Fed blinks, bails out AIG with $85Billion loan.

[theeedude]

http://www.nytimes.com/2008/09...sure.html?ref=business

Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and A.I.G.?s request for help from the Fed of just a few days ago was rebuffed.

But with the prospect of a giant bankruptcy looming ? one with unpredictable consequences for the world financial system ? the Fed abandoned precedent and agreed to let the money flow.

OK, so all the lines have been crossed by this Fed. Now it's bailing out insurance companies. Who's next? Let's just print money and bail everyone out who made bad bets.

 

[mshan]

80% stake []in return for[/b] an $85 Billion bridge loan.

Gotta wonder if they will end up making a lot of money over the long term (?)

Also, recent CNBC Asia webstream said market could have been down 1000 points, if AIG had been allowed to fail.

 

[theeedude]

$85Billion loan to a near worthless company that insured toxic mortgage securities against default.

 

[mshan]

That was in additon to the $70 billion credit line the Fed engineered in the private markets over the weekend.

It is apparently just one arm of AIG, AIG Financial (extensive worldwide derivatives exposure, and who owns the other end of all those credit default swaps?), that has put the whole firm at risk.

Sounds like there are still a lot of valuable assets at AIG, if you can unwind those positions in an orderly manner over time...

 

[Blackjack200]

#1 - The Government had no choice; this had to be done. Even last week when they were saying they wouldn't step in, I knew it was bullshit.

#2 - The Government should have taken a 100% stake. AIG is no longer viable as a for-profit corporation: investors should have lost 100%. The Government should have taken all the equity and auctioned it off to the highest bidder through a massive IPO after stabilizing its balance sheet.

 

[theeedude]

That's like saying someone is healthy aside from the whole full blown AIDS thing, just gotta separate those.
This company is worthless.

 

[mshan]

If you had to mark to market, right now, perhaps...

Hopefully LK will chime in regarding his "soft landing" comments in another thread.

 

[theeedude]

Do you know what kind of crap they insured? Insurance companies get wiped out by bad bets. Why should they be allowed to make bets with taxpayer money?

 

[StageLeft]

Originally posted by: senseamp
Do you know what kind of crap they insured? Insurance companies get wiped out by bad bets. Why should they be allowed to make bets with taxpayer money?

Because they're too big to fail, letting them die worse than helping, etc. you know the talking points

 

[theeedude]

Originally posted by: Skoorb

Originally posted by: senseamp
Do you know what kind of crap they insured? Insurance companies get wiped out by bad bets. Why should they be allowed to make bets with taxpayer money?

Because they're too big to fail, letting them die worse than helping, etc. you know the talking points

Yep, welcome to the United Socialist States of America.

 

[bctbct]

Anyone keeping tally on much we have donated this year?

 

[BrunoPuntzJones]

Originally posted by: senseamp

Originally posted by: Skoorb

Originally posted by: senseamp
Do you know what kind of crap they insured? Insurance companies get wiped out by bad bets. Why should they be allowed to make bets with taxpayer money?

Because they're too big to fail, letting them die worse than helping, etc. you know the talking points

Yep, welcome to the United Socialist States of America.

Aye comrade.

 

[gevorg]

This 85 Billion is nothing, won't change anything, might just as well save a major "established" insurance company for better or worse.

If you want to worry about a bailouts, checkout Freddie Mac and Fannie Mae. Their debts are in TRILLIONS! Guaranteed to devalue the dollar.

 

[NoStateofMind]

Originally posted by: bctbct
Anyone keeping tally on much has been stolen from us this year?

Fixed.

 

[Farang]

OP you have no idea what you're talking about

 

[Slew Foot]

I bought some losing lottery tickets, I want the government to bail me out.

 

[Dari]

If these companies are too big to fail, why weren't they regulated as such?

 

[jpeyton]

WHAT THE EFF

There is a robbery taking place and nobody is calling the cops.

 

[mshan]

Why don't you ask George W. Bush and all of the look the other way cronies he filled his government with?

And if the DOW had gapped down 1000 points tomorrow morning, would you be saying the same thing?

 

[NoStateofMind]

Originally posted by: jpeyton
WHAT THE EFF

There is a robbery taking place and nobody is calling the cops.

This.

 

[theeedude]

Short the dollar long term, is all one can do about this. This Fed has demonstrated that money is worthless to it, it will give it out hand over fist. If it's worthless to the Fed, it's certainly worth less to me.

 

[Blackjack200]

Originally posted by: Dari
If these companies are too big to fail, why weren't they regulated as such?

That's the real question. There's no doubt that the regulation will change to prevent a re-run. But people have a right to be outraged that this wasn't the case from the start.

 

[theeedude]

You cannot have working capitalism under these rules: Profits are MINE, but losses are OURS.

 

[Farang]

Originally posted by: Blackjack200

Originally posted by: Dari
If these companies are too big to fail, why weren't they regulated as such?

That's the real question. There's no doubt that the regulation will change to prevent a re-run. But people have a right to be outraged that this wasn't the case from the start.

I think the concept of deregulation of business has always been such an appealing one because the old argument goes, get government out of the way and business is more efficient. I think this gives those who support more regulation a lot more political capital in the years to come.

 

[bctbct]

Oil was down to $92 today, may have to bail those theives out next. :Q