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AIG bailout

post #1 of 13
3/19/09 at 9:37pm
Thread Starter 
Since various pieces of the AIG debacle are scattered in different threads, here's one dedicated to AIG.

Here are two must-read news pieces:

Eliot Spitzer (who was investigating AIG before he was busted for the earth-shattering indiscretion of hooking up with a call girl): The Real AIG Scandal: It's not the bonuses. It's that AIG's counterparties are getting paid back in full.

Excerpt:

Quote:
So here are several questions that should be answered, in public, under oath, to clear the air:

# What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
# Was it already known who the counterparties were and what the exposure was for each of the counterparties?
# What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
# What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
# Why weren't the counterparties immediately and fully disclosed?

Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.
Dow Jones wire: Hedge Funds May Be Getting A Bailout Via AIG's Payments

Excerpt:

Quote:
Hedge funds - investment pools made up primarily of high net worth individuals, pension funds and university endowments - have suffered like most during the crisis, but have pointed out with pride that as of yet their industry hasn't requested any government handouts. (snip)

Also, as reported Wednesday in The Wall Street Journal, AIG reportedly may be paying out many different hedge funds for bets in which the hedge funds waged that the housing market would crater against AIG's bets that it would remain robust.

It isn't clear how much in total that hedge funds stand to gain through the AIG payments, but the payments call into question the government's decision, whether out of haste or for any other reason, to allow the AIG bailout money to be dispersed to any counterparties, including hedge funds.
Someone on HuffPo suggested appointing Eliot Spitzer as a special prosecutor for this mess. I for one would love to see that.
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post #2 of 13
3/19/09 at 9:46pm
I read the Spitzer piece and agreed with most of it. Unfortunate that he couldn't check his ego in chasing some tail, he would have been in a prime position to go after the vipers and thieves in New York.
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post #3 of 13
3/19/09 at 9:50pm
Thread Starter 
Agree. I think his crucifixion is ridiculous though. But Spitzer is virtually unafraid of taking on extremely powerful corporate forces, and any kind of serious investigation of this is going to require someone who is to law as Liam Neeson in Taken is to @ss-kicking.
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post #4 of 13
3/20/09 at 4:42pm
http://www.newstimes.com/ci_11958924

Quote:
The legislature's Banks Committee and Attorney General Richard Blumenthal are issuing subpoenas this afternoon to force state residents who received AIG bonuses to the capitol next Thursday for a hearing on the details of those awards.

"There's just really a lot of questions to ask," Sen. Bob Duff, D-Norwalk, Banks Committee co-chairman said in an interview.

...

"These bonuses are going through the office of AIG Financial Products in Wilton," Duff said. "We need to find out a lot. Why is Mr. Liddy using this arcane Connecticut law to try and justify the bonuses? We also want to find out from the people who received these under which circumstances they're receiving them. Performance? Merit? Part of their salary? Was this part of their contracts?"
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post #5 of 13
3/20/09 at 4:59pm
If you want to read something truly horrifying: http://www.rollingstone.com/politics...e_big_takeover
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post #6 of 13
3/20/09 at 5:21pm
Thread Starter 
Thanks for the link. I'm starting to like Matt Taibbi's writing quite a lot.
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post #7 of 13
3/20/09 at 10:00pm
Quote:
Originally Posted by Zhukov View Post
I read the Spitzer piece and agreed with most of it. Unfortunate that he couldn't check his ego in chasing some tail, he would have been in a prime position to go after the vipers and thieves in New York.
Yeah, but did you see that piece of tail? Hubba Hubba!
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post #8 of 13
3/26/09 at 9:19pm
Thread Starter 
Quote:
Originally Posted by Matt Goldberg View Post
If you want to read something truly horrifying: http://www.rollingstone.com/politics...e_big_takeover
I finally got around to reading this and Heathus H. Christ, Taibbi paints an incredibly scary picture.

Even though it's a very long piece, I strongly recommend EVERYONE read it, precisely for the reasons described in the story:

Quote:
As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.
Someone (I can't remember who) said that the rent we pay to live in this system of democracy is awareness. We have to take time to deconstruct how this happened to have an opinion on what our government should do about it.

Not making the effort to understand it lets people get away with saying things like "poor people caused the financial collapse" or "the blame can be evenly spread around" because to people who haven't taken the time to learn the facts about the demand that created the glut of subprime mortgages and predatory lending, it seems plausible.

Taibbi's premise--that the opaqueness and general "you just don't understand" attitude of financial insiders is essentially a coup (and an effective one)--pretty much stands or falls on every one of us either remaining ignorant of the mechanics of this meltdown, or informing ourselves.
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post #9 of 13
3/26/09 at 9:34pm
As for education, if Taibbi's piece is still unclear (and I don't see how it could be but whatever), here's an effective visualization of what happened:

The Crisis of Credit Visualized: Part 1

The Crisis of Credit Visualized: Part 2
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post #10 of 13
3/26/09 at 9:42pm
Quote:
Originally Posted by yt View Post
I finally got around to reading this and Heathus H. Christ, Taibbi paints an incredibly scary picture.

Even though it's a very long piece, I strongly recommend EVERYONE read it, precisely for the reasons described in the story:



Someone (I can't remember who) said that the rent we pay to live in this system of democracy is awareness. We have to take time to deconstruct how this happened to have an opinion on what our government should do about it.

Not making the effort to understand it lets people get away with saying things like "poor people caused the financial collapse" or "the blame can be evenly spread around" because to people who haven't taken the time to learn the facts about the demand that created the glut of subprime mortgages and predatory lending, it seems plausible.

Taibbi's premise--that the opaqueness and general "you just don't understand" attitude of financial insiders is essentially a coup (and an effective one)--pretty much stands or falls on every one of us either remaining ignorant of the mechanics of this meltdown, or informing ourselves.
You just dont understand.
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post #11 of 13
3/26/09 at 9:48pm
Im sure most people have seen this already:

http://www.nytimes.com/2009/03/25/op...5desantis.html

Most of the negative reactions Ive seen to this focus simply on the dollar amount of his bonus ("Thats more than Ill make in ten years," etc) but the most important part in my mind was the reaffirmation of how fucked up people like Cuomo have handled this situation.
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post #12 of 13
3/26/09 at 11:52pm
Quote:
Originally Posted by Matt Goldberg View Post
If you want to read something truly horrifying: http://www.rollingstone.com/politics...e_big_takeover
So angering, nothing can be done about this! Damned bankers and politicians will be the end of us all.
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post #13 of 13
3/30/09 at 12:15am
Quote:
Originally Posted by The Closer View Post
Im sure most people have seen this already:

http://www.nytimes.com/2009/03/25/op...5desantis.html

Most of the negative reactions Ive seen to this focus simply on the dollar amount of his bonus ("Thats more than Ill make in ten years," etc) but the most important part in my mind was the reaffirmation of how fucked up people like Cuomo have handled this situation.
Taibbi's response.
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