Bernanke Says Fed Would Welcome ‘Full Review’ of AIG Aid by GAO
I applaud this choice but I want to make sure we are clear that there are major questions about giving “back-door bailouts” to Goldman Sachs and a few foreign banks by giving 100 cents on the dollar for credit-default swaps AIG held. Other counter-parties did take a discount or “haircut” on those debt insurance contracts so there is some explaining to do on those decisions.
To this point both Treasury and the Federal Reserve do not see any problem with their choices on this matter and the amount of U.S. tax payer money they used to bailout this insurance company. Honestly, the financial products division did not need to be bailout out, their normal insurance operations where is separate subsidiaries so even if that company failed they would still be able to make good on their other obligations. The reality is that major investment banks and foreign banks did not do proper due diligence on the ability of AIG to make good on this insurance in the event of a economic downturn and they should of been made to pay in a true free market system.
Bloomberg, New York - Federal Reserve Chairman Ben S. Bernanke said the central bank would welcome a “full review” of its aid to American International Group Inc. by congressional auditors and make all necessary records and personnel available to them.
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Goldman Sachs Blankfein Says He Wasn’t Asked to Take AIG Discount on Swaps
What a bombshell! Now we know the fix was in, Treasury did not even bother to offer a discount to AIG’s counter-parties. So it was a de facto bailout of Goldman Sachs among other firms and foreign banks visa-vi the U.S. taxpayer. What is even better about this bailout is that is didn’t fall under TARP restrictions, didn’t need to be paid back and Goldman will be paying huge bonuses this year with the taxpayers money.
Also, unlike the commercial banks, I doubt we would of went over the edge if they failed. Yes, investment banks are important and they make markets but we would of been able to survive without bailing them out. That’s capitalism, winner succeed and losers fail. I think Mr. Geithner will have some explaining to do if not having to resign over the fallout.
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein testified that he was never asked by U.S. regulators to accept a discount on investment contracts his firm had with American International Group Inc.
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U.S. Prosecutors May Indict Former Head of AIG’s Financial Products Unit
Reuters, New York - U.S. prosecutors are preparing to impanel a grand jury to consider indicting the former head of American International Group Inc’s AIG Financial Products unit for securities fraud, the Wall Street Journal reported.
The Department of Justice and the Securities and Exchange Commission have been investigating whether Joseph Cassano overstated the value of mortgage-related contracts and failed to disclose material facts about them to AIG’s outside auditor, the paper said, citing people familiar with the matter.
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NY Federal Reserve makes Morgan Stanley coordinator for AIG IPO
July 20 (Reuters) - The Federal Reserve Bank of New York has guaranteed Morgan Stanley a global coordinator’s role in any initial public offering (IPO) of American International Group units, documents made public on the New York Fed website show.
According to the documents, Morgan Stanley will earn percentage fees from the NY Fed if AIG sells any of its businesses, in addition to an initial $4 million payment as an advisory fee and $2.5 million per quarter.
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New York’s Attorney General Cuomo Widens His A.I.G. Investigation
Hopefully we will see our justice system starting working soon and many of this actors in this huge fraud put on the the American (and others) people. I am really surprised we have not seen the proverbial “witch-hunt” happened, its pretty obvious that crimes were committed and many people were complacent.
Instead we are worried about millions in bonuses (what about the trillions in secret loans from the Fed?) or booting GM’s CEO when we have not removed one bank or insurance CEO when they have losses that amount to ten times what these automakers have. In defence of the Big 3, at least they are providing jobs and we are making something compared to the shenanigans these banks are pulling. Please Mr. Cuomo, set the precedent we need so these does not happen again, soon.
News (NY Times):
Attorney General Andrew M. Cuomo of New York said Thursday afternoon that he was widening his investigation of the American International Group to examine whether its trading counterparties improperly received billions of dollars in government money from the troubled insurer.
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A.I.G. Reports 4Q Loss of $61.7 Billion as U.S. Gives More Bailout Aid
Wow, that just about sums it up. $61.7 billion loss in a single quarter. That is some major derivative exposure and losses. I can’t believe we are actually throwing money at this black-hole of liabilities. There will be outrage if we actually bailout all these unregulated insurance contracts out. It really makes me question why I am sending 1/3rd of my pay to our representatives that in turn have decided to reward greedy corrupt people, if save this flawed system, that is one thing. But, I want to see the board, executives, shareholders and bondholders get wiped out so I know they are not profiting from this mess and we are setting a precedent that will make the next lot think twice about running these types of practices. Here was the most scary statement of the whole article, “Although he avoided offering a forecast on the first quarter, Mr. Liddy said A.I.G.’s outlook was “very much going to be influenced by what happens to the condition of the economy and the financial marketplace around the globe.”” Well if I read this right, you have insurance that is tied to the markets going up when it looks like we are about to have Great Depression 2.0. When do this intervention stop and we let the markets sort this out?
News:
The loss of $22.95 a share compared with a fourth-quarter loss in the period a year ago of $5.3 billion or $2.08 a share. For the year, A.I.G. lost $99.3 billion or $37.84 a share, compared with a profit of $6.2 billion or $2.39 a share for 2007.
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AIG retires $16 billion in credit-default swaps with government funding
Here we go, we are now actually using real money to retire insurance contracts. Isn’t that great that we are going into debt to either by pieces of paper at face value or we are paying off insurance contracts that have already gone bust. How free market is that? There is so much profanity that I want use when I think about the evil that is being perpetrated on the American public.
This is basically robbery without the gun. What happens when an Insurance company issues too many contracts and a bunch come due???? They go bust and for good reason. In my opinion AIG should have been left to fail like anyone else who did not carry proper loss reserves. This gives future banks and insurance companies the lesson that is you make mistakes that puts your company at risk then you will pay the prices that everyone else pays, go out of business. If you want this too stop before we have so much debt that we default on our dollar then you need to educate people and start calling your representatives non-stop until you start hearing them change the tune of 100% bailout. Here is what one person said that had the guts to say it:
“‘Who are we bailing out here?’ is a broader question,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “We’re using public resources to provide benefits to these counterparties that they wouldn’t have had in a free-market solution.”
News:
American International Group Inc. retired another $16 billion in credit-default swaps, the contracts that almost caused the company’s collapse, after buying the underlying securities with help from the Federal Reserve.
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