (to avoid a situation like Lehman). I do, however, take issue with my tax dollars going straight into Maiden Lane which then makes payments to AIG’s counterparties AT PAR – why doesn’t the taxpayer get some equity or preferred stock in return for the bailout, between market value of the collateral and par amount? (Lehman’s collapse was the single stupidest thing that Hank Paulson did – if it didn’t collapse, perhaps an orderly wind-down of AIG and an orderly reduction of leverage in the system was possible).
@61
When thieves are running the shop, really, nothing is obvious.
What the hell is the big deal here? AIG owed money / had to post collateral in order to continue to function. Isn’t that why the government bailed them out – so they could continue business? If the government didn’t want AIG to fulfill their contractual obligations, the gov should not have bailed AIG out! What am I missing here?
Mahnahmahnah!
Capitalistic banking? Eisenhower’s military-industrial complex is now the military-financial complex. Loans from Wall Street? Just gimme government tit.
Interesting.
Everything I do, I do it for you. ———————————->
SPODE
@66 – The big deal is that I owe some money I borrowed to buy a Lamborghini despite my job as a retail clerk at Macy’s. Can I please use your tax dollars to help address that?
Love those ISDA “agreements” cum “credit agreements.” Looking forward to big law having its ass in a sling ‘cus ya know each trade is an addendum. Love the market “conventions” defense too. Fraud as a business practice and 9a well no one even knows what that is anymore.
Will big law take in the teeth like big accounting after Enron? Nah.
Sell your bonds ASAP.
@65 What you are missing is that these insurance contracts should never have existed in the first place. The group of AIG who wrote insurance on CDO-squareds was not regulated (thanks, Shrub) thus had no reserve requirements.
Hey, we gotta 9a defense too. The trades were not for “for the purpose of inducing” shit. We did it to loot. Big law be smart.
58 (and others), even if you don’t have a problem with bailouts, there is a glaring problem here: the inequity of the government’s actions, which only adds to the uncertainty, fear and anger in the markets and public.
Explain why GS shareholders are effectively immunized from losses on securities back by AIG CDS contracts while Citi shareholders are told to go screw themselves.
Explain why homeowners who never had any equity in their homes and are behind on payments because they overextended themselves are going to receive government subsidies while their rentor neighbor, who just lost his job, will not.
The point here is that the government’s action is not being guided by a set of firm and fair principles that can be used to predict how it will act but rather by political influence, whether that is wielded by “main street” via their representatives (read: Barney Frank and his ilk) or Wall Street (read: GS&Co).
The AIG fiasco is just one (albeit glaring) example.
> Explain why GS shareholders are effectively immunized from losses on securities back by AIG CDS contracts while Citi shareholders are told to go screw themselves.
Because Citi wrote hybrid CDOs off subprime mortgages and kept the AAAs on their books, shareholders deserve to be screwed. GS shareholders too, but not to the same extent; they sold their AAAs
People who think having every major bank in Europe fail wouldn’t hurt the United States, go post on that crook retard Blodget’s blog with the rest of those morons.
I wish it amazed me that morons got most of their “information” on complex credit issues from journalism majors and shills, and then called for catastrophic policy ideas.
The banks are going to fail regardless, it’s just a question of how much government cheese they piss away before they go tango uniform.
@78 Don’t be such a pessimist. If you’re talking about all banks you are wrong, if you’re talking about GS you are wrong, if you talking about B of A, well then you might be right but that’s a real maybe.
tango uniform = tits up?
It can’t be a good sign when SNL does a skit with Timmay offering billions for someone to come up with an idea to fix the crisis and putout a number 1 800 IDEAS? The honeymoon is over.
“Spring ahead, Fall back”
slow news day?
@81
I’m sure there are no new ideas about how to bailout irresponsible financial institutions and their counterparties without the taxpayer knowing. That is now an impossible task. So they better start working on real solutions. There are plenty offered already, it’s just that they’ve been ignored.
it’s not fair, but it’s right.
@ 75
FTW
You absolutely nailed it, as much as any one has. Need to come up with guiding principles, a basic conceptual framework, not this piecemeal, unpredictable, incoherent bullshit. Good luck getting that done though…
Eventually methinks we will run out of other people’s money.
@77 – you are such a fucktard. i can’t believe that you would call people idiots for reading the newspapers and then being annoyed about the misuse of their hard earned tax dollars. you sound like such a cu*t for thinking you are so much smarter than normal people. take your elitist “i understand CDO’s and counterpary risk” bullshit and shove it up your ass. If Goldman wanted to bet on this stuff, that’s their prerogative. Good for them if they make money on it. But don’t use my tax dollars for this crap – use it to make my kids schools better, pay teachers more.
#87, Margaret, how lovely of you to join us this evening.
Does anyone know if Neal Kashkari is still employed by Treasury and working on this situation?
Kudos to the “taxpayer” dude for channeling his anger with sensible comments (No sarcasm intended).
88 – Gee, such rightous indignation.
Sorry, but this stuff is one of those things that if you don’t understand the mechanics, you simply can’t talk about it. It’s like soliciting aircraft engineering advice through Twitter.
And I would absolutely call people idiots for reading general newspapers, blogs, and listening to CNBC commentators on this, because 95% of what has been said in general media (let alone online “new” media) is sensationalist, politically biased, or just flat wrong and stupid. If you are uneducated, you think that garbage is actually “right” and then become one of the boobs calling for the same idiot policy that the “journalist” is.
The sound and fury jounralist and rant artists don’t have any solutions. They just try to make you angry by stoking the “that’s my money!” sentiment, because that increases their rep and ratings.
“Nationalize the banks” – okay, but what do you do about the United States doubling its public debt overnight?
“Let AIG go bankrupt” – what purpose would that serve, it’s not a going concern anymore anyway, being 80% owned by the government and being run off.
“Screw Europe” – so what happens if SocGen and Deutsche Bank go under?
“Let Citi/BofA fail” – You do realize that the United States government is on the hook for the trillions of deposits, right? And that if the FDIC went bust, every bank in the country would soon follow, so honoring obligations isn’t much of a choice.
“WHY ARE WE BAILING OUT GOLDMAN SACHS THROUGH AIG, BUNCH OF BANKSTERS” – Because Lehman was a lot smaller than Goldman and comparatively less interconnected, and look at what that did. Anyone who says that letting Lehman fail didn’t cause much of the current disaster is either an academic who doesn’t do any business, or someone shilling to ignorant people about “free markets” and “consequences” (I’m looking at you Santelli and Kudlow). 99% of these dumb fucks didn’t even know that Lehman *had* commerical paper in money market funds.
@56 – Try selecting “John McCain,” and you’ll notice that they all donated to the other guy, too.
Unintended consequences – Do any of the Obamessiah’s policy gurus realize that implicitly putting the full faith and credit of the US behind CDS dealers gives short sellers free rein to run companies into bankruptcy? They can short a company’s credits and lead to a “run” with no fear of counterparty risk on the other side of the CDS trade. Full speed ahead!
I am AIG’s largest counterpart. Failing to meet your obligations would be unwise.
-Gen. M. Bison
You know, I think cabin-fever has set in amongst many here. I’m ready to get outside to grill some hotdogs, burgers and drink a few Busch Lights.
As much as I love creamy caesar romaine hearts with oysters, lobster in a grapefruit vinegarette with a few glasses of wine for lunch, it is always tainted with shop talk.
This winter carried on far too long.
The people in this thread (and, by extension, country) are so amazingly stupid that it’s almost funny. Except you can all vote. Kill me now.
“Unintended consequences – Do any of the Obamessiah’s policy gurus realize that implicitly putting the full faith and credit of the US behind CDS dealers gives short sellers free rein to run companies into bankruptcy? They can short a company’s credits and lead to a “run” with no fear of counterparty risk on the other side of the CDS trade. Full speed ahead!”
Shut the fuck up you stupid fucking douchebag. You clearly have no idea how flow trading works. Shut up shut up shut up
Think about the rumors swirling around Lehman at the time. What? They didn’t go along with everyone else, they didn’t contribute? So let’s use a moral argument and let them fail. yeah, that’s the ticket.
@92 – What’s your solution?
The 2005 bankruptcy law has precipitated the collapse of Bear, Lehman and AIG, and soon GE Capital (GE). This is why:
“The changes in the [bankruptcy] code expanded the scope and definition of financial transactions not covered by bankruptcy rules to include credit default swaps and mortgage repurchase agreements – products used widely by Lehman, Bear and AIG.
Lawyers said under the old rules, creditors of companies facing financial difficulties were wary of settling trades or seeking extra collateral because they knew such demands could precipitate a bankruptcy filing and potentially freeze their claims.
However, when the financial health of Bear, Lehman and AIG took a sharp turn for the worse this year, their trading counterparties – mainly hedge funds and other banks – were not deterred from seeking to settle their trades or forcing the three companies to put up more collateral.
Such pressure exacerbated the liquidity squeeze that ultimately forced the three companies to hoist the white flag.”
http://www.ft.com/cms/s/0/85790440-a6c3-11dd-95be-000077b07658.html?nclick_check=1
==
The logic is compelling. Give credit to the International Swaps and Derivatives Association (lobby) for the changes mentioned above.
The 2005 law was set to protect the financial industry from a debacle that they must have seen coming. But it turned out that getting money from Paulson was easier than sinking the company into a bankruptcy and getting the money that way. Paulson really never cared about moral hazard after all.
So this will not end. New AIGs will surface, pressured into liquidity crunches caused by collateral or trade settlement demands that they can’t meet without government help. But the demands have been made less risky to the counterparties by the new bankruptcy law. And with the government, starting under Paulson, throwing away any concerns about moral hazard, the demands are even less risky but costly to the taxpayer.
Someone has to disarm that bomb. But the ISDA is ready to oppose any sensible action that leaves their members less protected.
Some insightful links:
http://magspaces.com/articles/result/shame
@92 – It’s people like you that earn the scorn of everyday people. I don’t understand your stance – why do you think you are so much smarter than the average person. If there was a special tax (an FDIC like insurance/unemployment insurance) that Wall St. firms paid into to have “bailout” funds when they needed it, I’d have no problems with it. If Joe the common taxpayer’s money is being used, it should be explained to him what while he’s losing his job in Cleveland, some schmuck at Goldman Sachs has stock that still has value thanks to his tax money. Isn’t this an inequitable transfer? I’d love to hear your solution – mine has been simple – pay the taxpayer the difference between the market value of the collateral and par in preferred stock or equity. At least then its not a blind transfer of wealth. It’s shameful that hard working people are subject to such indignation – Hank Paulson is as toxic as a subprime CDO of a CDO. I don’t think we should let people forget – he sold over $500mm of Goldman Stock TAX FREE when he became secretary of the treasury to turn around and f*ck the country. What an asshole.
100, 103- Who said there is a “solution?” Real life problems don’t necessarily have 100% solutions. Sorry if crooks like Limbaugh, Santelli and Blodget prey on the ignorant by raising anger, but that’s true.
As far as I can tell, there is no way to fix AIG other than to run off the CDS contracts over time and sell the rest of the company for scrap. They are doing that. There’s really nothing else you can do to AIG. I don’t view this as a bailout – who wants their company to wind up like AIG?
Run it off and regulate the industry so that can’t happen again. Blowing up the major counterparties is only going to cause more damage, especially when those blowups take out *their* counterparties.
Citi and BofA – there’s really not much more to be done. Failure would break the United States because of the deposit insurance.
Goldman Sachs – who the fuck cares?
Everyone else – They’re already dead. You can’t punish MER, LEH and BSC any more. And none of those got “bailed out.” It’s not a bailout when your entire company is sold out from under you for scrap value, allowed to go bankrupt or absorbed and obliterated.
This fascination on what is “right” is useless, especially when there’s no actual mechanism that is going to make these boobs happy.
-
And stop saying that it is condescending to tell people to learn actual facts. That’s about being informed, not being inherently stupid. Political bias and uninformed ranting is fucking worthless.
It is perfectly acceptable to tell someone to read background material before opening their goddamn mouth on a complex subject.
Goldman Sachs not collapsing has nothing to do with people losing their jobs in Cleveland, except that I can’t picture a GS blowup having any sort of positive impact on job prospects in Cleveland.
@104 – Listen mate, made it perfectly clear that if you are going to take out counterparties at PAR, why can’t the taxpayer get preferred stock or common for the difference between the market value of the collateral and par? Why do you seem so insistent on these “sophisticated counterparties” not taking a haircut? My solution would not cause them to blow up – it would just inflict some pain on their shareholders. Systemic confidence would remain as they would remain viable counterparties, the shareholders and maybe the unsecureds might take some pain. The true “boobs” to use your term are not the taxpayers who are outraged by this, but the Goldman’s, the DB, etc’s that didn’t do their homework on counterparty risk.
It was a magical system. What could go wrong? Sort of like “the perfect crime”, many times you read about “the perfect crime” and on paper, in the book, looks perfect but in reality, something wasn’t perfect or the criminal wouldn’t be in jail. Same thing with this stuff and the sophisticated mathematical trajectories which spurred them. Maybe the guys who invented all of this should be made to unwind all of this?
The most learned observation in this thread is the introduction of going “tango uniform”. Nicely done.
I think we should take all of the money that we were going to give to BAC, C, WFC and the like, and give it to banks like BBT instead. I live in Charlotte, and I can tell you there is no incentive for BAC to streamline operations when we know we’re getting as much from the gov’t teet as we want. BB&T is healthy, 100% of money they would receive would be immediately lent, because they (unlike us) don’t need it just to keep the lights on. More importantly, it would create real incentive for BAC to start lending and move this thing forward.
Right now the “too big to fail” companies are like the inmates running the insane asylum. We need money to hit the economy, not prop up certain shareholders. We’re not lending, not even on good deals, so let’s get this gov’t money to someone who will…
Paulson didn’t realize his shares TAX FREE, they fell under the FORCED SALE rules.
Deferred.
Jesus.
@110 – effectively tax free. Read: http://www.forbes.com/2006/06/01/paulson-tax-loophole-cx_jh_0602paultax.html
“too systemically important in the financial system to be allowed to fail” is the new killing it.
@92 – please stop trying to use actual facts and interject reality here. It doesn’t work. It’s like trying to teach a pig to sing – it’s ultimately ineffective and it frustrates the pig.
F*k all that counterparty risk. F*k the CDS holders too. Why should they have a ‘get-well’ payday with Uncle Sam’s money? No more gov’t money given to AIG should be allowed to go to those f*n counterparties.
The counterparty list in #5′s post should all eat shit. Let them put the toxic shit on their own books. They all wanted it to begin with; let them all have it now.
@108 – ha – agreed!
@104
You said:
“As far as I can tell, there is no way to fix AIG other than to run off the CDS contracts over time and sell the rest of the company for scrap. They are doing that. There’s really nothing else you can do to AIG. I don’t view this as a bailout – who wants their company to wind up like AIG?”
Ah, you missed the part that the AIG counterparties are the ones that are getting the bailout. They couldn’t fucking care less about AIG at this stage. As the government continues to favor them, they are not restrained in preventing another AIG, or sinking AIG further into the hole. Remember, we just go a leak that is most likely incomplete, and there must be many more counterparties waiting in line for the government money.
This is a vicious cycle that has to be stopped immediately. The dynamics were set by what was described in @101.
108 here.
Thanks for the kudos. But seriously, I didn’t mean it as a joke. I really think they should give the money to people who are in a position to lend it. I’m really sorry that certain places destroyed them(our)selves, I really am, but if I step out of the realm of shameless self-interest long enough to think with the brain that used to be good for something. This money needs to keep flowing. Throwing it against a damn doesn’t do anyone any good in the long run.
108 here.
Thanks for the kudos. But seriously, I didn’t mean it as a joke. I really think they should give the money to people who are in a position to lend it. I’m really sorry that certain places destroyed them(our)selves, I really am, but if I step out of the realm of shameless self-interest long enough to think with the brain that used to be good for something. This money needs to keep flowing. Throwing it against a dam doesn’t do anyone any good in the long run.
Chris Whalen of Institutional Risk Analystics rips Geithner. Video.
Says Geithner knows nothing about financials, and that he’s only at Treasury to protect Goldman Sachs.
Whalen goes off:
http://bit.ly/JrNb
And word from Paul Keating the former PM of Australia that Timmaaay is essentially an idiot on Economic matters.
A good part of the problem is that the people involved with these “instruments” barely understood the “instruments” themselves. Those who say “you are so stupid, you can’t understand the mechanics here, in all probably, can’t fathom the mechanics involved themselves. That is not to say you may not be well versed in some small part of the whole, or maybe a large part of the whole, but, if you understand the whole, well then sir/madame, it is your duty to get yourself to Washington and explain it to them and tell them how ot fix it. Most people who were in the market and paying attention have some idea of what they think has gone on. To tell people it is “too complex” or that they are “too stupid to understand” or worse “too pedestrian for you, the one who knows to even talk with is jsut the kind of pomposity that got the financial system in this place to begin with. The prez hasn’t been able to get this across but essentially, this is everybody pitch in time, everybody roll of your sleeves time, everybody put on your thinking caps time. Cause, if you haven’t noticed, it is time to help, not criticize, not demean, not diminish someone because they did not have the educational opportunities or the employment opportunities you had, that serves no purpose and set us back as a country and a community. WE have to fix this, really fix this, now, not say “oh it’s hard work”….
http://dealbreaker.com/2008/12/auto-bailout-bill.php
Hey Nancy, it’s March. Surprise, retard!
My god, does MSN money have a link to this board or something? I have never seen so many stupid comments. Worry not high school dropouts and housewives, I know you don’t understand all this financial gobbledegook. I understand a bit of your language and will translate.
Bailout bad. But, AIG banktuptcy worse. If AIG go boom, many banks go boom. Banks go boom, business go boom. If business go boom, your 401k go boom and you get laid off from taco bell. See? AIG bankruptcy really bad.
AIG go bankrupt because they make deal and can’t pay–like you at Denny’s. So, if AIG not want to go bankrupt, must use money to pay out on deals it made. Doesn’t matter if made deal with Goldman Sachs or John the Baptist–if you make deal, you must make good on it. In fact, big part of reason bank bailout needed was because AIG was deadbeat–like you with child support. Wow, that lot of thinking. You deserve a beer.
John Batchelor just reported on his program that the WSJ’s breaking news says that the bond market is collapsing?????
#121, If you make a deal, then YOU make good on it, you are incipient, the tax payers don’t want to make good on WS’s deals, even if they do lose their jobs. You WS types are so thick, thank God some on WS have managed not be become a WS type or we would be in worse shape than we are now
@121
Of course you are absolutely right to explain that saving AIG meant paying its bad debts no matter who owned them.
Everyone on the board should have taken that for granted. That’s not the scandal. It’s that the payoff happened late in an election, where to explain to the public that the money was going abroad would have provoked all kinds of nationalistic fury and rage, and not unjustly, either.
Paulson and Bernanke stole that one over on the American public as if they were the idiot children who don’t deserve to be told what is going on in the household. They knew that a full account would have to be given and didn’t dare give it at the time. They literally thought that their handing billion of tax dollars at their own arbitrary will and behind Congress’ back to the likes of Santander, which was about to be shown up as having lost $500m+ to BERNIE MADOFF alone, could stay under the blanket somehow. Well it can’t. That’s the scandal.
@ 121
Brilliant. You ought to work for Timmy since it appears you have it all figured out. Thank God for your brilliance.
So now that AIG has been backed by you and all the other taxpayers I get to keep my job at Taco Bell. Problem solved. Nothing going boom again.
I will for sure head to work tomorrow knowing brilliant members of this post (like you) know how to fix the economy and insure sound principles in finance.
On my way back to MSN money….
@93: Of course they did. They didn’t really care who won, just wanted to make sure whoever did was bought and paid for.
US Should Let Some Big Banks Go: Republicans
http://www.cnbc.com/id/29583645
Senator Richard Shelby, top Republican on the banking committee, said the United States should not mimic Japan, which in the 1990s propped up failing banks and prolonged its economic downturn.
“Close them down, get them out of business. If they’re dead, they ought to be buried,” Shelby told ABC’s “This Week” program. “We bury the small banks. We’ve got to bury some big ones and send a strong message to the market.”
Uh, and what would that message be? You are totally fucked?
What is worse than a politician with power? Answer: A politician with power in the midst of a global economic tsunami.
The message would be this: when you are at the head of the CDO parade and the parade is over, you have no reason to remain in business. I do not think that many people here understand how derelict Citi was in their non-branch business, but Volcker is absolutely on target: Glass-Steagall repeal was a mistake.
@92
Don’t go into 85 Broad tomorrow. Bad things are going to happen.
@101
You almost have it right. The 2005 law gave special privileges to derivatives in BK. Do some more reading on this subject and realize just how FUCKED we are if we follow the “law”. Focus on “stay” as a keyword during your research.
@All you “C and BAC can’t fail”
It would be simple to just pay the depositors and screw the debt. Don’t think it can’t be done. This isn’t about the depositors. It is about Bill Gross & Co. You are being held hostage.
@109
Just wrong. You are a moron. Please don’t post anymore.
Anyone who thinks this isn’t an egregious transfer of wealth is retarded. The recipients of this wealth transfer like to pretend they are systemically important but they are not. No one really cares if GS or AIG or MS or BAC or C is around tomorrow. In fact, most people despise these organizations. The deposits will be fine and everyone else can go F themselves. Life will go on: Indeed, it will be better without thieves running the system.
The cries started quietly…
The sound is intensifying…
Soon…it will overwhelm everything…
@92
Trillions is a strech w/r/t deposits. It is maybe $1.7 or $1.8.
This could be easily realized in a liquidation.
there was a reason that the feds had a deposit cap of 10%. as for the fdic w/r/t deposits at c and bac (you should add wfc for good measure), you need to distinguish bank deposits (FDIC) from brokerage deposits (SICP).
@129 – everything okay?
@131 No
@132 – I get the sense you could use a hug. @bessy/EP – help him out…
@129
Are you trying to assert that there is a good chance Goldman will go under?
@133
After landing at Wachovia in the summer of 2003 in the RMBS group I invested my large bonuses in Gold and Farmland. I’m just waiting for those investment to come to full value and the continue bailout isn’t helping me.
@134
If it weren’t for the kindness of strangers, GS would already be under.
Pimp co?
@ 92
Thank you. The press is fucking annoying. Like they’re trying to back this into some fucking ideological Bush-era debate because they fucking know A LITTLE BIT of what they’re talking about.
@ 92
Thank you. The press is fucking annoying. Like they’re trying to paint this into some fucking ideological Bush-era debate because they fucking know A LITTLE BIT of what they’re talking about.
Warning, don’t read the Gawker.com take on this same article. Gad, journalists / writers shouldn’t even try.
Does anyone really believe that the government wouldn’t make good on every penny of C and BofA deposits?
I don’t want to deal with the panic if people start doubting the quality of FDIC guarantees. Doesn’t matter if it’s rational or not – the money market panic after LEH was entirely irrational and that still nearly brought down the entire Western financial system before the feds guaranteed those at par.
I don’t think it’s nearly so simple to say “screw the bank debt.” Most of this was bought up by institutions when holding bank stuff was good. “No one ever got fired for buying Citigroup paper,” that sort of thing.
Plus if you screw some bank debt, what happens to the rest? WaMu did not exactly go over well with what the government did there.
What did the people who are outraged by this think the Fed and Treasury meant when they said that AIG had to be secured to avoid systemic risk? The systemic risk was the collapse of the banking counterparties who had paid AIG to hedge their exposures through CDS. Being surprised (shocked!) that AIG is making transfers to its CDS counterparties is like shouting that you don’t understand what is happening at the top of your lungs. If you didn’t understand what systemic risk meant three months ago, you probably aren’t knowledgeable enough to have an informed debate about what’s going on.
And BBT and other banks that hold mortgages rather than mortgage backed securities don’t have to mark shaky mortgages to their level of potential impairment until they default unlike holders of securities who have to mark them to market and therefore acknowledge the impairment, so the relative health of regional banks could be entirely illusory.
@141
So basically investing in a bank can only make you money? We should also pass a law that stocks can only go up so we protect people’s 401(k) because they were responsible by saving and made the investment when buying stocks “was good”.
All you people who claimed “brilliance” when the markets were going up are no claiming “we were doing what everyone else was and we should be punished” on the way down.
I’m reminded of John Meynard Keynes statement that “A “sound” banker, alas! is not one who foresees danger, and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so
that no one can readily blame him. It is necessarily part of the business of a banker to maintain appearances, and to confess a conventional respectability, which is more than human. Life‐long practices of this kind make them the most romantic and the least realistic of men.”
Out of the mouth of Immelt:
“As for credit default swaps, he said investors can force substantial price moves “by spending 25 million bucks in a handful of transactions in an unregulated market. I just don’t think we should treat credit default swaps as like the Delphic Oracle of any kind. It’s the most easily manipulated and broadly manipulated market that there is.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajgcmH7NIFgs&refer=home
If, as Immelt asserts, CDS on GE Capital are manipulated imagine how much more so in the netherworld of SIV and CDO.
@144. Right so far.