Twitter
StumbleUpon
Facebook
Delicious
Digg
Newsvine
Google
Yahoo
TechnoratiAfter AIG Rescue, Fed May Find More At Its Door
WASHINGTON - In one $85 billion (47 billion pound) fell swoop, the U.S. Federal Reserve may have wiped out what credibility it won resisting Lehman Brothers' rescue plea and opened its door to countless other companies to come calling for cash.
![[The AIG logo is shown Wednesday, Sept. 17, 2008 in New York. U.S. stocks headed for a lower open Wednesday, with investors still anxious about the financial sector even after the government bailed out the insurer American International Group Inc. and Barclays PLC bought a chunk of Lehman Brothers. (AP Photo/Mark Lennihan)]](http://www.commondreams.org/files/article_images/aig.0917.jpg "aig.0917.jpg")
By providing a massive loan to American International Group on Tuesday, just two days after refusing to use public funds to save Lehman Brothers from bankruptcy, the central bank also invited tough questions on how exactly it determined whether a company was too big to fail.
Between the $29 billion the Fed pledged to swing the Bear Stearns sale to JPMorgan in March, $100 billion apiece to rescue mortgage finance firms Fannie Mae and Freddie Mac, up to $300 billion for the Federal Housing Authority, Tuesday's $85 billion loan to insurer AIG and various other rescue deals and loans, taxpayers are potentially on the hook for more than $900 billion.
"They pretended they were drawing a line in the sand with Lehman Brothers but now two days later they're doing another bailout," said Nouriel Roubini, a professor at New York University's Stern School of Business.
"We're essentially continuing a system where profits are privatized and...losses socialized," Roubini said, adding that auto makers, airlines and other struggling businesses would no doubt be asking for government help too.
The government was hard pressed to say no to AIG because of concerns that its collapse would harm thousands of companies around the world and cause chaos in the $62 trillion market for credit default swaps, where it is a big player.
Many on Wall Street were clamouring for a rescue earlier on Tuesday, and AIG's share price swung wildly throughout the day as rumours swirled of an on again, off again government rescue.
But Roubini said instead of handing out money to firms that made bad bets -- which could inadvertently encourage more risky behaviour if companies think they have a safety net -- the government should be buying up mortgages and rewriting the terms so that households are not buried in debt.
STRINGS ATTACHED
To be sure, the Fed attached quite a few strings to its AIG funding deal. The loan carries a high interest rate, the government can veto any dividends, and AIG is expected to sell assets over the next two years to repay its debt. Senior management will be replaced.
But the central bank also followed a pattern established with Bear Stearns in March and repeated with Fannie and Freddie earlier this month of essentially wiping out shareholders while protecting those who held debt.
Some economists warned that investors had caught on and were betting on future bailouts by selling stock and buying bonds in struggling firms. That ends up pushing down a company's share price, which can exacerbate its troubles.
"If the message is that any time something like this pops up we're going to wipe out the equity and coddle the bondholders, that is its own sort of moral hazard," said Michael Feroli, an economist with JPMorgan in New York.
"I don't think you have to be a die-hard free market advocate to be at least a little bit concerned."
BERNANKE ON THE HILL
Fed officials said that they needed to act because of AIG's extensive involvement in financial markets. Through its insurance, risk and asset management businesses, AIG has dealings with many thousands of companies all over the world, so a bankruptcy would have had huge global repercussions.
RBC Capital Markets analyst Hank Calenti pegged the market impact of an AIG failure at more than $180 billion, or about half of the total capital that financial firms have raised since the beginning of the credit crisis last year.
But JPMorgan's Feroli said the Fed could have chosen to let AIG fail, just as it had done with Lehman.
"We don't know if the disease would have been worse than the medicine," he said. "We'll never know. But we know we lived through Lehman."
He said the central bank needed to clearly explain when and why it would act to salvage a company in jeopardy or face the prospect of a long line of companies seeking bailouts.
Fed Chairman Ben Bernanke, who has stayed out of the public eye during the Lehman and AIG drama, is due to testify before a congressional committee next week and can expect some pointed questioning, Feroli said.
"He needs to provide some sort of clear demarcation of what is or is not a systemic risk."
"Of the many unconventional actions taken by the Fed in the current crisis, this may likely prove to be the most controversial and should make Bernanke's...testimony on Capitol Hill an interesting event."
Editing by Jan Dahinten
123 Comments so far
Show AllSorry for double posting this, but it is too important to get lost within this thread as just a 'reply'.
I don't think people really understand 'we the people' will own 80% of nothing because the FED is doing this bailout, and the FED is owned by 12 PRIVATE banks. This is not really a bankruptcy, but a consolidation, and at firesale prices for the greedy bastards that own the FED.
We must get rid of the FED and have the US Treasury controlling our monetary policy instead of private banks. If we did this, and paid interest into our own treasury we could eliminate the national debt.
Andrew Jackson kicked out the privately owned central bank and still remains the only president to completely erase the national debt. Four other presidents have threatened to do the same, but 'mysteriously' were assassinated. Get the picture now?
Can you recommend a (not too long or technical, but accurate and explanatory) source to read about the operation of the FED?
Joe
One thing that is missing from all this;
All this bailout money that the FED has been promising.....only the Congress can appropriate money yet they have not been consulted at all.
Of course there isn't much doubt that the Democratic congress will just meekly go along.
Lobo Gris
I can't help but suspect that, in some monstruous form, political favouritism is being played here. It is time that these 'banksters' fall into the grave they have been digging for others.
From a Russian source:
"Not being explained to the American people is that AIG, the World’s largest player in the $45 Trillion derivatives market, during the past two weeks had bet heavily on the World Markets against the damage from Hurricane Ike exceeding $2 billion in property damage, lost oil and gasoline production, lost wages and payments to companies forced to close, etc., it is obligated to pay, but which the actual damages are now being estimated will exceed $1 Trillion as the damages throughout the United States are finally tallied."
Could this be true?
I found the above qoute in this article:
http://www.dailypaul.com/node/62370
Namaste
I have sometimes wondered, what it would sound like, if we were able to translate what was being said by, say, hens laying eggs, or, perhaps, pigs in a slaughter house. I suspect, it would sound something like what I have just read above in your comments. "Some animals are more equal than others." G. Orwell
Nothing lasts forever and Friedmanomics is perhaps on the way out. Certainly a good portion of Latin America has or will shift away from it. Free market economics (unfettered capitalism actually) comes with too much death, destruction and misery and really only benefits a small portion of the population. Ideally a mix of Friedman and Keynes is what is best for most, relying soley on either is disastrous.
As to which firms get bailed out or not, one only needs to look at the level of bond holdings by those nations holding America's debt. Think China and the other Asian tigers as well as "sovereign wealth funds" around the world. The bailout of Freddie and Fannie was soley due to this. I haven't checked but I'm guessing the exposure to foreign debt for AIG was far greater than that of Lehman Bros. - goodbye Lehman.
What is going on is no surprise if your source of news is anything other than the mainstream media. Scary times, now and ahead of us....
It's called bringing on the New World Order. These bastards knew exactly what would happen years ago. The Thugs are bleeding the treasury dry - and hence the taxpayer and economy - for a reason.
All the "middle class" or "upper middle class" with the enormous ego, 2 jobs (or overtime), 3 cars, and 4 bedrooms - get ready to lose your standard of living. But it'll take awhile. The Thugs who pull the levers are not going to do it overnight or there actually might be riots, (assuming Amerkins had enough gumption to do so). No, the so-called "middle class" will boil slowly like a frog in a pot.
It's been going on for years already in case you haven't noticed. But they've scraped by on their easy credit, which is exactly what the Thugs wanted. As their income buys less and less, Thugs'll give them more credit to buy yet more cell phones, HDTV's, and another new car they've been trained to think they need but don't. It's called debt slavery, but they'll still brag about working more hours than the next guy - as if that's a good thing.
Where does it end? Probably sometime after the compliant/gullible "middle class" acquiesce to the RFID implant and/or surveillance cams on every street corner in every burg. LONG after.
The economist Nouriel Roubini, quoted in the above article, was recently asked if he saw any light at the end of the tunnel regarding the economic crisis. "Yes", he said, "but it's the light of an oncoming train wreck". Part of me wants to see this entire mess collapse, let the greedy bastards loose everything. Unfortunately so many may suffer in the process. Pensions will be lost, homes lost, some will go hungry and desperate. No one really knows what's about to unfold, or what it will look like. I hope it collapses just enough so that everyone wakes up, but it looks like most are asleep, or in major denial. MSM is finally starting to pay attention, but it's really too late.
These corporate criminals should be castrated.
What's another name for businessmen operating without oversight and constraint??
--- Criminals.
SKIN FLINTS
When the taxpayer money, my money, your hard-earned money goes to these irresponsible Ponzi schemers without any meaningful conditions, without any regulations about lending or about collateral to back up loans, it is like giving money to a cocaine addict. It will go up their noses and they will have the reasonable expectation that we will subsidize them again.
The investment banks and brokerage houses will continue the same practices: make bad loans that you know in advance cannot be repaid, collect huge commissions, salaries and bonuses, bundle the loans and sell them over and over at a discount to another corporation. Or they will come up with some other scheme knowing there will be grand theft and no consequences.
The people who did this knew EXACTLY what they were doing. The deregulation began with Bill Clinton's blessing in a delusional dream about the liberating effects of free and unregulated markets at home and internationally. He conveniently forgot that a small cabal of amoral gamblers and traders would be calling all the shots. It continued with the phony Greenspan and Gramm and with the placement of all kinds of pixillated drug and sex Brownies in regulatory bodies. All this opportunism, carelessness and fawning on the wealthy by our politicians set the scene for hordes of pillagers during the current administration.
My young son, told me several years ago that these mortgage practices were creating a house of cards that would come falling down creating wreckage not only in real estate finance, but in all financial sectors. He described the Ponzi scheme to me and the inevitability of the collapse, so don't tell me the operators and government pundits didn't know. They knew. They just got theirs and didn't care about the rest of us.
Hey, by the way, when you pay $85 billion for something, don't you own it? Can I have just one of the CEO's houses for my handicapped friend who lives on $9000 a year and just had his rent raised $200 a month by HUD? Meanwhile, the nickel and diming of schools and local needs continues. Imagine if we had privatized Social Security and put it in the hands of say AIG?
What these people did was criminal. But not every crime is illegal when the thieves write the laws. We need to elect independent Congressional and State officials who will write and enforce laws to protect average people.
And I agree with others who have said that China owns us more and more, since they hold the paper on our debts accumulated under George Bush and company. Can anyone foresee a problem with that or is it just me? Remember the golden rule - he who has the gold rules.
Joe
Remember as well the urgency to get those new bankruptcy laws passed. There was no crisis in the CCard industry of peoples not paying off their debts. They were rolling in profits, yet a bill to reform the laws seen as needed?
Why?
They knew EXACTLY what was coming.
Great post.
Ever have one of those moments when you catch something, out of the blue, in an unplanned flash? Years ago, at a time when I wasn't paying as close attention, I happened to be flipping around the channels and landed on a Clinton press conference, just at the moment that Helen was asking the question along the lines of---"What about antitrust laws and the increasing mergers and creation of monopolies?" You know what Clinton did? He turned his head. He turned his head and said absolutely nothing. He just stared in the opposite direction and after a long silence, called on another reporter. It was such an odd moment, frozen in time--I never forget it. Now we are hearing about all these companies buying or merging with other companies at the same time we are hearing the "too big to fail" condemnation. But I don't hear a word, not a word about the ever increasing consolidation continuing on a daily basis. Being "too big to fail" always insures that they won't and so much for competition and the free market.
Thank you for your kind words and for your vignette, Vern. Sometimes those little Jane Austen or Kurosawa moments in which someone gestures, or goes silent, or turns a head or shoulder away, or eyes glaze over will reveal a lot about people's inner character and what you can expect from them.
Joe
What I try to do when I hear about one of these crooked sheister corporations foisting their crap on the taxpayers (me) is to try to figure out what I can do to stop participating in the game. Obviously, as a taxpayer, the answer is to stop paying federal taxes, or at least, a concomitant portion of my tax bill.
I know it is possible to do this, but I, like many others, am worried about the consequences. Has anyone here withheld their federal taxes successfully? I know the IRS has no _legal_ recourse to collect taxes, but they and every other law enforcement agency believe they do, so they can seize all your assets and throw you in jail. What kind of recourse do individuals have to withhold their taxes?
Why not, "Fed Buys Halliburton!" "Halliburton wasn't really in trouble, Dick Cheney just wanted to cash out and buy one of the Cayman Islands."
AIG is the straw that broke the camel's back. I will no longer pay income taxes. I am a self employed IT contractor. No more quarterly payments and no more filing of tax returns. Its over. Its done. Enough is enough.
-- EKATON --
Supposedly, only death and taxes are certain. There is a third: in a brutal capitalist economy such as ours, Greed and Stupidity will always rule.
we've got fakedemocracy, check.
we've got fake reasoning for war, check.
we've got a socialist safety net for capitalist pigs, check.
you could probably call that fake capitalism, check.
we've got a fake investigative media, check.
we've got a fake american dream that we use to brainwash low wage labors to take our sh*t jobs, check.
now we just need a fake green business movement to fix everything... oh wait we already have that too, check.
There's plenty of potential for a real green business movement. It just gets zero help from everybody people expect.
yes I know there's huge green business potential. I'm afraid that it's just getting out advertised by the big money corps suddenly wrapping themselves in the green flag. Who's to tell what's genuine and what's not? here's one of my favorites... of the real green businesses.
http://www.aptera.com/
Another 85b borrowed from China unless either candidate wants to rescind the tax cuts for the wealthy and corporate elites.
Also,
---------------------------------------------------------------------------------
For half a decade now, every single major news outlet has been dead wrong on the economy. Only The Moderate Independent reported, 5 years ago, that what everyone was saying were "sound fundamentals" and "record growth" were actually an economic disaster that was building and building.
Now, all of the news sources that have been wrong all along, that were caught entirely by surprise by what is occurring, and, frankly, that still don't know what is actually happening, are supposedly "helping" you analyze the current situation and how the candidates match up in dealing with it.
Nice, huh? They haven't gotten anything right, yet they still claim to be experts who can advise you.
Only The Moderate Independent has understood and reported usefully on the economy. M/I has reported and predicted with 100% accuracy what is unfolding, without fail, for more than half a decade, while everyone else - everyone else - has been dead wrong.
So who can you turn to now to get the real perspective on what is occurring, and which candidate is better suited to deal with it?
The Only Article on the Economy You Can Trust
From The Only News Source To Get it Right For More Than Half A Decade
by
Thomas J. Bico
http://www.moderateindependent.com/v6iSEPT172008Economicreality.htm
Well, they are a class of people willing to carry water for management. When they talk about how the Dems would "raise taxes", they talk as if for us all, but really they just represent the interests of their own class--their own interests.
They don't speak for us.
FredrickJohnson - Excellent piece with a good dose of commom sense. I kinda knew, but couldn't nail down why everything was going south, but the stock market was going up.
I used to watch DW news from germany. One story I can't forget. Volkswagon workers relented and accepted a contract increasing ther're work hours. They went from a 28 hour work week before OT to a 33 hour work week before OT. Imagine what our unemployment would be if we went to 33 hours. Assuming we had the Mfg. jobs.
The piece also concluded that Russia and Osama bin Laden (If alive) will be the winners. Iran and Afganistan will become America's - Russia/Afganistan debacle. That doesn't even include Pakistan and Iran. Did they outsmart us, or did we outsmart ourselves?
opps i forgot ..dancing with the stars is on and oh i don't want to miss CSI either.. sorry i forgot myself for a minute..
85 billion dollars...imagine the medical equipment, manpower and medicines, that could be used in the us, to give every one health care for FREE,... regardless of class or race or financial status.. well the powers that be just tipped their cards.. we all got a peek at the amounts available for the "connected elite" should they feel a bit shaky and faint..so lets DEMAND our share of what the powers that be, seem to be able to afford for themselves and their cronies.
When comes Citibank?
"The man from the television crawled into the train.
I wonder who he's gonna stick it in this time.
Everyone was looking for a little entertainment,
So they'll probably pull his hands off when they find out his name.
And then they shut down the power all along the line,
And we got stuck in the tunnel where no lights shine.
They got to touchin' all the girls were to scared to call out.
Nobody was saying anything at all.
We were waiting for the end of the world,
Waiting for the end of the world,
Waiting for the end of the world.
Dear Lord I sincerely hope you're coming
'Cause you really started something."
Elvis Costello
The question "too big to fail?" is a propaganda ploy Reuters uses to help keep itself and the entire capitalist network afloat on the backs of humanity. In a civilized society that question won't be seriously discussed because everyone knows that big is wrong, thus big SHOULD fail ASAP. Reuters and the gang audaciously hope that question will inspire a bloated creeping mass of discussion noise to bury the only point that matters: Big is wrong, thus big SHOULD fail ASAP.
One has to wonder when the IMF will come in to fix the USA... Ask the people of Argentina how fun that is.
For $85,000,000,000.00 the American tax payer gets 79.9% of ... nothing?
Is it any wonder that after the government bailed out the insurer
American International Group Inc. "People are scared to death?"
I don't think people really understand 'we the people' will own 80% of nothing because the FED is doing this bailout, and the FED is owned by 12 PRIVATE banks. This is not really a bankruptcy, but a consolidation, and at firesale prices for the greedy bastards that own the FED.
We must get rid of the FED and have the US Treasury controlling our monetary policy instead of private banks. If we did this, and paid interest into our own treasury we could eliminate the national debt.
Andrew Jackson kicked out the privately owned central bank and still remains the only president to completely erase the national debt. Four other presidents have threatened to do the same, but 'mysteriously' were assassinated. Get the picture now?
79.9% of nothing is nothing. Just ask Maurice (Hank)
Will Treasury Secretary Henry Paulson be the one deciding whether or not Goldman Sachs will get government bail out money?
I hear so many complaints about how evil and unfair the bailout of AIG is, but who here does more than just pretend to know the far reaching effects of an AIG failure? Of course the Government does not bailout small businesses or individuals, if they did they would go bankrupt themselves. So many here cry conspiracy with this bailout, but then why was there no Lehman Bro. help? Thsi bailout will be repaid by AIG selling off assets quickly, due to its 11% interest rate.
"It is not if we will be extremists, but what kind of extremists will we be"
-- Dr. Martin Luther King, Jr
sucker.
The US is already bankrupt both in monetary and constitutional ways. The Republicans have fixed the United STates up just fine in accordance with their Nazi tenets. We have a fascist country, thanks to Cheney, Phil Gramm et all.
This bailout will be repaid? Heh heh. Will the Iraq war profiteering overbudget of three trillion be repaid? Let's just get down to the real point raised by your post - How exactly do the Repuks manage to corral people in with such statements as yours that have no basis in reality? My hypothesis is "audacity of hope".
This discussion has nothing to do with war profiteering. Please try and stay on topic. If you have the economic expertise to explain to me: a) why AIG failed, b) what effect will it have on our, and the global, economy, and c)
exactly how a government "bailout" loan actually works, then I would be glad to listen. This dilema was no cause exclusively by the Republicans, so lets try and not let the Democrats off the hook so easy. The duoply is fully at fault, not any specific one in it.
"It is not if we will be extremists, but what kind of extremists will we be"
-- Dr. Martin Luther King, Jr
o.k. mister repug-troll smarmy crap for brains. how about u explain a-c to us ignorant lefties who of course don't have the pure intellect to understand these very complicated issues like corporate welfare bailouts. Crawl back under the conservative rock whence you slithered. The true "market" solution would have been to let AIG go under and the market sort out the mess. You repugs are always so eager to apply market solutions to environmental issues (e.g., pollution credits), but when it really comes down to biting the bullet and letting your filthy rich cronies take the full brunt of their own unethical, unlawful, nefarious and stupid business practices, it never seems to be the right time for the market to do its thing. Funny how that works.
I do not pretend to know the answer to A-C. I tried to find answers to those questions and found nothing. It is true, our laissez faire government should have let them fail, but what then? When our economy collapses farther and faster who would you blame then? The Government of course. I am fully against most of what our current administration is. When an economist explains to me why letting them fail benefits anyone, then I will agree. The upper management is being entirely replaced, and yes the CEO and his cronies should have their assets seized, but that is another question entirely. Let us first attempt to slow and possibly end our economic collapse.
"The only means of strengthening one's intellect is to make up one's mind about nothing, to let the mind be a thoroughfare for all thoughts."
-- John Keats
You don't want to know the answers--you are blind and deaf because, as the man said, you can't handle the truth--it would cause a crisis of faith in your religion of the free market. NeoCon opportunists played you for a sucker, while they looted and swindled. They created their own reality and simpletons who so much wanted to believe all this ideological crap wrapped in the flag now are screaming about the sky falling after advocating the law of the jungle. If they are insured a safety net, you know a gubbermint handout--welfare, what incentive is there to stop the criminal practices made legitimate by those who bought the "get big gubbermint offa our backs line" hook, line and sinker? If they are "too big to fail" what is to stop them from continuing to merge and consolidate if that provides them with the safety net?
You see, I wouldn't mind imbeciles or fundamentalists embracing end times mythologies or Ayn Rand losers paving the way for the fat cats to crap all over the invisible hand, but we all suffer on account of those who willfully remain blind and deaf just to cling to their own pride and ignorance while trashing those who truly advocate a government of the people for the people and for the people and the common good. Language that McCain now hides behing while the facts of his record condemn him as a traitor to those principles.
I do actually want to know the answers. I have followed every link anyone on this site has provided, so that I might get a better understand of what happened. I also agree companies should never be allowed to get "Too Big To Fail", but AIG was already that big. I do not condone what caused this Failure, and both parties are at fault in this. But I do not condemn the attempt to save the continuely collapsing economy. I agree that it provides a "Safety Net" that other companies will try and take advantage of, and we cannot allow this. But we cannot allow a single company failure take down our economy with it. You label me things that which have no basis, instead of making a valid debate. Will there ever be a poster on CD that does more than yell and complain? Honest dicussion can get us so much farther than angry confrontations. I read and attempt to understand every issue that every poster replies to me, but it gets so discouraging when I have to sift through all the angry bullshit just to read your points.
"The only means of strengthening one's intellect is to make up one's mind about nothing, to let the mind be a thoroughfare for all thoughts."
-- John Keats
The question then becomes:
How come you aren't angry?
The answers are obvious--we don't need an investigation or a convened 911 panel to determine the cause as if it was an issue that has to be investigated. It has all been right out there in the open--legitimitized by de-regulation, so anyone playing innocent now is either a sucker, unwilling to face the truth and playing a naive act, or shifting the subject to complaining about the anger of those who are outraged by the ongoing carnage. The "ecomomy" was a house of cards, a fabrication created by deception and loopholes and Enron fairy dust sprinkled by the Keating 5. There was no economy to fail--it was all a mirage. Now we--you and me and generations to come are forced to prop the fairyland up, while they stroll away with their golden parachutes and looted fortunes intact--and we are the ones who lose the farm. The claim that we have to save the economy is little more than talking points--like "support the troops" to legitimatize an illegal occupation or that we need to give tremendous tax breaks to billionaires because they create jobs while they off-shore jobs. So, wise up and show some righteous anger aboout getting screwed by those who would rob your children's future to line their own pockets.
read bullit point 2 here and that is the reason AIG failed. they had too many policies on 'Credit default swaps' and was going down because of them.
http://seekingalpha.com/article/95891-five-systemic-problems-highlighted-by-aig-crisis
Why did Warren Buffett walk away for AIG?
Toxic debt on AIG's books.
American workers again bailing out the rich. Perhaps one day the American worker will be repaid, but only when the American worker demands repayment.
Will Treasury Secretary Henry Paulson be the one deciding whether or not Goldman Sachs will get government bail out money?
Please read my comment below. This collapse of AIG was avoidable.
ENDING THE MIXED ECONOMY!
I recall someone on CommonDreams saying that we should let those that bought homes, "knowing" they couldn't afford them, die by the wayside. Where is that commentator now? I had to explain to him that financial institutions have a responsibility to reduce adverse selection and moral hazard, something they failed to do as they piled on the risk and raked in the profits.
The irresponsibility of private financial institutions is being countered by hundreds of billions of dollars in taxpayers' money. If this doesn't end the lie that there's no money available for society or for ordinary people, then nothing will.
Obama is blaming Bush. But this is NOT all Bush's fault. Bush was merely continuing a pattern set by his predecessors, Ronald Reagan and Margaret Thatcher, the two champions of the "free" market. It was they who started this laissez-faire ball rolling, who experimented with ending the mixed economy.
And the chicanery continued with Clinton. It was his admin (Robert Rubin) that killed the Glass-Steagall Act of the 1930's. Clinton also brought about NAFTA.
The US needs a revolt/revolution, since both Dem and Rep parties are as corrupt as Nero's Rome.
ON AIG from CNN
(CNN) -- The Federal Reserve Board announced an $85 billion plan Tuesday to bail out troubled insurance giant American International Group Inc.
Suze Orman says it's a good thing the federal government bailed out troubled national insurer AIG.
The federal government decided to intervene after determining a failure of the company, whose financial dealings stretch around the world, could hurt the already delicate markets and the economy..."
ANNOUNCEMENT: THE 'FEDERAL RESERVE' IS NOT 'FEDERAL', NOT UNDER THE JURISDICTION OF, OR FORMALLY PART OF, THE US GOVERNMENT. IT IS A PRIVATE BANK IN CHARGE OF OUR MONEY SUPPLY. LEARN ABOUT THE FEDERAL RESERVE.
Who needs money? You were born with everything you need.
Empire Fire and Frost
Are there fall colors in the fall of empire?
How do you harvest awe?
Will the pennant bleed?
Does the shock of frost spike the colors in the fall?
Color code the bounty
Color code the bounty of debt
for a fall with new seasons of hope
like empire pie on a rope
to follow the spring with showers of
‘Don’t bring it on’
Empire fire and frost
the fall won’t be a loss
And how did the "credit crisis" get started and become yet another case of obscene corporate welfare billed to the taxpayers ?
The root cause of the financial market disasters are the WARS in Iraq and Afghanistan which are failed attempts at subsidizing the 21st century profits of American oil corporations.
War crimes and public debt have become the ultimate corporate welfare !
And increasing the money supply to fund the bailouts and fund the wars has fueled inflation which has become another aspect of socializing private profits.
Stiglitz has estimated Iraq and Afghanistan costs at $5 Trillion. To that figure we now must add the cost of bank bailouts, higher energy prices and the overall costs of the decline of the American economy.
complete article:
http://www.theaustralian.news.com.au/story/0,25197,23286149-2703,00.html
Iraq war 'caused slowdown in the U.S.
Peter Wilson, Europe correspondent | February 28, 2008
Excerpts:
" The Iraq war has cost the US 50-60 times more than the Bush administration predicted and was a central cause of the sub-prime banking crisis threatening the world economy, according to Nobel Prize-winning economist Joseph Stiglitz."
" The spending on Iraq was a hidden cause of the current credit crunch because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit.
" The regulators were looking the other way and money was being lent to anybody this side of a life-support system," he said. "
So, they actually used the potential jobs lost as part as the justification-yet who gives a hoot about all those other jobs lost--especially as the result of the same class off-shoring practices.
It is unspeakable in it's scope considering how long they have been claiming that health care is simply too expensive. Considering it is the taxpayer who shoulders the brunt, wonder where they think they are going to turn when the well runs dry? Foreign countries? Maybe then we will get health care?
I recall hearing bin Laden's right hand man specify their intent:
Weaken US militarily. Check.
Weaken US financially. Check.
Break the US up into regions--possibly controlled by foreign powers...
I always thought Lincoln was wrong about preserving the union. God knows the South keeps us in the dark ages. Apologies in advance to those sure to be offended-but oh well, they can have their fundamentalism and ignorance and we won't have to pay for all their gubbermint handouts anymore either since the South gets the lion's share while pissing and moaning about social programs. ;-)
The south? Really? Sure, parts maybe, but if you're looking for the core of the rural republican conservative base, you're looking in the wrong place. The southern cities are too ethnic to fit that bill. You'd be better off looking at the whitebread midwest "heartland", where if you're not a WASP you're not from there.
Moreover, a breakup of the US would only benefit us here in New Orleans. We could start charging the rest of you for the oil and the ports and the use of the Mississippi, and use that money to fix our own damned levees. We could close MRGO and start our wetlands building back up, and get the puritans off our back to allow Bourbon Street to really flourish. We could bring the drinking age back down, turn the adult businesses loose, legalize marijuana, and more. And more than ever, your tourism would flow here to take advantage of all the things you can't do at home. We might even join the EU, wouldn't that be cool?
The City-State of New Orleans... I like the sound of that. Bring it on.
Well, it was a bit tongue in cheek. You don't think da tewwowists are rallying for our successes?
But I did enjoy your scenario, I am sure we could dredge one up here in the despised liberal enclaves of the North East as well;-)
Pretty good reply.
Even bigger bailout on the way next week! Estimate:$80B to $160B, and they're sneaking it through the Senate as quiet as a mouse. Hold on to your wallets!
The nuclear industry is proposing 34 new reactors. Current estimates per reactor (without cost overruns) range from $6.2 billion to $12 billion per reactor. Unlimited loan guarantees that cover 80% of the 34 projects would guarantee $168.6 billion to $326.4 billion. The nuclear industry expects to pay $100 million in fees. Assuming these reactors have the 50% default rate as projected by the Congressional Budget Office, the taxpayer cost would be $84.2 billion to $163.1 billion.
This pre-bailout is happening next week in the Senate. A mere $85 billion in AIG bailout loans is nothing compared to this, and it's just getting started.
Can somebody please tell me why these giant companies are going belly up, right and left? Surely it can’t all be because of sub-prime and housing bubble.
By whose authority is Federal Reserve, which is actually not even part of the Federal Government, giving away public money to these companies whose CEO’s made millions as salary and bonus?
The Republicans historically and under W. for sure deregulate; fire the 'cops' who watch over Energy, Wall Street and the Housing Markets. This to facilitate semi legalized thieving while no one minds the store.
After a few years of sucking the companies dry, CEO's making hundreds of millions, you end up with Enron's, AIG's, Lehman Brothers and a Housing Market that crashed (this when risky mortgages were bundled and sold en mass-again made possible under W. deregulation)
Obama or McCain for the next four years.
Obama or more of the same.
Obama will raise taxes for the rich. McCain will raise them.
One of a million differences.
I know just the regulatory venue for our troubled investment community - the Chinese Communists. It's a little ham handed, like GWB's war on worldwide viral terror. The root problem with Wall Street is human corruption, the worm of callous greed that lies in the heart of homo proprietus, and it needs to be ferreted out ruthlessly, block by block, broker by broker, disguise by corporate disguise, by cadres of red shirted volunteers with flashlights and ropes and rat poison. The priests of capitalism want us to believe that the profit motive, like a pet weasel, can be nurtured into something that serves the public good. It may be that to adventure into imaginative risk with the expectation of reward is justified, but not beyond the point of recklessness where the temptation to actually swindle people becomes too strong to resist. If you're going to keep that system you have to run it like a no touch topless bar - with big bouncers to enforce the rules.
The game of risk and reward should be anyone's prerogative, but duplicitous salesmanship (of the kind you'll find in any bank today, and on steroids in any investment firm) amounts to snookering people into fronting the money for your own high risk adventures. The rules of disclosure should be as clear as at any roulette table. People who knowingly risk their money and lose it should not be reimbursed regardless of how "big" they are. A culture that becomes economically dependent on a labyrinth of unregulated, covert bubble scams is not long for this world anyway, no matter who pays the bill.
I can't really disagree with anything you say except that the root cause was the deregulation of Wall street and these banks...then we get to your unrelenting greed, etc.
Capitalism works and is a proven system (My Opinion) but it cannot work unfettered. For exactly the reasons you state. When the risk is removed, you no longer have a capitalist economy.
It's incredible that a few people can make decisions costing tax payers billions of dollars.
This is not even a covert rip off. Blatantly right in fron of our eyes and on the front pages.
Be afraid - Be very afraid.
So we can socialize corporations but any socializing of health care is forbidden. It is one thing to help the rich and quite another to help the working class least they start asking for even more. Our society can be anything we choose it to be, why are so many choosing to have one benefiting the small elite wealth holders while they struggle to exist?
Great observation. I'm not sure "our" society is ours any more however. When we've reached the point where the capitalist elite grant themselves a welfare state, that is actually, as one poster said, a return to feudalism. I guess the demise of habeas corpus should have tipped us off that we were drifting backwards in history.
I wonder what the net worth of Fuld and Greenburg is now?????
What do these men have in common????????
Privatizing profits?...in my world it's THEFT! Where is the taxpayers share and or dividend?
IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH! IMPEACH
Most americans are sheep, the great generation can't shoulder the burden of their kids anymore. It's getting to the "Let them eat cake" point, maybe a good investment is lead and black powder.
I like her idea of buying the bad mortgages from in-trouble lenders and re-issuing to borrower letting people stay in their homes at reasonable rates - keeps the base strong and removes need to bail out insurers like AIG (if mortgages stop failing, then the insured won't claim, and AIG won't fail).
Also, while it helps the in-trouble lender, it doesn't reward them since they lose their profit.
Kind of "trickle up" economics
Nah, makes too much sense for anyone in our government to try.
well well well
The republicans can not pin this on Clinton and democrats after all it was Mc Same's buddy to authored this bill to remove safeguards.
Hey who cares that the economy (once the most powerful in the world uptill 2000)
has gone to the dogs at least we are safe from terrorist.
So enjoy your saftey with an empty stomach and empty wallet
Vote McCain 2008 to complete the cycle
"The republicans can not pin this on Clinton and democrats..."
Oooh, you haven't been around here very long, have you? Just wait until the third party brigade arrives to tell us how Clinton and the Democrats are equally to blame, and only a vote for Nader can save us.
Uh Oh....I already heard it (on TV, so you know its true) started under Carter!
We have a winner!!!
progressiveparty wrote: "This is WHY nobody should be voting for McCain, Obama, Republicans or Democrats - do you finally get it? "
If Common Dreams posted an article about fluffy kittens, it would result in a number of posts like progressiveparty's.
Hey, wcdevins - Maybe we should have a contest to find the fastest time between an article/opinion piece appearing and a posting by one of these pod people.
These creepy billionaires insisted on deregulation, because of course billionaires are more honest than regular folks like us. They don't need anyone watching them. Well, what they did was sell us a bunch of BS mortgages and a bunch of BS credit that would make the mafia blush. Then they did not keep their books very clean. They were taking money from overseas like the Bank of China, but the Chinese decided that they weren't going to do that anymore, because these sleazebags are not trustworthy. Well guess who jumped in to save these thugs? The government. Well, our government is so deeply in debt right now due to thug looting Bush that well our whole government will probably go bankrupt. Our government lives on loans too, and well, they are not trustworthy either. This should get real interesting when the great empire crashes in debt. I feel sorry for military folks. They will probably be left where they are. Too bad Pelosi didn't do her job and impeach Bush and try him for treason.
The timing is interesting... surely ALL of these banks had problems before this particular moment. Seems like they're all lining up to get their FREE pass from Bush, in case Obama takes the office. It's plausible given the range and cost of these bail outs (all in fiat money! Face it, money itself is losing value as the sums can NEVER be repaid. It's like a game of monopoly that works so long as we're all willing to make trades, including that of our time, for these pieces of paper... as opposed to forming elaborate barter systems, a "separate financial reality.") that Obama would put at least SOME regulations back into place.
The End Timers see no problem with the big banks falling like drunken giants; nor with the ice caps melting; nor with war to determine who's God is the "right" one.. let us PRAY there are not enough of them to continue fueling the most grotesque policies of American history, both domestic & foreign.
The timing IS interesting. Is this Stage 1 of an October surprise: Create a general mood of impending doom. Stage 2: Create "an incident" or a resurgence of an existing problem: Iran, Georgia, Iraq, etc. (perhaps these were initially just trial balloons to see which would be most effective). Stage 3: Call off elections. Afterall, look at who the Repubs had as former and current nominees - literally a bunch of clowns. If I didn't know better, I'd think they really didn't intend to have an actual election.
Let them try it. I think people would finally rise up and throw off the mantle of such opression. If they really wanted revolution that would do it.
I've said it before; I'll say it again:
I think it's just wonderful that our enlightened government provides lavish social services in the form of safety nets for those who fall on hard times, and even those who brave hazards and risks to reach for extraordinary, spectacular short-term success and rewards!
"Those" meaning corporations and wealthy high-finance institutions and investors, of course!
I wonder if they've ever considered that sort of thing for ordinary struggling citizens? I know... that's crazy talk.
That's not crazy talk, Little Bro - that's COMMUNISM! The Sainted Ronald Reagan didn't deregulate corporate America and disable the government for you to seditiously bring up such pinko ideas!
No Republican policy in the last 50 years has improved the human condition in the USA.
Might want to stock up on some extra food and gas. Things will get ugly here fast. October Surprise! Bush can declare martial law for an economic collaps. Really.
I think people should think in terms of "bad winter coming".
Get some food stored up that could get you through to spring if it comes to that.
Make sure you are warm and secure in your home through the spring.
But don't "panic buy" anything, keep it cool.
Only good thing about living in south Florida, don't have to worry about the winter.
Cheney has no intention of letting go.
Let's call it what it is, corporate welfare. There is no amount of public money or public trust that the wealthy and their enablers, Congress, will spare to save themselves. If we're bailing out the bankers then we are democratic socialists. We need to spread the socialism around and not just apply it to the rich. Let's forget this idea that we are capitalists, we are not.
"The government CAN veto any dividend" - I'm a little bit offended by CAN. If it's our money we should OWN these companies.
I was struck by the story below this - "McCain would privative Social Security".
When I was young and broke on Monday.
Monday - Write a chech for $5.00 at the drug store.
Wednesday - Write a check for $10.00 at the drug store and deposit $5.00.
Friday - payday - cover the checks. Worked ALMOST all the time.
I should have been a banker.
Oh the foreign element, the foreign element--are we bailing AIG out for our benefit or theirs, or fear of what the foreign element can and will do? You see, we're not getting the whole picture. Ironically, an ever growing number of us are cash strapped, so the fed will have to--more and more--borrow from Peter to pay Paul, until the whole house of cards finally collapses. Can anyone else see how hard these fools are scrambling now to prevent the truth from becoming so evident that even the most idiotic among us cannot deny it? They are DESPERATE. Stay tuned, it should get interesting, an enormous blow-back is brewing...
It is not a Government of the people. Recognize that. Its purpose is to preserve the wealth of the elite and to keep the unwashed masses in their place.
The Federal Government of the United States is merely a branch office of the Multi_nationals. The purpose of the Government is to collect tribute for those elite and convince those masses that it in their best interests.
The only difference between the two parties is the manner in which it is done. The Republicans are the slave owners that whip their property in order to get them to work harder. The Democrats feel they can get more work out of the slave by ensuring they are fed.
.
Very well put!
Welcome to the wonderful world of corporate feudalism (presaged brilliantly in the 1975 version of "Rollerball") where upper management are the nobility, tele-evangelists the Church, junior management the minor gentry, supervisors the knights, and the vast majority (workers and customers) are serfs. In this redux of medieval Europe, one law applies for masses and another applies for those whom have the "proper pedigree."
One of the characteristics of corporate feudalism is that the majority of the money flows to the those at the top of the pyramid no matter the instance: feudalism is not a meritocracy!
The first thing to do is cut taxes on the wealthy so that those managers and CEOS can keep more of their hard earned bonuses!
Why was Lehman allowed to fail while AIG's investors are rescued? Lehman's investors obviously don't have the right connections.
Remember trickle-down theory? We're seeing Reaganomics at its worst.
q
This is not the real reason; but an excuse most people accept.
It was LB failure that led to AIG's problems. NOT! Both Guilty!
I feel sick to my stomach by the situation going on between Wall Street and the managers of our tax dollars. It is so brazen, but then everything this administration has done in the past 8 years has been brazen and without shame at all. I say: FOLLOW THE MONEY. Where are those billions from our tax coffers going? In whose pockets will the taxpayers' hard earned $$ go? FOLLOW THE MONEY.
Here in the real world, there are persons that I know who are behind on their credit card payments, their mortgage payments, their car payments, and their student loan payments. They get no relief, no safety net, no help at all from those "conservative" republicans who belief that hey, you made your bed, now you have to lie on it. But that doesn't seem to apply to the "big" players, to the tune of billions and billions of dollars because they must stay afloat or many more rich folks (but not nearly as many as us poor folks) will face financial trouble.
Here's the rub, the legislation that was put through giving corporations the same rights as a human being is being put to use. While the average American taxpayer helps this sick puppy, the corporation comes back as big and powerful as ever, and we the humans, are still working the two jobs, doing without and getting farther and farther behind.
Welcome to the Third World.
Yesterday you had to be either a millionaire or a moron to vote for McCain/Palin.
Today you can only be a moron.
This is WHY nobody should be voting for McCain, Obama, Republicans or Democrats - do you finally get it? The idea is to break us completely so these fascists thugs can have what they want: more $$$ for their pockets, and total absolute power over everyone else on the planet. It is time to wake up!
The two guests on Democracy Now! this morning were brilliant in their analysis of this heinous crime that is being commited against all of us. NO BAILOUT!!! When will we wake up enough to take our world back from these monsters?? (and that includes Barack Obama, folks).
Too whoever said " capitalism when its profitable and socialism when its losses" and thats a direct quote from a poster here on CD....your statement is proving quite true.
I would like to know what the upper management types and CEO's are leaving with? How much do you get for being this bad at management?
The CEOs of the Fannies walked away with $23 million.
Too bad the government won't just seize their accounts and assets.
Oh good. That makes me feel better. I thought they might have to go without.........
GDBRSSGAMFSH! My form of profanity.
I can hardly stand this. These people are nothing but a bunch of crooks...where are our reps who will bring these criminals to justice?
Some of that money being squandered is going into our reps' pockets.
q
Well said.
Why are we not pissed at in-competence and lack of responsibility .
This country has gone too linient against business. Gone too far for business, which has pushed us for more productivity while they burn the gains.
We are in too deep to know what to do.
and toophat for you!
toophat for you!
Glad to, Annabelle. The national debt before the Fannie/Freddie buyout was close to ten trillion. F/F increased it to 15 trillion. The Iraq and Afghanistan occupations will add another 3 trillion at least. Thats 18 trillion dollars. But as more and more privately owned LLC's (limited liability corporation, like GM, Ford, Washington Mutual, Bank of America, etc.) go broke the taxpayers will be required to assume liability. This is called socializing the costs and losses. These continuing failures will add at least another 5 trillion dollars to the taxpayers' liabilities. Thats 23 trillion dollars. Private hedge funds hold something like 600 trillion dollars in paper profits. When these crash the taxpayers will be left holding the bag. So thats a total of something like 625 trillion dollars. The investors simply can not be allowed to bear these losses. They must be imposed upon the taxpayers. There are around 150 million taxpayers in this country. Call it 200 million taxpayers and 600 trillion dollars in liabilities for easy math. That works out to about $3 million dollars per taxpayers. I don't know about you, but this will certainly break me, because I've only got about $6 million in the bank. I'm going to have to severely limit my lifestyle.
-- EKATON --
Sounds like something I once heard about debt. Owe a few hundred k's and the bank owns you, owe a few million and you own the bank. Seems we can now add, owe a few hundred billion and you own the government.
This economic gerfuffle is going to make the Great Depression look like a boom.
Hyperinflation will make millionaires of us all.
Hah! That's pretty good. I'm going to use that one.
That's right and gasoline will cost $5000 per gallon.
q
Gosh - I don't have a problem with taxpayers loaning corporations money to prevent them from failing and destroying the rest of this great economy. Just make sure that after the first year's low introductory rate we raise it at the same reasonable rates that any other sub-prime lender, or credit card company would charge, along with any late fee penalties & annual fees. Of course, those charges would automatically be deducted from the salaries of the board of directors.
must keep the oligarchy running smoothly.
Bear in mind that the people with the most money currently have the most power in Washington... therefore, any bailouts are going to be designed to maximize their profits and protection while the peasant class picks up the tab.
Over the past 25 years, we have witnessed the most incredible rape of the middle-class and poor since days of the robber-barons.
If you had a million dollars in 1983, you most likely have $3 million or more today... while the average person's net assets have dwindled by 25%.
But if everyone keeps voting for the Bushes, McCains and Palins, you will assure that the current trend will continue until the poor and middle-class are all surviving on gruel and living in mud huts.
The only meat your grandchildren will ever see will probably be rabbit or rat.
"Over the past 25 years, we have witnessed the most incredible rape of the middle-class and poor since days of the robber-barons."
Very well put.
q
Agreed.
Remember, it started with the acceptance, by Americans, of Ronald Reagen's policies and "conservative economic ideology." The middle class and poor must reject these policies and ideologies if they are to progress. Use your vote wisely.
Or perhaps our offspring could eat the rich. Not so much meaty as lardy fat.
Hello? Would someone explain where this money is coming from? The politicians keep hounding on no money for Social Security. There seems to be enough money when the need arises for the good old boys. How clever! Perhaps someone would care to add up the amount of billions that we are now responsible for, just a rough estimate will do. No wonder they want to privatize social security. Just ask anyone who has just lost their retirement in this gargantuan swindle if that is a good idea.
Sweetheart, these are your taxes!
No they're loans from China that your taxes will forever pay the interest on.
Why are Americans not pissed and demanding justice? The Feds should be helping the American home owners save their homes. Do we want all of these families on the streets of America?
I foresee these jackasses bring back the debtors prisons. This is where you will be thrown into prison and be made to work for no wages.
This peonage is the slickest way to enslave this country and they will get away with it because no one is fighting back. They are blaming people for taking the hook that they created to sell to the desperate who only wanted a piece of America. This was fraud from the beginning. People were talked into using these loans and took them in good faith.
You can piss and moan all you want about people being careless…..we all want the American Dream. We are all guilty of reaching out to achieve the fantasy, so we drink their highly advertise cool-aid.
They mixed the cool-aid; they need to be held accountable for it. Because no matter how you feel about it we are going to be the ones who will have to pay for it.
"Why are Americans not pissed and demanding justice?"
Because most Americans have no understanding of the details of these bailouts and the right-wing controlled corporate media is not about to educate them.
When I try to talk to people I know about these issues, I can see their eyes glazing over after about 10 seconds.
"Do we want all of these families on the streets of America?"
No one in this administration or on the board of the Fed gives a shit.
q
For sure with McBush and the momma bear we will be the most socialized nation on the planet - 18 billion to corp. farmers so they can feed us crap! Now the Wall St. we want no oversight folks need us to print more phony cash or do we have the Chinese print it for us? WAF'ed.