A.I.G. Reports 4Q Loss of $61.7 Billion as U.S. Gives More Bailout Aid

March 2, 2009 by · Leave a Comment
Filed under: Stock Market News 

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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Goldman Sachs’ Blankfein wants Mark-to-Market rule to stay put

February 9, 2009 by · Leave a Comment
Filed under: Opinion 

We completely agree with Mr. Blankfein’s opinion.  Just because people decided to overvalue assets to such excesses does not mean when things don’t go their way, we should abandon our accounting standards to preserve mal-investment.  This just shows that our current banking system is in fact “insolvent” and we have resulted to jiggering with our accounting methods to keep these banks and other financial institutions from going bust.  

We should make everyone come clean with their assets and liabilities ASAP and if you are solvent then we should assist them with taking over the good assets and if your insolvent, then your bond and shareholders takes the losses along with the bad assets.  Yes, we should let bad banks go under.  This is what will bring stability and confidence to the markets.  We are just prolonging our crisis and making it worse trying to bailout bad banks that made bad decisions when they were GREEDY

News:

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the financial industry shouldn’t abandon the “mark-to-market” accounting rules that some banks blame for aggravating global economic woes.

The rules, which require banks to book profits or losses when asset values rise or fall, should be even more rigorous, Blankfein wrote in an op-ed piece published yesterday on the Financial Times’s Web site. New York-based Goldman’s adherence to the practice “was a key contributor to our decision to reduce risk relatively early” in the credit crisis, he wrote.

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Federal Reserve to inflate another asset bubble to kickstart economy?

January 26, 2009 by · Leave a Comment
Filed under: Opinion 

Is this what I am actually reading?  We should create more mal-investment to spur spending that will lead us right into another crisis that would likely be larger than our current debacle?  If this tells us the only way to fix systematic problems is by creating others ones, then I have to tell you that we might need to look our how we are structuring our monetary system.  

The more you read into all the problems we read about in the daily financial news, it makes me wonder if some other financial forces are at play that are residue to other artifacts?  My suspect is the extension of credit through a fractional reserve monetary system.  If money = credit through how we treat paper currency and checkbook/debit money then compound interest equals compound debt by banks taking more deposit and using that to extend credit back into the financial system as loans.  

This looks to be a recipe for disaster and we might be making it even worse if we are bailing out the debt while incomes are falling.  Maybe the default of the debt was part of the flawed process.  This is basically I am with this whole crisis.   When you step back and take a close look at how all these pieces interact and how the news has come out and what order, you can see evidences of what I wrote all over the place.

News:

Federal Reserve Chairman Ben S. Bernanke and his colleagues may try once again to cure the aftermath of a bubble in one kind of asset by overheating the market for another.

Fed policy makers meeting tomorrow and the day after are exploring the purchase of longer-dated Treasury securities in an effort to push up their price and bring down their yield. Behind the potential move: a desire to reduce long-term borrowing costs at a time when the Fed can’t lower short-term interest rates any further because they are effectively at zero.

The risk is that central bankers will end up distorting the Treasury market, triggering wild swings in prices — and long-term interest rates — as investors react to what they say and do. “It sets forth a speculative dynamic that is very unstable,” says William Poole, former president of the Federal Reserve Bank of St. Louis and now a senior fellow at the Cato Institute in Washington.

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Bank of America in talks for more taxpayer bailout funds

January 15, 2009 by · Leave a Comment
Filed under: Industry News 

This sounds like a story we have heard before.  Now BofA is coming back to the trough for some more taxpayer porridge.  Until we ween them off and let the cards fall as they may, we will continue to put our nation in more and increasing amounts of debt to bailout financial institutions that have been treating the markets like casino expect when the house wins, we lose.

News:

Bank of America, the largest U.S. bank, is close to getting billions of dollars more in federal support from taxpayers, a person familiar with the matter said on Wednesday.

As Congress debated the future of the government’s $700-billion financial markets rescue program, the source said that Bank of America has struggled to digest its January 1 buyout of former Wall Street brokerage giant Merrill Lynch & Co.

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The Price of Capitalism by Karl Denninger

January 8, 2009 by · Leave a Comment
Filed under: Opinion 

This is a must read period, I have had the chance to exchange some email with Karl and he is quite a guy and if you follow his writings, he has been able to show take current problems in our financial crisis and show the technical side, while at the same time he explains it in plain English.  

In this article he takes about how Capitalism needs to work and why you have to accept when assets go up and down and not panic and try to use bailouts to prevent the natural process of Capitalism.  I think everyone should print this out and mail it in letter format to your national representatives.

Article:

“As a followup to my previous Ticker (“There Is No Unicorn That Craps Skittles“) I wish to address the myriad people who have written over the years about the “E-Viles” of debt-based monetary systems, which inherently ends up in a call to bar the imposition (or payment) of interest, or at least a ban on private collection of interest.

The problem with this folks is that it won’t work.

Let’s first define what INTEREST is.

It is the price that you pay to use someone else’s capital for a given amount of time and purpose.

That’s all.

The riskier that venture is, the more INTEREST you will be charged.”

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