Alternate Title: CRISIS AFTER CRISIS: Don’t Fear the Reaper
With nationalization of half of our nation’s mortgages, failure of decade old banks, a housing crisis, a food crisis, an oil crisis and a bee crisis, it seems like we have pretty much exhausted the list of things that can go wrong with today’s world.
Scary statements from former federal reserve Chairman Alan Greenspan certainly raise ears:
I can’t believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring.
But, Alan, what about the bees and the food? It’s like we have a crisis Megatron sitting right here in the dear old USA and we don’t recognize it because it’s all broken and fragmented. Wait until it forms into battle mode! Do we have any idea when it will be over? No. Do you? Would you consider making a “run” on the bank if your bank was expected to go bankrupt? We know several people who have been checking their deposits and moving cash around in case of impending doom.
All of us crazies running to the bank might cause a little havoc. We haven’t seen it in Virginia yet, but trust us, one of the VA banks is going to die in the near future. Who will it be? Are you scared?
Picture from hans s.
Popularity: 19% [?]
Tagged as: bank, doom, economy, Questions, reaper, run, Virginia
Can we add bees to the list of things to be scared of?
there are no more bees, so it’s hard to be scared of them
Some would say that is true for ghosts, aliens and vampires, and yet, they induce much fright
Some would say that is true for
ghosts, alienszombies, ninjas, pirates and vampires, and yet, they inducemuch frightmany annoying facebook apps.wait, so ghosts and aliens are still around, but ninjas and pirates aren’t?
your logic is so cryptic
Mostly I just miss ye olde facebooke before all the stupid apps. But yeah, I guess pirates are still around, but more in a “bang-bang capture-the-rich-people-sailing-past-Somalia” package than a “swashbuckle yarrrrrrrrrrr matey” sort of thing.
Top 5 things I am scared of today:
1. Waldemart, oops I mean WalMart, particularly the voting power of its followers I mean shoppers
2. No bees to bee scared of
3. September spiders
4. Coyotes in Virginia
5. Camp Rock
As long as you’re under the FDIC limits of $100,000 per account, you really don’t need to worry about a bank failing. I don’t have a mortgage or credit card debt, so I’m not worried about those aspects of our tanking economy. It will be interesting to see how things pan out in aftermath of the financial industry. Lucky for me I’m on a long-term view when it comes to retirement, etc. Now’s actually not a bad to time to invest in some companies while their stock prices are deflated.
@5
Ninjas are still around. I can’t find the FFA post with it, but I e-detailed my recent sighting somewhere in the archives.
Donk’s Ninja Story
The Bee thing was solved a long time ago… in fact decades ago. A guy I work with is also a bee keeper, he was saying that the bee situation was only a problem for those who have HUGE bee hive clusters. The problem: Drought, as documented, apparently, on just about every manual on how to keep bees.
@11: Really? Do you have a link for that? I can recall as recently as a few months ago news reports of the inexplicable bee die-off.
Ok. . .are we seriously talking about bees here?. . .Seriously? I expected more from ya’ll.
Two of the most prolific financial institutions in the WORLD absolutely IMPLODED and the topic of discussion here is bees?? Sad. The fallout from the Merrill/Lehman fiasco is going to impact the global economy for the next several decades. . .no. . .check that. . .the fallout from the Merrill/Lehman fiasco is going to completely alter the face of the global economy. period. . .And ya’ll are talking about little flying critters!. . .Again. . .I say. . .Sad!
For the record. . .however. . .bees are INDEED scary little buggers. . .especially the ones of the round, furry, bumble variety. . .I’m just sayin’
@13: It seems more reasonable to speculate about bees than a financial meltdown that hasn’t really run its full course yet. My take-away is that we won’t fully understand the ramifications of the “market correction” until the dust settles a bit more, especially regarding the fate of so-called “retail banks” such as AIG.
But then, I’m talking ex-recto, and I really like bees, whereas banks are generally regarded with high levels of suspicion, distrust, and, where necessary, outright scorn and hostility.
I keep my money in a jar next to my socks.
[half kidding]
@13, you obviously missed where everyone got schooled on serious discussions. so now we’re all off frolicking in flowery meadows trying to be lighthearted again.
/meadows with no bees
Bella, bees POLLINATE all of our food-producing crops and many other plants and colony collapse disorder is real, not some paranoid theory, just ask local beekeepers and farmers. If you don’t have any money or investments, you’re really not that freaked out by changes in bank ownership and the failings of large probably corrupt institutions…but we all have to eat and live on this planet. Last I checked. But I understand that to someone like you bees are just creepy crawly things, like, seriously, you know? I’m just sayin’
Sho - I just talked to a local SMALL beekeeping operation last weekend who lost half of their hives this year. They have also seen swarms in their fields unable to organize themselves into a new hive. I’ve never heard drought as being the “proven” cause and if it was figured out “decades” ago it wouldn’t really apply to the documented very recent and dramatic decline would it?
Beeing stung by a bank outranks beeing (yes, this is thread appropriate) stung by a bee by a hundredfold. Meanwhile while bees are relatively predictable in behavior if you treat them by the “don’t mess with us” standard. However the volatility and unpredictability of the mega corporations that we happily and trustfully hand over our life savings to, well you get my drift.
I suggest we start storing our money in beehives.
@8 well I wouldn’t count too much on the 100,000 FDIC insurance, sorry to be a party pooper, neither would I invest in slumping stocks for obvious reasons. However local wind energy sounds juicy…
@15: If deflationary pressures move in the way that many are predicting, your sock-drawer may, in fact, be a not-terrible place to keep your money. But there really is no need to PANIC! yet.
@15: I spend all my money at the cute little boutiques on the downtown mall. . .so my net worth is hanging in my closet
. . .but seriously. . .regarding the defunct banks. . .I spent a few years with Mother Merrill. . .had some AMAZING mentors. . .and those stellar individuals woke up this morning. . . with God knows how much of their net worth tied up in Merrill stock. . .not a good day to be an old school banker nearing retirement with 30 + years at the mothership!
@19 there’s no button anyway, it was stored in a bank that folded and was lost.
@21 I think they have replacement buttons in stock where they sell the Sarah Palin Merchandise.
Personally, I’m moving all of my financial assets to a hedge fund.
I still have a copy of circa 1930s bank statement of my fathers which shows an amount in his savings account and then a notation showing that amount reduced to five cents on the dollar.
About three months ago I moved my liquid assets, all of them, except for some high quality bonds, to Treasury notes. Not that I`m all that astute about money but I have a great respect for that old bank statement and the havoc it created and the loss of my father`s business .
I sleep well and never bought more house than I need .
I still regret, with no slur on women working, the circumstances, attitudes, whatever, which resulted in a family requiring two incomes to survive. Not really the way to go. Not sure how that happened - the Joneses had something to do with it I think.
Of course if one has nothing to lose, flippancy is affordable.
@24 the key is that you didn’t buy more house than you can afford - there was apparently some ridiculously stoopid lending/borrowing going on out there. and everything in the financial world is tied to real estate/property in some manner.
it was cheaper for me NOT to work when the kid was younger - daycare/commuting/work clothes etc. would have eaten up most of my salary, so we just budgeted seriously. it was better tax-wise, too. i have also known a few house-husbands when the case was that the mom had the larger income. of course, single parents don’t usually have an option.
living debt-free is the only answer.
i heart bees.
I drInk my liquid assets… haven’t lost any yet. One should also avoid doing anything whatsoever with people called Jones. They are invariably of Welsh descent which means no good will come of it.
@25 my father was unemployed for much of my childhood, & then he went out & became a car salesman & the drycleaning + commuting + him not being a very good salesman = we were better off before. good thing that didn’t last long.
Amidst the panic, I wonder if anyone noticed that the dollar got stronger and crude dropped below $100/barrel today.
does the wave
@28: Crude dropped below $100 yesterday afternoon during a special trading session. Also, gasoline went up, so not much help for us. The dollar though, that is some good news.
let’s go to europe!
I was figuring the drop in crude was the market predicting an economic slowdown in which Americans will be using less oil. And the rise in the dollar could be people betting that we’re hitting rock bottom, and it’s a good time to buy the dollar, which will, according to the logic, inevitably rise again.
Hey, you know what’s great about commenting on finance? It’s like you can say WHATEVER YOU WANT. Man, I should go to business school.
@31: I’m going next fall.
@32 Hey, you know what’s great about commenting on the weather? It’s like you can say WHATEVER YOU WANT. Man, I should go to weatherman school.
weatherman school.
Wow. orchid betrays she’s much more subversive than her previous comments suggested.
a vent - this site needs to talk politics. It’s the elephant in the room right now and very stupid to have a rule saying no politics. CHANGE!
just waiting for my mom to call up and totally rip my husband a new one for the downturn in the the market today…
/retirement’s calling and it’s really not very happy!
can you say deregulation? I knew you could! When the hell will they learn?
Just a thought-The CEO of Lehman Brothers, who hurbris on holding out for a better deal, caused the company to go into bankruptcy- name is Dick Fuld (fold).
@30: Gas went up due to the interruption in supply thanks to Ike. With crude where it is now, I would expect gas prices to drop again.
Also, some other good news - August inflation numbers were good.
@40 gas went up before ike affected anything. charlie crist is calling price gouging, & floridians know price gouging.
@41: I’d like to reiterate the proposal that Florida and all its parasitic inhabitants be given back to Spain.
@42 i second your proposal.
I say it again - deregulation is the problem. Great Depression, collapse of 87, S&L scandals, housing. Every time you deregulate Wall Street gets nuts and then we have varying degrees of collapse. Period. End of story. Wake up. When the wealthiest 1% are allowed to do as they please we invariably all get screwed.
@44 Yea, let them do as they please; work 100 hours a week., pay 40% of your government’s income taxes and create more jobs than the bottom 80% of taxpayers combined, (boy you got screwed) but please regulate them some more because the government always knows better. Read some history, if anything FDR’s great society efforts prolonged the Great Depression (and why can’t we capitalize [sorry for that word] the Collapse of 87!) Period end of story.
The invisible hand of the free market strokes the turgid shaft of deregulation until there is an explosion of golden parachutes all over the bloated armani stomach of the one percent, and then once spent, it reaches for the crusty sock of government bailout and wipes its self clean enough for a trip to a tax shelter in the cayman’s.
/economics is hot.
@46: And then the next morning it takes you out for the feeling-guilty-afterwards brunch, where you’re served hash browns smothered, covererd, and Lehman Brothered.
@46 Damn that is fucking poetic, where have you been McBelmont yo?
@45 - first off, that’s some mighty nice revisionism. FDR didn’t have a “Great Society”; that was LBJ. And the next thing you’ll try to say is that WW2 brought us out of the Great Depression and not the rural electrificaton and infrastructural projects of the WPA. Learn your history before you attempt to quote it. How many times must trickle down economics be misproved before you give up on it as a philosophy? And back before govt intervention people DID work 100 hours a week because the captains of industry had their way. Kids, too. At least argue with me based upon reality and not a trickle down wet dream of reality (nod to b-yo).
For those of you who don’t know, UVA Credit union had a huge system glitch and all my accounts are in negative numbers. Nothing like watching thousands of dollars disappear right in front of your eyes!
@45 - haha. Sorry - I have to comment on this. You tell me to read some history? Well, ummm I spent 4 years studying it under respected, published professors and you obviously “learn” yours from Republican talking points.
Sorry - was using the “R” word a no-no?
[…] From a commenter: For those of you who don’t know, UVA Credit union had a huge system glitch and all my accounts are in negative numbers. Nothing like watching thousands of dollars disappear right in front of your eyes! […]
You’re losing your ability to capitalize on your history education; “great society” of FDR, not “Great Society” of LBJ; perhaps you should have studied a bit more carefully…..well, damn if your professors published it must all be true; did you study logic too, were they published logicians?
Does anyone have any popcorn? This is great stuff.
@45 have you ever worked 100 hours in a week; I know hundreds who do consistently and don’t even fit in that 1%; poor slobs only fit in the top 10% (adjusted gross income of about 109k) who, by the way, paid 70% of your government’s tax revenues.
Yes I worked 100 hours a week regularly when I was in the Navy. It’s why I didn’t reinlist. I thought you were refering to the Great Society due to the sentence in which you wrote:
“Read some history, if anything FDR’s great society efforts prolonged the Great Depression…”
If you weren’t refering to the Great Society program, then what you should have written would have been:
“Read some history, if anything FDR’s great SOCIETAL efforts prolonged the Great Depression…”
or even:
“Read some history, if anything FDR’s great SOCIAL efforts prolonged the Great Depression…”
Because - correct me if I’m wrong - The New Deal was an ECONOMIC program comprosed of many facets. The Great Society, was a SOCIAL program designed to create greater civil rights and equality.
And logic? Says the one who thinks the wealthiest 1%, left to their own devices, will look out for us plebians. During every period in history when they have been unregulated they have paid their workers as little as possible, made them work as much as possible, and fired them or even killed them when they asked for more pay or a bigger share of the wealth they had every bit as much a hand in creating as their bosses did.
Yes - kill them I said. West Virginia coal miners in the early 1900’s were murdered by the dozens when they tried to unionize after years of systematic mistreatment by the owners of those mines.
And before you argue - no rich man became rich on the sweat of his brow alone. No rich man became rich without SOME use of public assets. Roads to distribute their goods, subsidized electrical grid to keep electricity cheap and available to run their factories, public schools to educate their workforce, public fire stations to stop their assets from burning down, and the list goes on and on and on.
So do I think the wealthiest among us owe a greater debt to society? Yep, sure do.
Do I think that unless regulated they will engage in an orgiastic rape of the working man to make themselves that much richer? Yep, they’ve done it before and would do it again.
Under the Clinton tax code there were plenty of folks making it rich. The Gates and Hiltons of the world weren’t hurting by any means. Under the Bush tax code they are getting even richer and the REST OF US ARE GETTING POORER.
And yes, my naiive son, when an academian is published it does generally mean they are more respected by their peers and therefore they generally have a unique insight which earns them that respect and makes their publications worth reading. Not all of the time, but as a general rule yes.
I wish there was a rule which said “When statistics regarding income are quoted/published it is mandatory to state whether the figure is individual income or a household income figure”. Very confusing. I`m single and can never tell how I`m doing in comparision to the population . By the way when do single folks get a tax break?
And you know HUNDREDS of people who work 100 hours a week? Really? You know a lot of damned hard working people. Liar.
And you brought up the 100 hours a week in some vague reference to a world gone mad in which Wall Street traders weren’t allowed to bundle irresponsibly conceived loans (ARM, interest only, & NINJA loans [No Income No Job Applicant]) into even more irresponsibly inflated securities which, sold on the world market, are causing a global credit crunch and possibly a global recession or depression. We don’t know yet.
The type of regulation I am talking about is not allowing Wall Street to wrap up shakey mortgages into securities overvalued at 20 to 1 and then cry for a bailout when the rug is pulled out from under them because the house of cards they built collapsed in the first mild breeze.
I’m a mad, mad communist! What madness I speak! You are actually just an inverted communist who believes in privatizing profits while socializing LOSS. Why shouldn’t the rich pay more taxes? The taxes they pay can go to put the government is in a better position to BAIL their DUMB ASSES out when Wall Street’s own fiscal drunkedness catches up with them.
This is getting out of hand. You both have different political opinions and this turned into a personal not topical debate. Please no more political discussion.
reminds me of my family reunions…
Seriously, even I was reading this and thinking “lighten up.”
I just want to point out that I’m not involved in this conversation, in case anyone suspected I mistook this for the alternate alias thread.
@ 59 I say let it play out. I dont see one personal attack in the above, albeit impassioned, debate. It is no where near out of hand, and I for one am interested in both points of view.
Perhaps Thor #231, when whatever personal finances you draw upon to live the life of jetting off to richmond to eat overpriced fennel conserva, you will be equally impassioned. Perhaps not. But until then, understand that some of us are already there.
Its pretty safe to say that something is going down economically, hell its even the topic… god forbid folks discuss it. I lost thousands to Ken Lay and his merry band of highwaymen that pillaged the forest of energy deregulation. Hell my grandfather, a life long PG&E employee, lost his house and all of his savings. ‘What safer an investment that “utilities”‘ folks said. It sounds an awful lot like ‘what safer investment than mortgage backed securities?’ to me. I would like to hear divergent viewpoints, especially the impassioned ones, way more than speculation on the interior color scheme of cville’s latest boojy eatery.
But thats just my two cents (which if multiplied by a hundred, would just about cover one share of AIG stock).
eat overpriced fennel conserva… run out you will be…
/FTFM
“I would like to hear divergent viewpoints, especially the impassioned ones, way more than speculation on the interior color scheme of cville’s latest boojy eatery.”
It’s good to have you back, yo.
shut up Thor and pass the popcorn Stanley
YOU shut up Mcarooni!
there are so many political blogs out there already - with the inevitable “passion”, vitriol, bias, and ignorance that they attract. what was missing from the above thread was wit and humor, which distinguishes cvillain. maybe in this election year, a no-holds-barred political thread can be started for those visitors who like to get angry. i certainly like to about one week a month.
@63 was pretty “personal” and disparaging.
i like reading about color schemes and boojy restaurants. feeling kinda boojy with my money in the stock market.
/dave
I’m McQuiting the site tomorrow.
you mean McQuitting.
crap, now i’m biting my nails again
63 was pretty “personal” and disparaging.
how so?
i like reading about color schemes
if you knew me, you would know that i like nothing more myself. but look up at the top there… see it? thor #385 is cranking on people discussing the topic! abzurd, no? besides, as if this foresaken joint could ever become little green footballs, daily kos or free republic or whatever… let the passion flow i say, eventually it will degenerate into stupidity, tartare and cliquey misspellings of lame e-flirting terms.
/mandatory humor is never funny.
Can it technically be “personal” when there are multiple Thors?
@72 Shut your trap
i thought it was personal, but i have a huge sore spot regarding people who make judgments about how other people spend their money, so perhaps that was my bias. maybe he saved up to go to richmond? maybe he grew up extremely poor, gives a ton of money to charity, and was toting a friend to the airport who lost his license so that friend could go see his dying mom in the hospital in manitoba. maybe he was born wealthy, has a trust fund, gives nothing to anybody, and has stock in the Si restaurant chain. maybe he owns a fennel farm and wanted to try the finished product.
mandatory humor: oxymoron
i can see you feel strongly. sorry you’re “already there”. blowing you a kiss.
/opens another beer
Backing off in respect to Thor. Tipping hat to b-yo. Look - bottom line? The “economic royalists”, as FDR would have put it, have run this country into the ground in the last 8 years. Largely by yelling over those with a sensible voice. I won’t be yelled over any more.
$700 billion lost yesterday alone. $700 billion with a “B” (almost a trillion with a “T”). Poof - gone overnight. That’s as much as we spend in foreign oil in an entire year. I’ll let that sink in a bit.
You think the brakes can be put on this over night, if at all? Batton down the hatches people. If you have money in the markets or not. Batton down the hatches.
/sleeve out.
I didn’t mind wizsleeve, thanks for puttin’ up the fight today. I couldn’t agree with you more.
i’m currently staying in the 6th story of a hotel that presides over a casino in chester, west virginia. the staccato of slot levers and quarters clanging rhythmically down the abyss is punctuated by legions of grimy, sleepless geriatrics anchored to the stools and wheelchairs that face the screens… double-bar/cherry/single-bar… one more pull… oxygen tanks in tow; chain smoking and financial desperation as far as the eye can see.
a shuttle bus to the horse track nearby stopped to drop off a couple in the parking lot where their RV was parked… on blocks… where they live. a beautiful riverside lot in the shadow of an abandoned steel mill, what used to be a windshield now just a living room view, staring wistfully at a palace built on the riches of social security checks poured wholesale into an armada of endlessly rolling slots.
it’s tuesday evening as usual at the savings and loan arm of the central bank of hell.
I thought we all agreed to argue in smaller postings. I’m economically dumb (or just dumb) and sure coulda learned something had I not zoned out in the middle of the arguments above. suggestion for next time:
“you suck trickle down!”
“you suck logician!”
that said, I place a vote for well versed arguments being allowed as long as people don’t get all stompy-offy to mcquit. I don’t think the above was personal, no one said anything about anyone’s mom.
/pouters suck
I think all of the above was the plot of “It’s a Wonderful Life” …which is weird. I want to play drunk Old Man Gower.
As we conclude our 65th showing of “It’s a Wonderful Life”
sleepless geriatrics anchored to the stools
It’s more than infelicitous, young parlie, to condemn the elderly on the grounds of their incontinence. You should feel ashamed.
/for me to poop on!
@58; finally, the truth will out; “I”m a mad, mad communist!”
@78 your mom!
guys guys guys… this is such a proud moment for me. never in my wildest dreams did I believe the mcquit would be so universally embraced. what a gift I have bestowed upon this BLOG. what a legacy!
oh, and the economy, right? I think, though I can’t be sure what with not having read most of what’s above, that I agree with the wizard.
And i awake to find the invisible hand has reached for the crusty sock once again. Must berough to be the head of an institution that’s “too big to fail”. Oh, thats right. Not so much.
And you are right, firefly, it is none of my business how Thor #652 makes or spends his duckets. The point I was trying to make is that it seems to be part of this country’s problem that folks ignore serious issues until they affects them personally. Im not saying that we should all agree, merely saying we should at least seek to understand so that we can make an informed decision whatever that may be. Its seems to me that most people are most interested in either preaching to the choir, or actively blocking out any information at all. Willful ignorance is our national character flaw, and it has allowed a relatively small number of people to absolutely loot the american dream.
I would love to go on, but american midol is on. I like so totally hope Freda wins! She’s so cute! Hey… why doesn’t my bank card work?
/shoulda listened to eisenhower when he warned us way back when.
bruce lee? whoops.
hahahahahahaha
@82 - haha. Yeah - that’s called sarcasm, my man! I’m a moderate capitalist who believes that the same reasons which make communism fail make unregulated capitalism a disaster (human self-interest and greed).
I’m also an Obama-crat who owns 4 guns, lives in the city but grew up in the country, and who belives in State’s rights as well as the proper role of the federal govt in certain areas. I won’t re-ignite a debate by going into which roles the fed should fill, but that wasn’t my point.
The point is that, while you might cast me as a lefty through and through for saying that Wall Street should be regulated nothing could be further from the truth. I have some leftist views, a bunch of centrist views, and a very short list of right wing views (all of which have been abandoned by the modern Republican party).
The federal government shouldn’t bail out anything. They should just let the economy drop and let it pick itself back up.
@89 if AIG failed, there wouldn’t be much left to pick up in the first place. our markets are already being hit hard, and AIG got a loan to keep them afloat (which is actually a *great* deal for the federal government and taxpayers.. AIG and it’s shareholders got the shaft in that deal, and badly) .. anyway, I can’t even imagine what the US markets would look like today if AIG went under. Europe’s markets would be hit hard, european banks would start to fail as well.. calling the scenario catastrophic is an understatement. Cataclysmic is a lot closer.
Like I said, this was an incredibly good deal for the Fed to make .. it’s not a bailout, it’s an 11% loan to a company with enough assets to repay the loan in full, they just couldn’t be liquefied quickly enough to pay it’s obligations.
The real debate is if companies should be allowed to get ‘too big to fail’ in the first place.. what do you do? Force them to break up into smaller, ‘failable’ independent companies? Force them to become nationalized? I don’t know, but I think it’s pretty obvious from this scenario that unchecked raw capitalism is not the answer.
We need a depression to right the ship.
I’d rather avoid WWIII, thanks.
It’s unavoidable. You can’t prevent the inevitable. You can only delay the cataclysm and make it larger. Frankly, I’d rather we make major world-changing decisions about the economy now while we still have the best and most sophisticated military in the world than in the future when we won’t. There’s a precedent for this kind of meltdown. While comparing America and the Roman Empire is somewhat cliched (especially since most people make false comparisons), there is a real correlation between what we’re seeing now and the Crisis of the Third Century A.D.
@93 When you respond to some of the points in my original post (such as why the government making a loan to a company that easily has the ability to repay that loan.. AIG was profiting to the tune of ~2.5-3.5b a quarter before Katrina alone), I’ll continue this conversation.
Correct me if I am wrong, but was not the death knell for AIG the losses they took on insurance payments given out to other institutions, specifically insurance against possible losses from investments in mortgage backed securities? It is these sort of meta-investments that generate huge amount of paper wealth that lead us on the ‘less liquid’ side of things to call the whole market largely a house of cards. Frankly, I would would rather have the whole thing fall down as far as it will go, so that it can be rebuilt from the ground up, rather than trying to replace a card here and a card there and hoping for the best (what ethan, i think, is describing as a delay tactic).
Live by the sword, die by the sword. One cannot have the benefits of a free market when things are going up, and the benefits of government backing when headed downward. Too big to fail? Has anyone ever put that to the test, or is it just a theory? And hasn’t, in essence, the institution already failed?
Further, whether or not the deal brokered btw AIG and the fed is a “good deal” for taxpayers is yet to be seen. It makes sense to give them time to liquidate their assets in a reasonable amount of time, but not if there isn’t anyone willing to buy the assets at decent price. Then again, Fannie and Freddie could end up costing US taxpayers between 300 billion and several trillion, so I suppose another eighty billion or so is just couch change at this point.
Next up: Washington Mutual.
/is renting mad max videos for impending hunter gatherer society survival tips - desert dune buggies patrolling for petroleum! yay!
http://money.cnn.com/2008/09/17/news/companies/aig_explainer/index.htm?postversion=2008091715
Key points:
“After it became clear that the private sector would not come to AIG’s aid, the Federal Reserve Tuesday night stepped in and gave the insurer access to as much as $85 billion. The offer is good for two years, but comes at a steep interest rate of nearly 11.4%.
In return, the government took a 79.9% stake in the insurer and expects AIG to sell off assets to repay the loan.”
..
“The company has more than enough collateral to back the loan, senior Fed staffers said Tuesday night. Experts interviewed agree that AIG’s units are worth more than $85 billion.”
…
The Fed likely took an equity stake in the company, rather than just giving AIG a loan, because it felt the company has a lot of value and might make money for taxpayers, said Anthony Sanders, professor of financial institutions at New York University. The government made a similar investment in Continental Illinois bank, which failed in 1984, and turned it around at a profit.
“The payoff on equity is unlimited on the upside,” Sanders said. “With debt, you just get interest.”
@95 “Two banks enter. One bank leaves.”
The company has more than enough collateral to back the loan, senior Fed staffers said
The fed also said mortgage backed securities were “a good as cash”. As did Moody’s and the lot. To bad about the outdated data sets they were using to rate those notes. You may well be right, but forgive my skepticism.
And who has the cash on hand to purchase said assets? BofA, and maybe a handful of others in the U.S.
Oh, and the chinese and saudis…
Not to mention the unprecedented consolidation amongst financial institutions that is a byproduct of all this asset liquidation. Actually, @95, that is funny, but also scary. At this rate, there will just be “The Bank”.
@98 Good points, but still — AIG’s insurance division is *incredibly* profitable. With that alone, they can easily pay back the Fed in 10 years (but of course the sooner the better, which is why they’ll force the sale of some assets).
If you really think AIG will be profitable, you should go ahead and invest in them now since shares are $2.13, down from $60 a year ago.
@101 I bought some shares right before the closing bell today.
How is it that AIG will even exist once it has been cannibalized?
@103 From the article I linked:
“What happens to the company’s core insurance and retirement services subsidiaries is the big question. They are undoubtedly among AIG’s most attractive units, but they are also the heart of the business. Its general insurance business - which includes property and casualty - brought in $2.2 billion in profits this year.”
That’s the money making part of AIG. And:
“Its life insurance unit is likely the last thing the company wants to sell since it is the bedrock of AIG’s business, experts said. Though the subsidiary has been hit this year by fallout from the credit crisis, forcing it to take a $9.6 billion charge in the first six months of the year, it is generally stable.
“They will try to keep all or nearly all of the insurance business in place,” Light said.
–
so that’s how they’ll continue on. Look back to how they operated pre-Katrina:
http://news.bbc.co.uk/2/hi/business/4438118.stm
AIG, the world’s largest insurer, saw net income for the three months to 30 September fall to $1.7bn (£989m) from $2.69bn for the same period last year.
and more recently:
http://www.iht.com/articles/ap/2008/09/17/business/NA-US-AIG-Assets-Glance.php
- General Insurance: Profits of $2.16 billion in the first half of 2008, compared with $6.07 billion a year ago.
so yeah. Even with the way the economy is going, their insurance division is still incredibly profitable. The profits from that alone can keep them existing as a company.
Will it still be incredibly profitable if another major hurricane wrecks the Gulf Coast or San Francisco gets hit with a 9.0 earthquake? Insurance companies are incredibly profitable when nothing happens…
How much net profit will they generate when they’re supposed to pay the federal government back 85 billion dollars on an 11% interest rate? Also, what happens if/when AIG pays back the debt? Will the federal government sell off their 79.9% stake?
@105 yes. even with Katrina, they were still profitable, though not as much. Of course, I’m sure that they have raised the insurance rates to make up for some of those losses in areas prone to natural disasters, so I’m not sure you’d see as high of a loss.
Insurance is obviously a risk. I’ll take the chance that the world won’t turn into that bad NBC movie or whatever, “The Day After Tomorrow”, which sounds like what you’re describing. Yes, if a string of cat-5 hurricanes, 9.0 earthquakes, tornados, plagues of frogs all hit at once, AIG is in pretty big trouble. I’ll take those odds, though.
AFAIK, the government keeps their 79.9% share of AIG, just like they kept the stake in Continental Illinois bank, which it eventually sold to Bank of America. I may be wrong on this, but I’ve yet to see anything saying otherwise.
@97 good one!
I’ll take those odds, though.
Just did some reading and listening and from what I gather those odds, even sans natural disaster, are about 50/50. For the fed to reverse is stance that they would not bail out an more institutions 180 degrees over the weekend means they are scared. I hope for all our sakes that you make some coin. I also hope:
• that the FDIC can cover its obligations, as it is starting to redline.
• that these “shadow economy” market instruments will be at least be kept track of, if not outright regulated
• that the national debt, currently set at about 5 trillion dollars, will be adjusted to reflect our obligations to freddie and fannie (possibly an additional 5 trillion dollars) as well as other federal bailouts. and while we’re at it the iraq war (20 billion a month) so that we can accurately reflect on our situation and take the measures to correct them. Our options? Sell more debt to china or raise taxes. Neither are good, but one seems to have a distinct advantage over the other.
• that the illusion that has been sold to us will start to clear like fog n the morning, and people will start to form their own opinions, through respectful discussion with people they disagree with, through education, through consensus… (rather than buying and jerking knees to the sound bite bull shit that has been sold to us on a hot plate from those who could care less about us) and demand change.
/drinking and economics… bad combo.
@108 that was what i said at comment 18?!
that the illusion that has been sold to us will start to clear like fog n the morning, and people will start to form their own opinions, through respectful discussion with people they disagree with, through education, through consensus… (rather than buying and jerking knees to the sound bite bull shit that has been sold to us on a hot plate from those who could care less about us) and demand change.
now that’s a bet i wouldn’t take.
I’d be a little more in favor of this loan/bailout if the Fed actually had the money to do it. They needed to get new financing from the Treasury to prop up their own balance sheet.
I’d be a little more in favor of this loan/bailout if the Fed actually had the money to do it. They needed to get new financing from the Treasury to prop up their own balance sheet.
From what I read, they typically like to have $800 billion — after this loan/bailout, they have roughly $200 billion left. That’s still a decent amount of change, but if they need to bail out some other banks that are ‘too big to fail’, then they want to have the additional cash on hand, mainly for investor confidence than anything else.
A huge part of the problem is the banks gobbling each other up, making them too big to fail. Though, with the stance the fed took on AIG, it’s not like the banks want to come running to the fed — paying 11.4% interest and losing 80% of your company is not something you want to do. Hopefully with the stance the fed took on AIG, it’ll discourage that in the future.
yank, I’m confused
when the emergency “lender of last resort” has to raise emergency funds itself…
but yea, $200 billion is a decent amount…but look how quickly it came down from $800 billion. there is still a world of hurt to muck through, and i will be shocked if the Fed gets through it all with only $200 more billion.
my main problem with all this is that Hank Greenberg and company approached AIG several times over the weekend offering help, only to be rejected. Whatever your opinion on Hank, I find it ridiculous that the government jumped in when there was already a willing partner. If they were going to interfere it should have only been to demand AIG take the deal.
No big deal. We’ll just print more money. It’s the American Way.
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