"The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries."
Because BK would have caused cascading cross-defaults, an a real meltdown. The Fed now has time to pick and choose when and how to liquidate.
Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency. The open questions are whether that is even possible, and which one they will pick if forced to choose.
WOW!! Citi lost 138 billion on Lehman Ford and GM want 50 billion , Freddie and Fannie wants 1 Trillion.... all I want is about 5 million and I will drive to Canada and watch this horrible disaster unfold in my new fishing boat.
Why not take it into receivership and unwind the assets properly.
If AIG gets a loan, than any American contemplating bankrutpcy should demand the FED provide funds under the Equal Protection Clause of the UNITED STATES CONSTITUTION.
So rather than let AIG go through BK and sell off the assets, the FED will give them the money to stay in business long enough to do it themselves. And if their is any meat left, the FED gets it.
Nemo, you are correct. The common is essentially worthless - but that was the argument about Freddie and Fannie several months ago, and some investors kept buying it anyway - until it was proven worthless!
The preferred is probably worthless too. This will be an "orderly" fire sale - start the Buffett rumors - I expect he will buy some of these assets at pretty attractive prices.
Main Entry: fas·cism
Pronunciation: ˈfa-ˌshi-zəm also ˈfa-ˌsi-
Function: noun
Etymology: Italian fascismo, from fascio bundle, fasces, group, from Latin fascis bundle & fasces fasces
Date: 1921
1often capitalized : a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and b
Refusing private equity offers and going to the Fed, AIG reminds me of the joker at batman dark knight. You don't give me loan? I blow myself and everybody up!
In the end what's the ending of this AIG joker? DEAD!
better than AIG going under. Because this isn't a conservatorship it won't trigger default under the ISDA definitions.
That said, the rate on the loan is incredible! L+850 on secured money is pretty insane. The Fed could probably make pretty good money on this deal. The people that really get screwed are those that bought protection on AIG in the last few months. Those contracts were going for 52% upfront plus another 9% running. On the open tomorrow you can expect those CDSes to crater. That'll leave a mark!
"Because BK would have caused cascading cross-defaults, an a real meltdown. The Fed now has time to pick and choose when and how to liquidate.
Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency. The open questions are whether that is even possible, and which one they will pick if forced to choose."
That sounds like Ipod.
They most certainly are NOT! They are doing this to benefit the well connected playas and dump the shit somewhere else. They don't care about you or me.
tj's right. AIG isn't on the radar screen of ordinary Americans. But when WaMu shuts the doors this week, everyone will know we've got serious problems.
you simply have to figure out when the old maid card is really the moral hazard card, you want the moral hazard card.....as a poker player...thats the money.
tj & the bear, WaMu is huge, but not important for the system. IF WaMu fails, the Treasury will backstop the FDIC. That will cost the taxpayer (and lead to higher insurance rates), but it won't threaten a melt down.
Nemo writes The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
Sincere thanks for the calming words. I believe this to be true as well, but it seems that with creeping J6P awareness comes J6Panic. That might force the Fed's hand in choosing which of the two to help in the end.
this is not a bailout of AIG - but it still smells like bailout of bondholders. After they (dis?)orderly sell 1 trillion in asset to cover 1 trillion in liabilities, will they have anything left to cover 85$ bln?
Maybe they will - but who did the due diligence and where is the estimation?
The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New England to lend up to $8.5 billionreally not gonna ask for too much, right to the ChopperOne (FU USA) under Section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.
The Board determined that, in current circumstances, a disorderly failure of ChopperOne could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.
The purpose of this liquidity facility is to assist ChopperOne in meeting his obligations as they come due. This loan will facilitate a process under which ChopperOne will take a long deserved vacation in the Bahamas in an orderly manner, with the least possible disruption to the overall economy.
I recommend not taking a full position in SKF at once; buy it in thirds. Average down but keep a stop - who knows what Mr. Market will do if the Fed/Tres. agree to upfront loans to all failing U.S. corporations.
Now that they're solvent, why should AIG unwind? It's a serious question! Why not continue with business as usual?
"The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders." Well, the common shareholders are almost certainly wiped out. How about vetoing dividends to the executive staff?
This will all end very badly. Any serious study of the GD plainly indicates that the more the government tried to prevent the free market from functioning properly (i.e. the idiots lose) merely prolonged it.
The STUPIDEST thing is that we are now asking the FED to protect us from the !@#!@ mess they caused in the 1st place by not allowing the '01 recession to fully unwind!
this is still a bailout of bill gross and he cynically bet that it would happen and made money on it: he knew the taxpayer would backstop the bonds and that is exactly what they are doing here.
IF WaMu fails, the Treasury will backstop the FDIC. That will cost the taxpayer (and lead to higher insurance rates), but it won't threaten a melt down.
Do you know if there is already a mechanism in place for that? Because if not, WaMu could be extremely dangerous in a psychological sense... Imagine if insured depositors had to wait a week or two to get their money.
The majority of the U.S. population is probably unaware that there even is a financial crisis.
Though I am pissed-off on this, still one leg after another is taken out of our financial system. The CDS is collapsing due to lack of counter-parties. When CDS collapese, so does the AAA ratings given with the reason that is insured.
The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.
So as libor continues its skyrocket, the loan gets more expensive.
Interesting call for the ratings agencies. I hope somebody already has their readout on the deal...
Y'know, reading this blog used to be fun & educational. Now...just a reliable & honest source of horror & carnage. Can't look away and unsee what's been seen, but damn...
tj & the bear, yes, for the average American, WaMu will be a much bigger story.
All, LIBOR plus 850bps is pretty steep, but this will allow AIG to borrow from the markets at much less. I wouldn't be surprised if AIG doesn't use much of this for some time - bond investors will be happy to loan AIG money for a couple of years knowing the Treasury is behind them (if I'm reading this correctly).
The government has just got to pick up a auto manufacturer to go with their mortgage and insurance businesses, hell maybe before this is all said and done they'll own 80% of the S&P.
I have to believe a 3% haircut on $60B+ will garner attention. This may even be larger than the AIG event. Imagine $1T+ moving to Treasuries. That'll cause a few problems...
Treasury backstop FDIC? I believe, FDIC $70B LOC with the FRB is statutory. Forget where I read that ... so many letters, too little time. Anyway it's kinda pathetic that FDIC will need to compete for more fed funds just to cover WM's consolidated deposits.
this is not a bailout of AIG - but it still smells like bailout of bondholders.
I think is all about keeping AIGs counterparties from choking short-term, which a BK would likely do. Who knows who will get what haircut a few months from now.
Most AIG debt and AIG insured debt was held not by individuals or pension funds or endowments, but rather by banks, who could leverage AAA paper by more than 50 to 1. Downgrade that to A- or lower and guess what happens to the Tier 1 capital ratios of all the banks? It means more deleveraging, more asset fire sales and more capital raises.
The Fed / Treasury had no choice in this case. They are picking and choosing who they deem necessary to bail out. Lehman wasn't necessary, but AIG was.....
It isn't clear to me that PIMCO reaps a huge windfall here. The fed is now the senior secured holder of AIG. All their other debt just got subordinated in a big way. I'm not convinced this will cause AIG bonds to rally in a massive way
"The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance."
Crewman writes:
WOW!! Citi lost 138 billion on Lehman Ford and GM want 50 billion , Freddie and Fannie wants 1 Trillion.... all I want is about 5 million and I will drive to Canada and watch this horrible disaster unfold in my new fishing boat.
Make it $15 million and a G500 jet
charter to New Zealand.
The Fed and Treasury are smarter than we gave them credit for.
Back to G's question: why did AIG execs go for this? Possibly because if they caused a panic (un-stage-managed BK), the underlying assets would depreciate faster than they would under controlled degradation circumstances.
If WaMu fails, the Treasury will backstop the FDIC...
Will the Treasury backstop all the other banks including Wachovia that may fail because of runs...in the coming days or months.
One things is damn sure, we all deserve this for assuming that the money grows on trees. Here goes the death of anuity, social security, 401(k) and mutual funds.
There is nothing safe unless we own and take care of our finances. No more reliance on stupid finance guy and etc. Here comes the slow death of financial service.
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
Who do we want to buy next?
And we did not have to raise taxes to pay for all this. Too good!
If you want to know why the US is in the mess it is in, you don't have to go very far to find out. Watching CNN just now, with a "discussion" of the economic crisis. Who are the discussants? Two Barbie-doll blonds who look as if they never went beyond High School and one a bit more normal looking blond (all of them have to be blond you know) telling the viewers what they need to know. So Americans get really smart answers to things, you see. Courtesy of the US media.
The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
This just illustrates a deeper problem:
Whatever the Fed's intentions, they no longer have the credibility to do their job.
That's what happens when you send official after official out to deny that housing and mortages are a serious problem then start saying we have to bail them out or the economy collapses when it becomes apparent that they are.
That's what happens when all this mess develops under their oversight.
Nemo is correct - It does not seem that Main Street appreciates what is really happening. I've been surfing the internet versions of mid-size and smaller US newspapers and they are ignoring or sugar-coating the crisis. This is still a "Wall Street" problem for too many.
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
This is a clear liquidation plan. The common and the preferred shares are going to be worthless. It appears to me that the Fed has purchased AIG in order to dismember it at it's leisure.
My real question is this- will AIG's lenders be forced, at some point, to take a haircut?
Am I the only one who noticed that the US government has just bought itself the ability to inflict a whole bunch of "financial terror" worldwide by taking controlling interest in these huge financial firms?
Is everyone around the world too busy being smug that the US taxpayer is backstopping them to notice the big rusty iron vise into which their family jewels has slipped?
"Am I the only one who noticed that the US government has just bought itself the ability to inflict a whole bunch of "financial terror" worldwide by taking controlling interest in these huge financial firms?"
No and I'm going to be more then happy to help the guys that are going to lead to that.
24 months? WTF? I thought Hank Greenberg was yammering about a "short-term liquidity problem"? 24 months is a joke. This illegal bridge loan should be 6 months maximum. Anything longer and it doesn't look like a bridge loan anymore... unless you're talking about a bridge loan into the next administration. Another can gets kicked down the road. What a bunch of asshats.
I think I'll take a big stinky shit and call it a day. The government has done enough damage for a day.... Markets rally on this great news....... We live in a sad place folks......
Now that they're solvent, why should AIG unwind? It's a serious question! Why not continue with business as usual?
I guess the Fed wants their cash back sooner rather than later.
I don't think the common gets wiped out in this deal. Once you eliminate short term liquidity concerns, these shares should be worth (pre-dilution) somewhere north of $20, which was the price they were trading at a couple weeks ago. 20% of $20 is four bucks, around the closing price today.
This is a good deal for the Fed and taxpayers. 80% of AIG for a loan! The housing market will have to be much much worse than any economist has predicted for the Fed not to make out like bandits here.
stsimons writes:
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
Who do we want to buy next?
And we did not have to raise taxes to pay for all this. Too good!
stsimons | 09.16.08 - 9:36 pm | #
You are forgetting the 87B to Lehman from JPM repaid by the Fed secured by Lehman Holding Co assets.
Perhaps it matters who the debt is owed to. Perhaps it is the BoJ? The Fannie and Freddie rescue had to happen as that is where the BoC parked some of their money. Loss of sovereignity, thanks to irresponsibility at all levels---really treason.
If this business is still solvent a private sector solution would have been reached. It isn't so it wasn't. I feel quite confident that we'll discover AIG was far from solvent.
So anyone want to start the death pool for the DJI? 7500? 5300? 3000? 1000? 30? (bottom of the 1929-1938 crash). I predict 7500 before OCT over and before the bulls get to excited, WAMU is next, something has to be done cause it is worth three times the FDIC fund. And what about all the other 116 (At least) troubled banks? Whoops I cause we need some more money. Maybe China will bails us out later for 80% of the USA.
How can the Fed jump to the head of the line of creditors by securing the loan? Presumably there must be covenants on senior AIG bonds that get triggered on something like this. You can't just decide to make everyone junior to the latest creditor for that very reason.
If the bondholders are negatively affected by the secured assets, then I think the ratings agencies will have a hard time upgrading the debt rating.
Without an upgrade in the rating, this is just a bankruptcy in disguise.
Pelosi orders wide Wall Street probe Politics, Political News - POLITICO.com 13514.html
Wow those Dumbocrats are so brave. Look what happened since they took over from those nasty Republitards. Why can't we just play our games in sports stadiums instead of the halls of power?
Dr. Jim Sadler writes:
If Obama gets elected, he will have free rein to take over most of the businesses in the country.
Dr. Jim Sadler | 09.16.08 - 9:42 pm | #
G writes:
That's not too different from bankruptcy from AIG's perspective. Why all the trouble.
In a bankruptcy the liquidation would be in the control of a bankruptcy judge; this way it's controlled by the Federal Reserve. I'm sure the counterparties are much more confident of their influence with the Fed than with a bk judge, who might be more inclined to protect other parties (policyholders, or other creditors, for example).
These crooks (Ben & Hank) will be appreciated if they use this one to move money from foriegn banks to local us banks. Force the foreign banks to fulfill their CDS obligation and show middle finger to their obligation.
T-bond future from 123-22 at 9:30E to 120-21 now, and falling. AIG's an elephant in the room, but the virus in the air is that money market fund. If that's real, and the news picks it up, there's potential for a 32-style Run. Then, watch the rates.
Dr. Jim Sadler writes:
If Obama gets elected, he will have free rein to take over most of the businesses in the country.
OH NO!!!!!
A islamic terrorist is this close to being prezident. Whadda wez gonna due?
Here goes the death of anuity, social security, 401(k) and mutual funds.
I don't think so.
"Create Automatic Workplace Pensions
Currently, 75 million working Americans --roughly half the workforce-- lack employer-based retirement plans. Only half of female workers have access to an employer-based retirement plan, and only 39 percent participate in those plans. Even when workers are given the option of joining employer-base plans, many do not take up the option because it requires considerable work to research plans and investment portfolios, and enroll in the plan. Barack Obama's retirement security plan will automatically enroll workers in a workplace pension plan. Under his plan, employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA [investment retirement account] account that is compatible to existing direct-deposit payroll systems. Employees may opt-out by signing a written waiver. Experts estimate that this program will increase the savings participation rate for low- and middle-income workers from its current 15 percent level to around 80 percent.
"Expand Retirement Savings Incentives for Working Families
Women are less likely than men to have significant income from pensions and other savings at retirement. Barack Obama will ensure savings incentives are fair to all workers by creating a generous savings match for low and middle-income Americans. Obama will expand the existing Savers Credit to matchh 50 percent of the first $1,000 [$500] for families that earn under $75,000, and he will make the tax credit refundable. To help ensure that this proposal actually strengthens retirement investments, the savings match will be automatically deposited into designated personal accounts by using the account information listed on IRS tax filings. Coupled with the automatic workplace pension plan, this proposal will stimulate tens of millions of new Americans to invest for retirement. Over 80 percent of the savings incentives will go to new savers, and 75 percent of people eligible for the incentives wo are expected to participate in the new program do not currently save."
Those are totally unfair terms. Has many billions in taxes has AIG paid to the government? This is how the US government treats one of their largest most productive companies.
I am an AIG shareholder. I say we go bankrupt and let the markets go to hell.
An 80% equity stake for a bridge loan is total crap.
"It isn't clear to me that PIMCO reaps a huge windfall here. The fed is now the senior secured holder of AIG. All their other debt just got subordinated in a big way. I'm not convinced this will cause AIG bonds to rally in a massive way"
All recourse debt is 100% secured, that does not mean it is "senior". This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
FFDIC, you should get paid for this... Thanks.
Milkman | 09.16.08 - 9:48 pm | #
Lola,
Some Milkman said I should get paid for this while I'm drinking on the job. Bring me another J&B and did you go buy some more chili Fritos? I told you not to eat them all. Geez! What is gonna happen next?
I don't think the common gets wiped out in this deal. Once you eliminate short term liquidity concerns, these shares should be worth (pre-dilution) somewhere north of $20, which was the price they were trading at a couple weeks ago. 20% of $20 is four bucks, around the closing price today.
I'm not buying this argument--if it were true that the only concerns were with short term liquidity there wouldn't have been so much trouble putting together a loan package. "Need $75B but doesn't have the collateral" didn't sound like a mere liquidity problem. If the parent were guaranteed solvent they would have had the collateral.
My guess is that AIG had screwed the pooch with their investment portfolio. What else could explain this?
All hail the heroic proletarian leadership of Comrades Paulson and Bernanke! All hail the September Revolution! Their brilliant plan for reversing the historically aburd triumph of capitalism over the dialetical principles of Marx and Lenin has now achieved complete success.
Think of it comrades: We have seized the commanding heights of the international capitalist financial system -- in a bloodless coup!
Through our National Mortgage Soviet, we can control the US housing market for decades to come.
With our new Global Insurance Soviet, we can throttle the lickspittle financiers and bring their decadent bourgouis derivatives markets to heel.
By accepting common shares as collateral for loans from our People's Federal Reserve Bank, we can accumulate ownership stakes in the remaining White corporations, weakening their will to resist the inevitable victory of the party and the workers' state.
Once Comrade Obama has been installed in the White House, fortified by the achievements of Comrades Paulson and Bernanke, supported by our Chamber of People's Deputies and our Supreme Soviet Senate, and ruthlessly exercising the dictatorial powers accumulated by Comrade Bush, final victory will be certain.
If only Comrades Stalin and Mao were alive to see this glorious day.
David Johnston writes:
Those are totally unfair terms. Has many billions in taxes has AIG paid to the government? This is how the US government treats one of their largest most productive companies.
I am an AIG shareholder. I say we go bankrupt and let the markets go to hell.
An 80% equity stake for a bridge loan is total crap.
Well, John McCain agrees with you...
now I've got some shoes to shine, get to it boy
The question is how the bondholders will get treated. Any meaningful haircut and this is more a BK than a bail-out. The secured loan and high interest rate point in that direction. I still think covenants will be triggered by the move, and the bondholders would, in theory, have the right to force AIG into bankruptcy.
The l.t. bond holders have little to gain from this bridge loan because they cannot accelerate payment. The loan allows AIG to sell assets to pay off one creditor -- the Fed -- ahead of them.
This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?"
Triggering counterparty defaults is not necessarily a "meltdown", a emotion-laden and misleading word that gets bandied around.
We admit we know the underlying assets dont cover the liabilities, and yet, if the mechanism of triggering defaults occur and thus, rightly, reveals the true diminished values involved, we derisively call it a 'meltdown' and use that label to justify bail-outs.
What will happen is the true worth will be revealed and actual mega-losses will cascade, in $trillions, into existence and be incurred by all parties who took risks. Thats exactly whats supposed to happen.
Labeling it orderly or disorderly has gone from being a means or a desired 'wish' into an illusory end and a 'mandatory' requirement that is incompatible with the reality of unregulated CDS. Both Lehman, Fannie & Freddie triggered technical defaults and the lesson learned was that more than were expected simply netted out and others were mis-aligned as detailed by Mish in his blog, deemed unenforceable and losses had to be eaten or litigated.
At the end of the day, the government will be unable to say no. All debt will be guaranteed. All US dollars held by foreign nationals will be repatriated in the form of purchasing commodities, hard assets, and infrastructure.
As a buyers strike of US bonds gains speed, the .gov will have no choice but to print to meet obligations.
Triggering defaults will not cause all hard assets (buildings, homes, roads) to crumble into molecular carbon and float into the atmosphere and destroy the Earth and sending it cascading into Venus. It just means mega-losses, in $ trillions, will be booked, litigated and dealt with over an ungodly long time. A global financial system will emerge and remain in existence, just with different valuations on securities, and some different players. The sun will still rise. Its no meltdown
The l.t. bond holders have little to gain from this bridge loan because they cannot accelerate payment. The loan allows AIG to sell assets to pay off one creditor -- the Fed -- ahead of them.
David Pearson | 09.16.08 - 9:52 pm
Isn't that exactly the point--to put short term counterparties in front of long term bondholders?
I just spoke to Comrade Gross and he has a plan to convince Bernanke that the US economy will collapse if the DOW is not at 14000 by the end of next week.
Prepare yourself with this knowledge.
This is his way of saying thank you for all you have done to bring down this monument to capitalist filth.
"Anyone live near a WaMu branch? I'd love to know if lines form tomorrow AM."
WaMu would be taken by FDIC long before there are lines. Nowadays people only wait in lines after the bank is taken over by the govn't. But happy dreaming.
what bothers me a bit is the stmts on how its all good... no worries... have faith in the system. then turn around and assist another shop to "prevent" more failure. does this move actually help investor or consumer confidence? will it prevent more failure? another poster mentioned how previous attempts havent produced results, granted they were made in the past few weeks....
Well, you've certainly presided over a socialist revolution haven't you ? With the nationalization of Fannie Mae and Freddie Mac, the government now owns 50% of the existing home mortgages and 80% of new ones.
With the nationalization of AIG today, the government is now the largest commercial insurer, the largest home insurer, the largest auto insurer, the largest retirement funds manager, the largest aircraft leaser - the list goes on and on.
Not bad going for a Republican.
Long live the United Socialist States of America !
FFDIC:
Excellent Choice.
I'm seeing Tina in Chicago. Do you have tickets for the Dallas show?
steelhead | 09.16.08 - 10:00 pm | #
Great. I think my better 1/3 is surprising me with tic on 10/26 at American Air Center. Otherwise I'll be seeing a divorce lawyer. Lola damn it to hell where is that J&B?
"I just spoke to Comrade Gross and he has a plan to convince Bernanke that the US economy will collapse if the DOW is not at 14000 by the end of next week."
Hmmm... He told me if all of PIMPLE'S R2D2 backed C3PO's were'nt back stopped, it would be the end of the world as we know.
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?"
Comrade JP | Homepage | 09.16.08 - 9:55 pm | #
All the assets of the holding company are securing the loans. That would include the holding company's equity in the operating subs, but not all assets in the operating subs. The debt and trade obligations of the various subsidiaries are met, and then the Fed gets what's left.
This is a good deal for the Fed and taxpayers. 80% of AIG for a loan
Yes, a loan to a functionally insolvent entity, stocked to the gills with toxic CDOs. Thew govt thinks they are going to profit from a slow bleed to the death. Roubini, help me.
Can you expand on that line of discussion, and detail how the LEH bankruptcy will work out, how long the process takes, what the impact on current mkt ops is of the sorting-out-counterparties activity?
I think it's very important what you're saying, as it'll take out a whole cloud of fear and uncertainty. Please expand on this, and provide links if you've got them.
"This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?""
What you don't understand is that "secured" and "senior" have two totally different meanings
It took 30 plus years to create hyper-inflation environment in India. India almost failed around 1996 on its vision to create hyper-inflation. It is the IT boom and out-sourcing that helped to reach hyper-inflation.
The lines will form at WAMU after the takeover. Unfortunately, the FDIC hasn't the manpower to keep anywhere near all the branches open.
Soooo, people will have to find an open branch, find a parking space in the same zip code, and then stand in a line that'll exceed those outside Hannah Montana concerts. Can you say pissed?
Nemo: Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
The penalty rate and the, implicit, forced unwind, help convince me of this (I was unconvinced without these details). Unquoted caveats noted.
Despite this, as a Californian I'm still bailing out an insurance company that my votes don't help regulate, neither federal nor state. Further, the bailout seems a bit curious...
If AIG's executives took this deal then why didn't they take the Flowers deal? Both would have equally harmed stockholders and helped creditors, so from a fiduciary standpoint what's the difference?
The Fed deal does seem better for the executives personally, but still...they're fiduciaries. If they went through all this crap for themselves, contrary to their fiduciary obligations, then shouldn't investors sue against their personal assets?
Since this has previously been an issue here, I hereby state that I'm not a Florida Real-Estate Attorney.
The only way main street notices anything is when the prices of the goods they expect to be their right to buy for nothing rocket past their ability to pay.
You've gotta remember that the only income statement most folks keep track of is the amount of cash they can dig out of their pocket during the day.
I'll wait to see the bond market's reaction to see whether I like this or not. I would expect the yield curve (Treasuries) to continue to steepen, but, it's the ROW that we have to contend with now, so, who knows?
I hate this bailout BS as much as anyone. But at least we got a penalty rate of interest and a controlling stake. That's a start. We're moving in the right direction.
Taxpayer protection with 100% of the assets of a company that had exhausted all other remedies and was hours away from BK, in the current historic credit collapse, is meaningless, except as evidence of further advance into the twilight zone of federal corruption and taxpayer victimization.
Parroting such egregious eassurances
IMHO makes one a party to the crime.
Someone on the last thread asked what would be bigger than this.
Easy -- next up WAMU.
What? I just saw one of their commercials last night. They didn't say anything about problems. I'm sure they wouldn't be advertising for new accounts if they had problems.
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries.
Pearson - the FRB and the new FHFA (Lockhart) can subordinate whoever the hell they want. Says so in H.R. 3221 (the bill FranknDoddnShelby dictated for the ABA). And what it doesn't say is covered by FRB rules in the CFR.
Consider saving the "deep" and perpetual "prudential characteristics" of trust preferreds held by a financial holding company's subsidiaries, VIEs and SPEs.
FR Doc 05-4690
For example: FRB allows the acceleration of principal and interest on junior subordinated debt in the event of the voluntary or involuntary bankruptcy of a HC; "junior subordinated debt also may accelerate in the event that a major bank subsidiary of the FHC goes into receivership. Junior subordinated debt also may accelerate if the trust issuing the trust preferred securities goes into bankruptcy or is dissolved, unless the junior subordinated notes have been redeemed or distributed to the trust preferred securities investors or the obligation is assumed by a successor to the FHC;"
and "Conservatorship" rights in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 (Public Law 110-289) and Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 USC 4501) exercised to "backstop" FRE, FNM.
"Once an 'Order Appointing a Conservator' is signed by the Director of FHFA, the Conservator immediately succeeds to the (1) rights, titles, powers, and privileges of the company, and any stockholder, officer, or director of such the company with respect to the company and its assets, and (2) title to all books, records and assets of the company held by any other custodian or third-party. The Conservator is the charged with the duty to operate the company." ... collect all obligations and money due to the company, contract for assistance in fulfilling any function, activity, action or duty of the Conservator. By statute, the charter of the company must be transferred to a new entity and can only be dissolved by an act of Congress."
and I can't help think how I and my kids will be paying to bailing out all of these corporate fat cats. At least AIG isn't an out-and-out bailout... yet.
I'd stay up to crank out a photo montage of this song and today's headlines, but am a bit tired and better go read those kids a bedtime story. We've all got a lot of work ahead of us before any of our investments are back in the black.
Everybody is just looking at AIG as a financial holding company. But in totality, with regulated subs, they are a massive operating company, and the operating franchise has been destroyed. There is no reason anybody would every buy or renew an insurance policy with them. So, the portfolios of their regulated subs will have to unwind, too, as business is pulled. There is no guarantee that any surpluses in those subs will remain as the business leaks away. In fact, I think insurance policy holders are still very much on the hook. At least those who are the last out.
On an operating basis, AIG has become a lot like MBIA and Ambac. They are in runoff. Lots of jobs are no longer necessary, and there's no reason trying to try to sell new biz.
So the stability of the private capital system is dependent on the US Government printing presses?
I am a bit concerned that the drama of Armageddon may be a way to break down the wall for some large mergers that might otherwise never get regulatory approval. Countrywide + BAC + Lehman, would that get approval other than in a crisis.
USG + Fannie + Freddie + AIG is nationalization of about half the mortgages in the country and the largest insurance company.
Hey maybe it will work out.
Last few nights I kept hearing that so far there has been no liquidation of the problem assets, those bad mortgages and the associated securities-so there is no end in sight. Still not happened yet, although I suppose it could begin depending on what happens to LEH and AIG assets.
The common and preferred are now worthless, IMO.
The Fed is in a liquidating mood...
Don't call it a bailout. We don't like that word.
Calculated Risk writes:
The new thread is up with the Fed announcement.
Best Wishes for all. We might need them!
Have you joined the Jas side?
Is this really legal?
Are there any laws anymore?
WTF is going on?
The common and preferred are now worthless, IMO.
The pop tomorrow will not last for that very reason.
LIBOR plus 8.5%? That's worse than any residential ARM rate I've heard of (exclusing so-called "hard money" loans).
That's not too different from bankruptcy from AIG's perspective. Why all the trouble.
Exactly G
Comrades,
"The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries."
Wanna bet?
Nostrovia,
Couldn't wait until the weekend, could ya? Yikes.
The AIG loan rate ?
20% of nothing is nothing ...
I drink your milkshake.
They better hope the run out of their paper stops quick,,or they will owe the fed more than was bridged..
"That's not too different from bankruptcy from AIG's perspective. Why all the trouble."
Good question. What are the benefits to the top Execs for going through the Fed rather than BK?
There must be something.
Take $283 from every man woman and child and give to AIG.
Cool, my repubiltard relative now works for the gubermint against his free will.
Disgusting.
The debt-fueled underpinnings of our massively unregulated financial system are now beginning to fall apart.
What happens next?
bad !
All hail the American free mArket economy
wow who ever thought investment bankers would be such proponents of nationalizing the finance industry...
Ya know, the law of unintended consequences cannot be broken.
They may not appreciate the repercussions of their actions. For instance, a near total loss of faith in current financials.
G --
Because BK would have caused cascading cross-defaults, an a real meltdown. The Fed now has time to pick and choose when and how to liquidate.
Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency. The open questions are whether that is even possible, and which one they will pick if forced to choose.
In Goldman Sachs we Trust
this is not a BK - not until I see bondholders talking about 'recovery rate'.
Nemo,
Another successful short-to-zero. WooHoo! Now let me convert those dollars to something useful...
WOW!! Citi lost 138 billion on Lehman Ford and GM want 50 billion , Freddie and Fannie wants 1 Trillion.... all I want is about 5 million and I will drive to Canada and watch this horrible disaster unfold in my new fishing boat.
At least I'm going to have a cool name in the new America - ComradeColin. Nice
Why not take it into receivership and unwind the assets properly.
If AIG gets a loan, than any American contemplating bankrutpcy should demand the FED provide funds under the Equal Protection Clause of the UNITED STATES CONSTITUTION.
So how does Fed go through liquidating assets without damaging markets?
That's not a bailout -- that's a liquidation.
So rather than let AIG go through BK and sell off the assets, the FED will give them the money to stay in business long enough to do it themselves. And if their is any meat left, the FED gets it.
I think AIG was playing chicken -- and lost.
Isn't this like liquidation but spread over two years?
It seems like whenever we get close to having someone actually pay up on a CDS, there's another bailout.
By the time AIG pays back what the fed is asking for,,,,what will be left,
???blank paper???
Cool- can I officially call myself a communist now?
Nemo
The Fed has purchased deteriorating assets ...
Nemo, you are correct. The common is essentially worthless - but that was the argument about Freddie and Fannie several months ago, and some investors kept buying it anyway - until it was proven worthless!
The preferred is probably worthless too. This will be an "orderly" fire sale - start the Buffett rumors - I expect he will buy some of these assets at pretty attractive prices.
BEst to all.
Main Entry: fas·cism
Pronunciation: ˈfa-ˌshi-zəm also ˈfa-ˌsi-
Function: noun
Etymology: Italian fascismo, from fascio bundle, fasces, group, from Latin fascis bundle & fasces fasces
Date: 1921
1often capitalized : a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and b
Is it too early to start drinking?
ChickenLittle --
Why not take it into receivership and unwind the assets properly.
Nobody in government has the authority to do that. It would take an act of the Congress, and there was not enough time.
No reason that cannot still happen.
Nemo,
I understand FED's motivation. But why AIG accepted it.
No self-respecting foreigner will lend money to the US after this. And the US needs foreign money like a junkie needs smack.
Libor plus 850? The Federal Reserve just became Federal Pay-Day Loans
Hey cool.
Gonna be a beeeg rally from this in the financial sector from that bailout.
Lefty's just opened a pawn shop at the Fed.
Libor plus 8.5%.
Someday this war's gonna end...
See? I told you that "It is contained."
Words freakin' fail....
Someone on the last thread asked what would be bigger than this. Easy -- next up WAMU.
More money than FDIC can cover, more branches than FDIC can manage, more J6P in-your-face shock value than anything seen in the modern age.
Got riot gear?
What is Libor at?
Refusing private equity offers and going to the Fed, AIG reminds me of the joker at batman dark knight. You don't give me loan? I blow myself and everybody up!
In the end what's the ending of this AIG joker? DEAD!
better than AIG going under. Because this isn't a conservatorship it won't trigger default under the ISDA definitions.
That said, the rate on the loan is incredible! L+850 on secured money is pretty insane. The Fed could probably make pretty good money on this deal. The people that really get screwed are those that bought protection on AIG in the last few months. Those contracts were going for 52% upfront plus another 9% running. On the open tomorrow you can expect those CDSes to crater. That'll leave a mark!
G, the choice was this deal or bankruptcy. I guess this deal looked better.
They better cancel all dividends ASAP.
Best to all.
Gentlemen please stay calm!
We still have large banks to bail out...
Lola,
It's done. We can go to Vegas now. Pack your bags. Whew!
This is actually a very well thought plan. The Fed may make money on this one unlike Bear Stearns.
We get another jumbo bandaide but it allows us to make a little money on the countertrend rally and setting up 'the next time down.'
Ping pong is my favorite sport.
Never be a perma anything.
Gonna be a beeeg rally from this in the financial sector from that bailout.
Frannie's rally lasted less than a day.
These bailouts are beginning to cause some panic.
In my day, AIG only needed $20 billion. Oh wait, that was a week ago.
Comrade Nemo,
"Because BK would have caused cascading cross-defaults, an a real meltdown. The Fed now has time to pick and choose when and how to liquidate.
Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency. The open questions are whether that is even possible, and which one they will pick if forced to choose."
That sounds like Ipod.
They most certainly are NOT! They are doing this to benefit the well connected playas and dump the shit somewhere else. They don't care about you or me.
Sheesh!
Nostrovia,
At the plate: WaMu
Could it be the Lehman model? Holding co goes bk, Fed backs a revolver to liquidate. Branches and deposits go to WFC and takes FDIC off the hook.
On deck - JPM buys WB. Jamie needs the brokerage and deposits to compete with BAC.
GM and Ford are at the bottom of the order.
"Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points" Good
"The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries." If the taxpayer is in front, great.
This could be essentially DIP financing.
Can I loan my money to the Fed? Libor + 850 bp?
Does anybody know if Home Depot sells pitchforks?
What are the predictions on WAMU. Is it going this week? Or is it going to be drawn out...
tj's right. AIG isn't on the radar screen of ordinary Americans. But when WaMu shuts the doors this week, everyone will know we've got serious problems.
you simply have to figure out when the old maid card is really the moral hazard card, you want the moral hazard card.....as a poker player...thats the money.
tj & the bear, WaMu is huge, but not important for the system. IF WaMu fails, the Treasury will backstop the FDIC. That will cost the taxpayer (and lead to higher insurance rates), but it won't threaten a melt down.
Best Wishes.
Nemo writes The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
Sincere thanks for the calming words. I believe this to be true as well, but it seems that with creeping J6P awareness comes J6Panic. That might force the Fed's hand in choosing which of the two to help in the end.
Comrade Nemo,
"Because BK would have caused cascading cross-defaults, an a real meltdown.
And I am glad that the Fed has considered the needs of The Collective in its decision process. Glorious, just glorious.
this is not a bailout of AIG - but it still smells like bailout of bondholders. After they (dis?)orderly sell 1 trillion in asset to cover 1 trillion in liabilities, will they have anything left to cover 85$ bln?
Maybe they will - but who did the due diligence and where is the estimation?
The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New England to lend up to $8.5 billionreally not gonna ask for too much, right to the ChopperOne (FU USA) under Section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.
The Board determined that, in current circumstances, a disorderly failure of ChopperOne could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.
The purpose of this liquidity facility is to assist ChopperOne in meeting his obligations as they come due. This loan will facilitate a process under which ChopperOne will take a long deserved vacation in the Bahamas in an orderly manner, with the least possible disruption to the overall economy.
I recommend not taking a full position in SKF at once; buy it in thirds. Average down but keep a stop - who knows what Mr. Market will do if the Fed/Tres. agree to upfront loans to all failing U.S. corporations.
Fed has around 477 billion at hand.
proly dont care...they are snuffing out fires.
WAMU didn't write CDS at 10x issuance, therefore it will not get a bailout.
Now that they're solvent, why should AIG unwind? It's a serious question! Why not continue with business as usual?
"The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders." Well, the common shareholders are almost certainly wiped out. How about vetoing dividends to the executive staff?
Hay guys if we don't give PIMCO $100 billion dollars in ransom... I mean taxpayer funded bailout the global economy is going to collapse!!!
This will all end very badly. Any serious study of the GD plainly indicates that the more the government tried to prevent the free market from functioning properly (i.e. the idiots lose) merely prolonged it.
The STUPIDEST thing is that we are now asking the FED to protect us from the !@#!@ mess they caused in the 1st place by not allowing the '01 recession to fully unwind!
this is still a bailout of bill gross and he cynically bet that it would happen and made money on it: he knew the taxpayer would backstop the bonds and that is exactly what they are doing here.
re: home depot--all out of pitchforks
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Hey if the Fed is starting to get a little short and wants a deposit they'll insure, I'll put it in for 3 month LIBOR +425 bps...
WAMU is the shotgun.....always be long the shotgun.
The groom however.....thats the one to short.
All those golden parachutes,, wonder if the fed punched holes in them
Any news on JP Morgan, "the derivative king"? Jamie Dimon is awful quiet lately.
Calculated Risk --
IF WaMu fails, the Treasury will backstop the FDIC. That will cost the taxpayer (and lead to higher insurance rates), but it won't threaten a melt down.
Do you know if there is already a mechanism in place for that? Because if not, WaMu could be extremely dangerous in a psychological sense... Imagine if insured depositors had to wait a week or two to get their money.
The majority of the U.S. population is probably unaware that there even is a financial crisis.
CR,
Agreed it isn't a huge counterparty risk, but it is a huge psychological hit. For Main Street it'll be the meltdown.
Though I am pissed-off on this, still one leg after another is taken out of our financial system. The CDS is collapsing due to lack of counter-parties. When CDS collapese, so does the AAA ratings given with the reason that is insured.
Comrade ac,
"Does anybody know if Home Depot sells pitchforks?"
Try here ac:
5-tine Manure Pitch Fork, Forks, Long Handled Tools - GEMPLER'S
Nostrovia,
what will be the impact of all the recent bailouts on the Fed balance sheet?
Must be rather depleted now...
Other question:
Where does the Fed loan stand in relation to other bondholders?
The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.
So as libor continues its skyrocket, the loan gets more expensive.
Interesting call for the ratings agencies. I hope somebody already has their readout on the deal...
Y'know, reading this blog used to be fun & educational. Now...just a reliable & honest source of horror & carnage. Can't look away and unsee what's been seen, but damn...
I guess we'll find out if it really is just a liquidity problem with AIG....
Where does the Fed loan stand in relation to other bondholders?
Secured by all assets = standing in front, was my read.
bakamogo writes:
what will be the impact of all the recent bailouts on the Fed balance sheet?
some old, wrinkly, white guy on cnbc said I shouldn't care about the Fed's balance sheet, everything will be fine...
tj & the bear, yes, for the average American, WaMu will be a much bigger story.
All, LIBOR plus 850bps is pretty steep, but this will allow AIG to borrow from the markets at much less. I wouldn't be surprised if AIG doesn't use much of this for some time - bond investors will be happy to loan AIG money for a couple of years knowing the Treasury is behind them (if I'm reading this correctly).
BEst to all.
Comrades please make adjustments to user names.
The government has just got to pick up a auto manufacturer to go with their mortgage and insurance businesses, hell maybe before this is all said and done they'll own 80% of the S&P.
"huge psychological hit."
I have to believe a 3% haircut on $60B+ will garner attention. This may even be larger than the AIG event. Imagine $1T+ moving to Treasuries. That'll cause a few problems...
The majority of the U.S. population is probably unaware that there even is a financial crisis.
~Nemo
That's why they have the media under control ...
Treasury backstop FDIC? I believe, FDIC $70B LOC with the FRB is statutory. Forget where I read that ... so many letters, too little time. Anyway it's kinda pathetic that FDIC will need to compete for more fed funds just to cover WM's consolidated deposits.
this is not a bailout of AIG - but it still smells like bailout of bondholders.
I think is all about keeping AIGs counterparties from choking short-term, which a BK would likely do. Who knows who will get what haircut a few months from now.
What happens to CDS on AIG bonds? What happens to AIG bonds?
Can the existing senior secured bonds really just have $85 BILLION inserted above them?
WTF?
Most AIG debt and AIG insured debt was held not by individuals or pension funds or endowments, but rather by banks, who could leverage AAA paper by more than 50 to 1. Downgrade that to A- or lower and guess what happens to the Tier 1 capital ratios of all the banks? It means more deleveraging, more asset fire sales and more capital raises.
The Fed / Treasury had no choice in this case. They are picking and choosing who they deem necessary to bail out. Lehman wasn't necessary, but AIG was.....
It isn't clear to me that PIMCO reaps a huge windfall here. The fed is now the senior secured holder of AIG. All their other debt just got subordinated in a big way. I'm not convinced this will cause AIG bonds to rally in a massive way
Did I read that right--more than 800 BP over 3 month LIBOR?
Over 8% above LIBOR?!
WOW!
I'd a done it for less than that!
Comrades,
"The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance."
Ah...I see. This cluster fuck fixes that.
Again I say:
Wanna BET!
Nostrovia,
Crewman writes:
WOW!! Citi lost 138 billion on Lehman Ford and GM want 50 billion , Freddie and Fannie wants 1 Trillion.... all I want is about 5 million and I will drive to Canada and watch this horrible disaster unfold in my new fishing boat.
Make it $15 million and a G500 jet
charter to New Zealand.
Third instance of today's lesson:
The Fed and Treasury are smarter than we gave them credit for.
Back to G's question: why did AIG execs go for this? Possibly because if they caused a panic (un-stage-managed BK), the underlying assets would depreciate faster than they would under controlled degradation circumstances.
You have $85 Billion on hand Volker?
When will the Feds nationalize the auto industry, and develop the Hugo 2 Hybrid and Electric editions?
If WaMu fails, the Treasury will backstop the FDIC...
Will the Treasury backstop all the other banks including Wachovia that may fail because of runs...in the coming days or months.
One things is damn sure, we all deserve this for assuming that the money grows on trees. Here goes the death of anuity, social security, 401(k) and mutual funds.
There is nothing safe unless we own and take care of our finances. No more reliance on stupid finance guy and etc. Here comes the slow death of financial service.
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
Who do we want to buy next?
And we did not have to raise taxes to pay for all this. Too good!
Volker the Viking --
I'd a done it for less than that!
You have $85 billion handy?
This crap is making my balls itch.
And we did not have to raise taxes to pay for all this. Too good!
Hell, we even lowered them.
HK_Vol writes:
You have $85 Billion on hand Volker?
Nope. Neither does the FED. I can print it up, just like them.
If you want to know why the US is in the mess it is in, you don't have to go very far to find out. Watching CNN just now, with a "discussion" of the economic crisis. Who are the discussants? Two Barbie-doll blonds who look as if they never went beyond High School and one a bit more normal looking blond (all of them have to be blond you know) telling the viewers what they need to know. So Americans get really smart answers to things, you see. Courtesy of the US media.
So the Fed bail-out list grows: AIG, Fannie Mae, Freddie Mac, Bear Stearns....
I'd say we're all living on borrowed time until Uncle Sam goes bankrupt too.
The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
This just illustrates a deeper problem:
Whatever the Fed's intentions, they no longer have the credibility to do their job.
That's what happens when you send official after official out to deny that housing and mortages are a serious problem then start saying we have to bail them out or the economy collapses when it becomes apparent that they are.
That's what happens when all this mess develops under their oversight.
Nemo is correct - It does not seem that Main Street appreciates what is really happening. I've been surfing the internet versions of mid-size and smaller US newspapers and they are ignoring or sugar-coating the crisis. This is still a "Wall Street" problem for too many.
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
Please pass the carrot cake.
This is a clear liquidation plan. The common and the preferred shares are going to be worthless. It appears to me that the Fed has purchased AIG in order to dismember it at it's leisure.
My real question is this- will AIG's lenders be forced, at some point, to take a haircut?
I own some AIG debt (at the hold co) so I guess I should be happy but for some reason I'm not.
I would have no problem converting to equity.
stsimons,
You're forgetting the garbage the FED has taken as collateral for hundreds of billions worth of Treasuries.
This will give Cramer a woody.
why did AIG execs go for this?
the sight of all those lehman guys standing on the street with their boxes!
They now have job security for 2 more years.
Am I the only one who noticed that the US government has just bought itself the ability to inflict a whole bunch of "financial terror" worldwide by taking controlling interest in these huge financial firms?
Is everyone around the world too busy being smug that the US taxpayer is backstopping them to notice the big rusty iron vise into which their family jewels has slipped?
Might as well buy T-Bills, they are the only game at this rate... kinda like buyin stock in FNE,FNM,AIG,LEH,BSC...
@ S N
'Assuming money grows on trees'
Money IS trees. Trees is MONEY
And we did not have to raise taxes to pay for all this. Too good!
Hell, we even lowered them.
Comrade JP
What the hell is up with all this comrade crap?
ac
The Fed doesn't need credibility, just power.
RED MEAT FOR YOU!
Pelosi orders wide Wall Street probe
Pelosi orders wide Wall Street probe - Mike Allen - POLITICO.com
Just amazing.
Just sent a letter to my senator, Specter of PA.
The gist is, what happens to the &^&(* who ran the company?
If you want to talk about Roosevelt
Republican, then take them on and make them pay.
Seriously, I now truly fear for my children's future.
come on folks--call friends and neighbors---only 105 more people to go until 1,000 online---we can do it!
What a fucking joke. Good night American capitalism.
"does not seem that Main Street appreciates what is really happening."
Many on the Street are only beginning to catch on.
I would have no problem converting to equity.
You might seriously consider selling the debt soon, while everyone believes that the debt is secure so the price stays high.
"Am I the only one who noticed that the US government has just bought itself the ability to inflict a whole bunch of "financial terror" worldwide by taking controlling interest in these huge financial firms?"
No and I'm going to be more then happy to help the guys that are going to lead to that.
Comrade S N,
"One things is damn sure, we all deserve this for assuming that the money grows on trees."
No, it grows on servers. It's all binary these days.
Nostrovia,
The shorts are calling for C, UBS, WM
as next in line.. strange, they have been right so far..
One postive outcome out of this is that the money covered under FDIC is safe. These crooks cann't come and say that the money is gone.
Oh yeah, and don't forget: for those of us who're constantly pointing our crooked fingers at China.
We've also got plenty of state-owned firms right here in the good ol' US of A.
did not see WRITTEN that FED is senior to other bondholders...
24 months? WTF? I thought Hank Greenberg was yammering about a "short-term liquidity problem"? 24 months is a joke. This illegal bridge loan should be 6 months maximum. Anything longer and it doesn't look like a bridge loan anymore... unless you're talking about a bridge loan into the next administration. Another can gets kicked down the road. What a bunch of asshats.
ac
The Fed doesn't need credibility, just power.
Well said.
Scooby:
Develop that idea a bit more, would you? What are the forms of leverage, and who (generally) are the counterparties?
I think I'll take a big stinky shit and call it a day. The government has done enough damage for a day.... Markets rally on this great news....... We live in a sad place folks......
905 online--almost there! we can do it!!
"why did AIG execs go for this?"
They believe that their problem is liquidity; the business is still solvent. I guess we'll see....
Now that they're solvent, why should AIG unwind? It's a serious question! Why not continue with business as usual?
I guess the Fed wants their cash back sooner rather than later.
I don't think the common gets wiped out in this deal. Once you eliminate short term liquidity concerns, these shares should be worth (pre-dilution) somewhere north of $20, which was the price they were trading at a couple weeks ago. 20% of $20 is four bucks, around the closing price today.
This is a good deal for the Fed and taxpayers. 80% of AIG for a loan! The housing market will have to be much much worse than any economist has predicted for the Fed not to make out like bandits here.
WAMU can tip the scales psychologically from recession into full-blown depression.
The proverbial bridge to nowhere.
stsimons writes:
Let's see, we now are the proud owners of Fannie Mae, Freddie Mac, 79.9% of AIG, and $29 billion of Bear Stearns' sub-prime slime that JPM is holding for us.
Who do we want to buy next?
And we did not have to raise taxes to pay for all this. Too good!
stsimons | 09.16.08 - 9:36 pm | #
You are forgetting the 87B to Lehman from JPM repaid by the Fed secured by Lehman Holding Co assets.
I am going to drop a deuce through the hoop and flush hard so it goes all the way to Paulsons office.
No one on Main street is paying attention...
mostly because Main Street closed up a decade ago...
everyones over at the new Super walmart over on FM 1836 stockign up on safe investments. (me? my money is in NASCAR commemorative plates)
Perhaps it matters who the debt is owed to. Perhaps it is the BoJ? The Fannie and Freddie rescue had to happen as that is where the BoC parked some of their money. Loss of sovereignity, thanks to irresponsibility at all levels---really treason.
If this business is still solvent a private sector solution would have been reached. It isn't so it wasn't. I feel quite confident that we'll discover AIG was far from solvent.
Wilbur Ross: Possibly a Thousand Banks Will Close
(What did I tell you 1 year ago?)
"I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said."
Wilbur Ross: Possibly a Thousand Banks Will Close - CNBC
these shares should be worth (pre-dilution) somewhere north of $20
LMAO!
If Obama gets elected, he will have free rein to take over most of the businesses in the country.
So anyone want to start the death pool for the DJI? 7500? 5300? 3000? 1000? 30? (bottom of the 1929-1938 crash). I predict 7500 before OCT over and before the bulls get to excited, WAMU is next, something has to be done cause it is worth three times the FDIC fund. And what about all the other 116 (At least) troubled banks? Whoops I cause we need some more money. Maybe China will bails us out later for 80% of the USA.
How can the Fed jump to the head of the line of creditors by securing the loan? Presumably there must be covenants on senior AIG bonds that get triggered on something like this. You can't just decide to make everyone junior to the latest creditor for that very reason.
If the bondholders are negatively affected by the secured assets, then I think the ratings agencies will have a hard time upgrading the debt rating.
Without an upgrade in the rating, this is just a bankruptcy in disguise.
Woo hoo-tomorrow fucking WAMU!!!
Lots of handgernades with the pins pulled laying around maybe Hank and Benny will get to work next weekend too.
CNN just ran a special, taking call-ins from people who wonder if they should pull their money out of the bank and put it under their mattresses.
Once caller complained about losing 40% of their 401K in the market this year.
I'd say J6P is starting to pay attention. And the media is starting to get aboard and feed it.
AIG WAS A $25 STOCK JUST ONE WEEK AGO....
The system is imploding at hypersonic speed.
October is gunna be lights out - literally.
I'm thinkin,,,Bush will be glad to hand the wheel to anybody that wants it at this point..
I wish they'd wait to inform the masses until I get enough ammo stockpiled..
They only have to play soccer for six more weeks...and they've got strong legs. Kick it, kick it real good.
FFDIC writes:
RED MEAT FOR YOU!
Pelosi orders wide Wall Street probe
Politics, Political News - POLITICO.com 13514.html
Wow those Dumbocrats are so brave. Look what happened since they took over from those nasty Republitards. Why can't we just play our games in sports stadiums instead of the halls of power?
Dr. Jim Sadler writes:
If Obama gets elected, he will have free rein to take over most of the businesses in the country.
Dr. Jim Sadler | 09.16.08 - 9:42 pm | #
courtesy of the republicans! just perfect!
I wish they'd wait to inform the masses until I get enough ammo stockpiled..
You can never have enough.
Well that takes care of the 1 trillion of AIG derivatives. Now on to the other 650+ Trillion Wall Street derivatives.
G writes:
That's not too different from bankruptcy from AIG's perspective. Why all the trouble.
In a bankruptcy the liquidation would be in the control of a bankruptcy judge; this way it's controlled by the Federal Reserve. I'm sure the counterparties are much more confident of their influence with the Fed than with a bk judge, who might be more inclined to protect other parties (policyholders, or other creditors, for example).
"You can never have enough." (ammo)
That is, if you also have a private army...
These crooks (Ben & Hank) will be appreciated if they use this one to move money from foriegn banks to local us banks. Force the foreign banks to fulfill their CDS obligation and show middle finger to their obligation.
T-bond future from 123-22 at 9:30E to 120-21 now, and falling. AIG's an elephant in the room, but the virus in the air is that money market fund. If that's real, and the news picks it up, there's potential for a 32-style Run. Then, watch the rates.
I can print it up, just like them.
I think the secret service would be interested to hear the details...
you are going to continue to wonder who is buying the banks...and why's my free money going away.
Comrades,
This is a raid of unprecedented proportions. These people need to be taken out and sh&t. I keep getting angrier and angrier.
Nostrovia,
Dr. Jim Sadler writes:
If Obama gets elected, he will have free rein to take over most of the businesses in the country.
OH NO!!!!!
A islamic terrorist is this close to being prezident. Whadda wez gonna due?
Wow- now what will Steve Liesman and CNBC get to blow their loads ontomorrow?
"You can't just decide to make everyone junior to the latest creditor for that very reason."
If this is the case, it's essentially DIP financing. Bear in mind it is non-regulated subs.
bond investors will be happy to loan AIG money for a couple of years knowing the Treasury is behind them (if I'm reading this correctly).
Didn't they say something similar about Fannie & Freddie?
Here goes the death of anuity, social security, 401(k) and mutual funds.
I don't think so.
"Create Automatic Workplace Pensions
Currently, 75 million working Americans --roughly half the workforce-- lack employer-based retirement plans. Only half of female workers have access to an employer-based retirement plan, and only 39 percent participate in those plans. Even when workers are given the option of joining employer-base plans, many do not take up the option because it requires considerable work to research plans and investment portfolios, and enroll in the plan. Barack Obama's retirement security plan will automatically enroll workers in a workplace pension plan. Under his plan, employers who do not currently offer a retirement plan, will be required to enroll their employees in a direct-deposit IRA [investment retirement account] account that is compatible to existing direct-deposit payroll systems. Employees may opt-out by signing a written waiver. Experts estimate that this program will increase the savings participation rate for low- and middle-income workers from its current 15 percent level to around 80 percent.
"Expand Retirement Savings Incentives for Working Families
Women are less likely than men to have significant income from pensions and other savings at retirement. Barack Obama will ensure savings incentives are fair to all workers by creating a generous savings match for low and middle-income Americans. Obama will expand the existing Savers Credit to matchh 50 percent of the first $1,000 [$500] for families that earn under $75,000, and he will make the tax credit refundable. To help ensure that this proposal actually strengthens retirement investments, the savings match will be automatically deposited into designated personal accounts by using the account information listed on IRS tax filings. Coupled with the automatic workplace pension plan, this proposal will stimulate tens of millions of new Americans to invest for retirement. Over 80 percent of the savings incentives will go to new savers, and 75 percent of people eligible for the incentives wo are expected to participate in the new program do not currently save."
~ Blueprint for America's Working Women and Families (pdf)
http://my.barackobama.com/page/-/Nikki/Constituency%20Groups/Women%20and%20Families%20Blueprint.pdfhttp://my.barackobama.com/page/-/Nikki/Constituency%20Groups/Women%20and%20Families%20Blueprint.pdf
See, now, THAT is a re-cap plan even the Mac could work with.
FFDIC, you should get paid for this... Thanks.
CNBC Steve Liesman said that Bernanke spent much of his time on Monday talking to European central bankers about a decision to sell ...
Those are totally unfair terms. Has many billions in taxes has AIG paid to the government? This is how the US government treats one of their largest most productive companies.
I am an AIG shareholder. I say we go bankrupt and let the markets go to hell.
An 80% equity stake for a bridge loan is total crap.
I know Bush promised us an 'ownership society' but this wasn't exactly what we had in mind...
How many SWFs own stock in AIG? Will they get stiffed? Pretty soon he'll be known world round as Uncle Stiffem.
central banks are 'pouring money into play', and for some reason,,,,its not workin????
I for one welcome our new oligarch masters.
David Johnston-congratulations, your stock is now not only worth less it is worthless.
its working, you just have not seen limit up on commodities in quite some time.
Neil, That was ownership of society..
"It isn't clear to me that PIMCO reaps a huge windfall here. The fed is now the senior secured holder of AIG. All their other debt just got subordinated in a big way. I'm not convinced this will cause AIG bonds to rally in a massive way"
All recourse debt is 100% secured, that does not mean it is "senior". This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
Bill Gross -- Too politically correct to fail
I have a very large chunk of cash in a money market.
tommorrow it gets pulled.
All of it.
Money markets are next.
@ Mary
Proud Mary keep on churning.
Ok, I'm a RED baiter.
Once caller complained about losing 40% of their 401K in the market this year.
I know the people I work with are loaded to the gills with emerging market stocks in their 401k plans.
I begged and pleaded with them not to.
You try and help these capitalists but they don't listen.
What can you do?
FFDIC, you should get paid for this... Thanks.
Milkman | 09.16.08 - 9:48 pm | #
Lola,
Some Milkman said I should get paid for this while I'm drinking on the job. Bring me another J&B and did you go buy some more chili Fritos? I told you not to eat them all. Geez! What is gonna happen next?
I don't think the common gets wiped out in this deal. Once you eliminate short term liquidity concerns, these shares should be worth (pre-dilution) somewhere north of $20, which was the price they were trading at a couple weeks ago. 20% of $20 is four bucks, around the closing price today.
I'm not buying this argument--if it were true that the only concerns were with short term liquidity there wouldn't have been so much trouble putting together a loan package. "Need $75B but doesn't have the collateral" didn't sound like a mere liquidity problem. If the parent were guaranteed solvent they would have had the collateral.
My guess is that AIG had screwed the pooch with their investment portfolio. What else could explain this?
All hail the heroic proletarian leadership of Comrades Paulson and Bernanke! All hail the September Revolution! Their brilliant plan for reversing the historically aburd triumph of capitalism over the dialetical principles of Marx and Lenin has now achieved complete success.
Think of it comrades: We have seized the commanding heights of the international capitalist financial system -- in a bloodless coup!
Through our National Mortgage Soviet, we can control the US housing market for decades to come.
With our new Global Insurance Soviet, we can throttle the lickspittle financiers and bring their decadent bourgouis derivatives markets to heel.
By accepting common shares as collateral for loans from our People's Federal Reserve Bank, we can accumulate ownership stakes in the remaining White corporations, weakening their will to resist the inevitable victory of the party and the workers' state.
Once Comrade Obama has been installed in the White House, fortified by the achievements of Comrades Paulson and Bernanke, supported by our Chamber of People's Deputies and our Supreme Soviet Senate, and ruthlessly exercising the dictatorial powers accumulated by Comrade Bush, final victory will be certain.
If only Comrades Stalin and Mao were alive to see this glorious day.
(202) 224-3121
Start asking your congressmen questions, you can also call now and leave messages!
David Johnston writes:
Those are totally unfair terms. Has many billions in taxes has AIG paid to the government? This is how the US government treats one of their largest most productive companies.
I am an AIG shareholder. I say we go bankrupt and let the markets go to hell.
An 80% equity stake for a bridge loan is total crap.
Well, John McCain agrees with you...
now I've got some shoes to shine, get to it boy
I keep getting angrier and angrier.
Welcome to my nightmare.
The question is how the bondholders will get treated. Any meaningful haircut and this is more a BK than a bail-out. The secured loan and high interest rate point in that direction. I still think covenants will be triggered by the move, and the bondholders would, in theory, have the right to force AIG into bankruptcy.
The l.t. bond holders have little to gain from this bridge loan because they cannot accelerate payment. The loan allows AIG to sell assets to pay off one creditor -- the Fed -- ahead of them.
I once asked my pop who was on Wall Street for 50 years with a nice pedigree (Choate, Harvard)"Hey, Dad how does Wall Street really work?"
His reply 'Biggest circle jerk in the world son, but a well remunerated circle jerk."
kind of reminds me when the British govt nationalized the East India Company after they lost control of the sepoys...
Ross writes:
@ Mary
Proud Mary keep on churning.
Ok, I'm a RED baiter.
Ross | 09.16.08 - 9:50 pm | #
Evening thread music after another hard day on the PC. I'll take any excuse to introduce my long time idol Tina Turner - Proud Mary
YouTube - Tina Turner performs Proud Mary live
Comrade Angry Saver,
"I keep getting angrier and angrier."
Twas actually thinking of you when I typed it.
Nostrovia,
This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?"
Damn it all!
Good idea, Angry Saver:
YouTube -
Triggering counterparty defaults is not necessarily a "meltdown", a emotion-laden and misleading word that gets bandied around.
We admit we know the underlying assets dont cover the liabilities, and yet, if the mechanism of triggering defaults occur and thus, rightly, reveals the true diminished values involved, we derisively call it a 'meltdown' and use that label to justify bail-outs.
What will happen is the true worth will be revealed and actual mega-losses will cascade, in $trillions, into existence and be incurred by all parties who took risks. Thats exactly whats supposed to happen.
Labeling it orderly or disorderly has gone from being a means or a desired 'wish' into an illusory end and a 'mandatory' requirement that is incompatible with the reality of unregulated CDS. Both Lehman, Fannie & Freddie triggered technical defaults and the lesson learned was that more than were expected simply netted out and others were mis-aligned as detailed by Mish in his blog, deemed unenforceable and losses had to be eaten or litigated.
We are now truly a fascist state. Naomi Wolf was spot on.
Hear hear, Comrade Principle!
Futures do not look as strong as i would like...Hummm
Anyone live near a WaMu branch? I'd love to know if lines form tomorrow AM.
Hyper-inflation
Here we come.
At the end of the day, the government will be unable to say no. All debt will be guaranteed. All US dollars held by foreign nationals will be repatriated in the form of purchasing commodities, hard assets, and infrastructure.
As a buyers strike of US bonds gains speed, the .gov will have no choice but to print to meet obligations.
Deflation? I laugh in your face.
Hyper-inflation, here we come.
Comrade FFDIC,
Gotta go with CCR...sorry:
YouTube - Creedence Clearwater Revival
Nostrovia,
I know Bush promised us an 'ownership society' but this wasn't exactly what we had in mind...
You have to think about the book called "To Serve Mankind" the aliens brought with them to Earth.
It all depended on how you interpreted "serve"...
Triggering defaults will not cause all hard assets (buildings, homes, roads) to crumble into molecular carbon and float into the atmosphere and destroy the Earth and sending it cascading into Venus. It just means mega-losses, in $ trillions, will be booked, litigated and dealt with over an ungodly long time. A global financial system will emerge and remain in existence, just with different valuations on securities, and some different players. The sun will still rise. Its no meltdown
The l.t. bond holders have little to gain from this bridge loan because they cannot accelerate payment. The loan allows AIG to sell assets to pay off one creditor -- the Fed -- ahead of them.
David Pearson | 09.16.08 - 9:52 pm
Isn't that exactly the point--to put short term counterparties in front of long term bondholders?
"The question is how the bondholders will get treated."
I suspect with the rate and the equity stake, the terms aren't fantastic.
Hey all, good news.
I just spoke to Comrade Gross and he has a plan to convince Bernanke that the US economy will collapse if the DOW is not at 14000 by the end of next week.
Prepare yourself with this knowledge.
This is his way of saying thank you for all you have done to bring down this monument to capitalist filth.
Anyone live near a WaMu branch? I'd love to know if lines form tomorrow AM.
Comrade Midwest Product | Homepage | 09.16.08 - 9:56 pm | #
I do but I aint' leaving CR'N CNBC.
"Anyone live near a WaMu branch? I'd love to know if lines form tomorrow AM."
WaMu would be taken by FDIC long before there are lines. Nowadays people only wait in lines after the bank is taken over by the govn't. But happy dreaming.
They tell me,,bond holders 'always' win!??
This is a good deal for the Fed and taxpayers. 80% of AIG for a loan
We'll see if it's a money maker. But at least the terms are in place to give taxpayers a shot at getting a return.
I've been saying all along that Bernanke and Paulson were giving away the store.
I'd have pushed for 99.9% of upside, but this is a start.
Not surreal anymore . We are living in"new reality" aka the twilght zone .
FFDIC:
Excellent Choice.
I'm seeing Tina in Chicago. Do you have tickets for the Dallas show?
looks like the cds market will swallow the whole system lock ,stock,and barrel!
what bothers me a bit is the stmts on how its all good... no worries... have faith in the system. then turn around and assist another shop to "prevent" more failure. does this move actually help investor or consumer confidence? will it prevent more failure? another poster mentioned how previous attempts havent produced results, granted they were made in the past few weeks....
Bill Gross wins again....WTF? Let the bondholders take a haircut
Is there a stream for CNBC Asia? All I'm getting on XM is some pre-recorded program.
This is what sent off to my CO senator:
Comrade Allard !
Well, you've certainly presided over a socialist revolution haven't you ? With the nationalization of Fannie Mae and Freddie Mac, the government now owns 50% of the existing home mortgages and 80% of new ones.
With the nationalization of AIG today, the government is now the largest commercial insurer, the largest home insurer, the largest auto insurer, the largest retirement funds manager, the largest aircraft leaser - the list goes on and on.
Not bad going for a Republican.
Long live the United Socialist States of America !
Sincerely,
XXXXXXXXX
-K
FFDIC:
Excellent Choice.
I'm seeing Tina in Chicago. Do you have tickets for the Dallas show?
steelhead | 09.16.08 - 10:00 pm | #
Great. I think my better 1/3 is surprising me with tic on 10/26 at American Air Center. Otherwise I'll be seeing a divorce lawyer. Lola damn it to hell where is that J&B?
Comrade ac,
"I just spoke to Comrade Gross and he has a plan to convince Bernanke that the US economy will collapse if the DOW is not at 14000 by the end of next week."
Hmmm... He told me if all of PIMPLE'S R2D2 backed C3PO's were'nt back stopped, it would be the end of the world as we know.
That Still Gross is so inconsistent.
Nostrovia,
It's not a bridge financing, it's a pier financing. It doesn't get AIG to the other side -- more like walk the plank boys.
So what happens when the sales of AIG assets start to come up short? Are the Fed going to save the day with a LIBOR +16% loan next time?
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?"
Comrade JP | Homepage | 09.16.08 - 9:55 pm | #
All the assets of the holding company are securing the loans. That would include the holding company's equity in the operating subs, but not all assets in the operating subs. The debt and trade obligations of the various subsidiaries are met, and then the Fed gets what's left.
They tell me,,bond holders 'always' win!??
Always? Hardly, after inflation and taxes.
Guys, there is never going to be hyper-inflation in this country as long as all other developing countries print their money.
Yes, a loan to a functionally insolvent entity, stocked to the gills with toxic CDOs. Thew govt thinks they are going to profit from a slow bleed to the death. Roubini, help me.
Nowadays people only wait in lines after the bank is taken over by the govn't.
That may well be tomorrow.
I can't wait until AIG gets to bid on the Treasury Department's workers compensation and life insurance renewals!
exactly,,,,'walk the plank financing'
Austin Tex,
I think I missed something about the money market bit. What's going on there?
Anyone else know or can explain?
Cry for me Roubini...
Comrade Joe,
"Not surreal anymore . We are living in"new reality" aka the twilght zone."
YouTube -
Nostrovia,
DOES THIS TAKEOVER TRIGGER AN CDS DEFAULTS??? I sure hope so...
Avl Dao:
Can you expand on that line of discussion, and detail how the LEH bankruptcy will work out, how long the process takes, what the impact on current mkt ops is of the sorting-out-counterparties activity?
I think it's very important what you're saying, as it'll take out a whole cloud of fear and uncertainty. Please expand on this, and provide links if you've got them.
David Pearson --
The question is how the bondholders will get treated.
YES! This is the vital question.
"Secured by all assets" (and in control of the company) sure sounds like the Fed loan is senior to all other debt.
But is that actually possible in a legal sense short of bankruptcy?
I am not sure even our local expertise is up to answering this definitively, and it is the key issue.
"This is really an equity infusion, senior to all common and preferred, but junior to all other debt and "trade" obligations e.g. swaps with PIMCO.
Maybe I don't understand.
The Fed statement claims that all AIG assets are securing the loans. If AIG defaults, the Fed takes all the assets. What's left for the "all other debt and trade obligations?""
What you don't understand is that "secured" and "senior" have two totally different meanings
Now we know what Newtie (Gingrich) meant by the "Ownership Society!" We own the m!@#$%^^r!
To paraphrase Tanta, "Now we're all owners!"
Citizens FFDIC and Misean,
Thank you thank you. Tina and CCR in the same knight.....
fraudian slip...
Does this mean the wingnuts will let us have single payer healthcare?
Or is that still considered 'socialized' medicine?
It took 30 plus years to create hyper-inflation environment in India. India almost failed around 1996 on its vision to create hyper-inflation. It is the IT boom and out-sourcing that helped to reach hyper-inflation.
Okay, I thought the title stuff was over the top. Now I'm in.
Do we also get a little red 10-k?
Comrade homedad43
If Bush was any dumber they would have to water him twice a day.
The lines will form at WAMU after the takeover. Unfortunately, the FDIC hasn't the manpower to keep anywhere near all the branches open.
Soooo, people will have to find an open branch, find a parking space in the same zip code, and then stand in a line that'll exceed those outside Hannah Montana concerts. Can you say pissed?
Nemo: Here's the thing, folks. The Fed really is trying to stave off the meltdown without harming the taxpayer or the currency.
The penalty rate and the, implicit, forced unwind, help convince me of this (I was unconvinced without these details). Unquoted caveats noted.
Despite this, as a Californian I'm still bailing out an insurance company that my votes don't help regulate, neither federal nor state. Further, the bailout seems a bit curious...
Since this has previously been an issue here, I hereby state that I'm not a Florida Real-Estate Attorney.
Looks like the initial exuberance in the Asian markets is already fading.
The only way main street notices anything is when the prices of the goods they expect to be their right to buy for nothing rocket past their ability to pay.
You've gotta remember that the only income statement most folks keep track of is the amount of cash they can dig out of their pocket during the day.
I'll wait to see the bond market's reaction to see whether I like this or not. I would expect the yield curve (Treasuries) to continue to steepen, but, it's the ROW that we have to contend with now, so, who knows?
Comrade Midwest Product writes:
Nowadays people only wait in lines after the bank is taken over by the govn't.
That may well be tomorrow.
Comrade Midwest Product
Comrade, comrade...
"Midwest Product"?
What have I told you about mingling with the natives?
They may seem friendly but their ideas are dangerous and seductive.
We are very pissed off at Uncle Sam!!!!!
We must be made whole on our investment in AIG!!!!!
Kind of like : WOOOOTT!! YEEEEEEAAAHHH!!!!
Wait, what exactly are we cheering about again?
Rut ro.
The only question Paulson asked was
"Today is Sunday, right?"
Comrades,
I hate this bailout BS as much as anyone. But at least we got a penalty rate of interest and a controlling stake. That's a start. We're moving in the right direction.
Taxpayer protection with 100% of the assets of a company that had exhausted all other remedies and was hours away from BK, in the current historic credit collapse, is meaningless, except as evidence of further advance into the twilight zone of federal corruption and taxpayer victimization.
Parroting such egregious eassurances
IMHO makes one a party to the crime.
Tea parties may be coming back.
(microphone off).
Money market sub $1 NAV - Yves is talking about it.
Here's the Bloomberg link: Reserve Primary Money Fund Falls Below $1 a Share (Update4) - Bloomberg.com
"""if Bush was any dumber,,they would have to water him twice a day"""
Gawd,,,i was ready for that...
I haven't heard the words "Free Market" mentioned in over a week.
George Bush is a very, very bad man!!!! We so pissed off!!!!!!!!
tj & the bear writes:
What? I just saw one of their commercials last night. They didn't say anything about problems. I'm sure they wouldn't be advertising for new accounts if they had problems.
P.S. They even have free checking!
It looks like a week of Sundays so far.
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries.
Sounds like "all" to me.
Mr.Sparkle:
Front page of MarketWatch.com. Title
Money market fund halts redemptions. Also earlier thread here.
The next step is to radically raise the discount rate. Penalty rates of interest are in order given the quality of the assets being swapped.
Financial firms can't say no to our terms and WE know it.
Nemo Nemo,
It's legal if they say it is.
The Fed isn't even a u.s. government entity. It is owned by the banks.
When they chartered the Fed, it was a renunciation of Congress' duty to oversee the finances of the the 'somewhat' Republic. They got tired and lazy.
yeah, all of a bad company...wheeeee!!!! what a bargain!!!!!!! we get to go down together now
"Barclays to buy Lehman banking divisions for $250M"
just $250m !
and they also spent 1.5billion to buy two much more valuable data centers, and a building.
So should I move some of my 500K out of WaMu this month?
When this over,,,rest assured,,AIG will be nothing but bare bones..
Pearson - the FRB and the new FHFA (Lockhart) can subordinate whoever the hell they want. Says so in H.R. 3221 (the bill FranknDoddnShelby dictated for the ABA). And what it doesn't say is covered by FRB rules in the CFR.
Consider saving the "deep" and perpetual "prudential characteristics" of trust preferreds held by a financial holding company's subsidiaries, VIEs and SPEs.
FR Doc 05-4690
For example: FRB allows the acceleration of principal and interest on junior subordinated debt in the event of the voluntary or involuntary bankruptcy of a HC; "junior subordinated debt also may accelerate in the event that a major bank subsidiary of the FHC goes into receivership. Junior subordinated debt also may accelerate if the trust issuing the trust preferred securities goes into bankruptcy or is dissolved, unless the junior subordinated notes have been redeemed or distributed to the trust preferred securities investors or the obligation is assumed by a successor to the FHC;"
and "Conservatorship" rights in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 (Public Law 110-289) and Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 USC 4501) exercised to "backstop" FRE, FNM.
"Once an 'Order Appointing a Conservator' is signed by the Director of FHFA, the Conservator immediately succeeds to the (1) rights, titles, powers, and privileges of the company, and any stockholder, officer, or director of such the company with respect to the company and its assets, and (2) title to all books, records and assets of the company held by any other custodian or third-party. The Conservator is the charged with the duty to operate the company." ... collect all obligations and money due to the company, contract for assistance in fulfilling any function, activity, action or duty of the Conservator. By statute, the charter of the company must be transferred to a new entity and can only be dissolved by an act of Congress."
7 Sep 2008 FAQ, pdf
http://www.treas.gov/press/releases/reports/fhfa_consrv_faq_090708hp1128.pdf
7 Sep 2008 FAQ, Preferred Agreements, pdf
http://www.treas.gov/press/releases/reports/pspa_factsheet_090708%20hp1128.pdf
Surreal is right! Reading CR tonight and checking Quicken while listening to Wyclef Jean and Norah Jones sing "Any Other Day"
( YouTube - Wyclef Jean ft. Norah Jones - Any Other Day )
and I can't help think how I and my kids will be paying to bailing out all of these corporate fat cats. At least AIG isn't an out-and-out bailout... yet.
I'd stay up to crank out a photo montage of this song and today's headlines, but am a bit tired and better go read those kids a bedtime story. We've all got a lot of work ahead of us before any of our investments are back in the black.
-WB
Everybody is just looking at AIG as a financial holding company. But in totality, with regulated subs, they are a massive operating company, and the operating franchise has been destroyed. There is no reason anybody would every buy or renew an insurance policy with them. So, the portfolios of their regulated subs will have to unwind, too, as business is pulled. There is no guarantee that any surpluses in those subs will remain as the business leaks away. In fact, I think insurance policy holders are still very much on the hook. At least those who are the last out.
time to move cash to swiss francs & euros....should be able to double yr money in 3 years...
Funds holding AIG shares as of July and August:
American International Group Inc (AIG)
Wow. Not only did I miss the role call votes on C-SPAN but none of the networks even covered the signing in the Rose Garden ceremony.
Credit Default Swaps,the problem is to big.The fed is not,the government is not capable of standing behide wall street greed!
this seems like a nice delay to the problems of someone paying up for much of the poor choices these large shops have made...
On an operating basis, AIG has become a lot like MBIA and Ambac. They are in runoff. Lots of jobs are no longer necessary, and there's no reason trying to try to sell new biz.
Angry Saver:
Penalty rates are a nice start.
I want testicles and well, whatever the female equivalent is. I'll have to check with Pelosi's staff...
Get back to you on that.
Big Opportunity for other insurance companies. I expect to see a lot of Mr. B's Ozzie Iguanas on TeeVee soon.
Can we say "Thanks, but no thanks," to a Bridge Loan to Nowhere?
Rob Dawg --> someone will youtube it
"The next step is to radically raise the discount rate. Penalty rates of interest are in order given the quality of the assets being swapped.
Financial firms can't say no to our terms and WE know it."
Are you MAD? That would mean swapping good cash for dumb treasuries, and then what would the Fed bail out the "market" with?
So the stability of the private capital system is dependent on the US Government printing presses?
I am a bit concerned that the drama of Armageddon may be a way to break down the wall for some large mergers that might otherwise never get regulatory approval. Countrywide + BAC + Lehman, would that get approval other than in a crisis.
USG + Fannie + Freddie + AIG is nationalization of about half the mortgages in the country and the largest insurance company.
Hey maybe it will work out.
Last few nights I kept hearing that so far there has been no liquidation of the problem assets, those bad mortgages and the associated securities-so there is no end in sight. Still not happened yet, although I suppose it could begin depending on what happens to LEH and AIG assets.
Wow, there's Legg Mason again. Gotta short that puppy tomorrow!
Bridge loan= walking the plank under these guides.........
Thank God they finally found those WMD's!
Comrade FFDIC,
I thought they already watered him? Did I miss something?
Nostrovia,