Posted on 11/17/2009 5:33:33 PM PST by WashingtonSource
When the New York Fed renegotiated its original $85 billion deal to bail out AIG last year, it "effectively" transferred tens of billions dollars of cash from the federal government directly into the coffers of the AIG’s counterparties, according to an audit by TARP Inspector General Neil M. Barofsky.
(Excerpt) Read more at mindovermarket.blogspot.com ...
Further proves that TARP was one huge arse ponzi scheme, along the same lines as Stimulus was and ObamaCare will be or is.
This flailing and floundering are just the death spiral of the New World Order and the Progressives. They have the look and even they know the Jig is up. We will take the USA back and as usual...Return to sanity. Be prepared. The South is rising again.
The banks not collapsing clearly saved the treasury money, but that aside, has there been a direct cost? What is it?
Hint, AIG is a giant bond fund, and bonds have been rallying continually since this time last year.
Your protectionism of AIG cracks me up.
AIG is about as corrupt as they come, period.
Let AIG be "as corrupt as they come". But has the corruption cost the US treasury money? How much? What is the loss, now or eventual? Do you have any figures or analysis to offer on the point, or are you profounding ignorant of the entire matter, beyond the smears you read in headlines and repeat mindlessly?
Your explanation of what the literal meaning of “protectionism” is was quite educational....not.
Personally, I would have let the corrupt AIG implode like a house of cards and watch people like you scurry as AIG headed for and was sorted out by a bankruptcy court.
You might enjoy being ripped off, but I, among a multitude of others, do not. Obama/Geithner/AIG scandal for the win, huh? Have a good one.
AIG currently has assets worth $844 billion on its balance sheet; if you back out some non-tangibles $838 billion. It has liabilities of $766 billion, and net worth for the equity (including the preferred the US treasury owns) of $72 billion. $68 billion of that is the preferred, representing the net amount the treasury has actually invested.
Note that the $50 billion or so of loans from the Fed are under the liabilities above, and that the $68 billion is lower than some headline figures because the headlines refer to authorizations not actuals. (There was e.g. a $30 billion tranche authorized in April of 2009 that has only been drawn on for $3 billion).
The bulk of the company's liabilities are for things like life insurance policies. There is $122 billion in long term debt included in that liability figure above, those are its privately held corporate bonds.
The asset side is mostly bond positions, including e.g. nearly $200 billion in corporate bonds, $75 billion in non-US government bonds, $50 billion in munis, $60 billion in mortgage backed, etc.
Where is the loss again? How much do you think it will eventually be, and why? Do you think the US treasury preferred will be worth zero, and thus that the whole thing will have cost the treasury something like $65 billion? (Since it has already received a few billion in dividends etc).
I'd be surprised if AIG earns enough above the preferred for the common to be worth much. The market current values the common at about $5 billion. Some of that is perhaps option-like value from the call-like position of the common. You are free to go short it.
The equity is 8% of the assets. It is easy to see why the company looked worthless last year but is not worthless today - it is a giant pile of bonds, and the total US bond market has returned 14% since this time last year. On the liability side a lot of it is free float or nearly free short term debt; 15% or so costs 8-10% (the LT debt) and 10% or so costs 5% (the preferred). So one is talking about a sheet that earned something like 14% on the asset side and paid only something like 2% on the liability side in the last year, to reach its present position of positive 8% equity.
Let is be bad public policy to save illiquid firms; I don't think it always need be so but I'll stipulate it to make my point. It is still a good *trade* to buy a leveraged bond fund when corporate rates are running 10-15% in a panic, and ride them back to normal levels of credit spreads.
Men who thought those panic spreads would continue indefinitely, or wanted them to, undoubtedly did not recognize at the time that is was in fact a good trade, not a piece of charity that was throwing money away. But some people did recognize that is was a good trade, whatever the motives or the public policy angles involved.
At any rate, it has not in fact lost money and it doesn't look like it is going to. I expect the eventual full round-trip profits to the US treasury to be modest - maybe $10 billion when all is said and done. But that isn't a loss, let alone a "rip off".
Your approval is not required for a single sentence of the above analysis to be true...
Your approval is not required on AIG being about as corrupt as they come, being most of us know it to be a fact, especially as it relates or regards AIGs misappropration US taxpayer money or should I say, an 11 figure cash injections.
Your lame defence of AIG is very reminiscent of Geithner’s continued failed attempts.
Last fall, it might have been perfectly reasonable to fear eventually loss on such an investment because it might not have been clear that it would succeed. It was clear to me and to many others, but undoubtedly there were many who sincerely feared it would lose money and cost the taxpayer a bundle. But you, you feared it might work and might save rich men money, and that to you was and remains what was wrong with it.
You just can't sell that position.
The fact remains it won't end up costing the treasury a nickle. The same cannot be said for a thousand other boondoggles of the present administration, or indeed, of modern government generally, both parties and at all times. But this is the one that upsets you. We can all see why.
Envy is an evil thing...
Corruption is an evil thing and defending it makes even more so.
You want rich men everywhere to become poor. I want rich men everywhere to flourish and stay rich. Why? Because I know a prosperous capitalist economy without rich and prosperous bankers is a round square and a misunderstanding. That is the difference between us.
Lately we have been visited by both Goldman Sachs and AIG apologists. They don’t see any corruption and everything is squeaky clean with their heroes at both companies.
Going back in time ...
Lehman Brothers is allowed to fail (Sept 15, 2008) and the FED and Treasury said we are drawing a line in the sand, no more bailouts. A few days later (Sept 18, 2008) AIG is bailed out to the tune of $85 billion dollars. Hank Paulson (former GS guy) meets behind closed doors with GS CEO Lloyd Blankfein before pulling the trigger. GS receives $20 billion (that they were going to lose) because AIG is bailed out. Then GS gets another $12 billion from the FED after being converted to a bank holding company (Sept 21, 2008) in order to qualify for those funds (which they eventually paid back). The AIG bailout was nothing more than a massive bailout of US and European investment banks who were going to lose their shirts if AIG went down as the counterparties to all their bad bets.
Back room deals with taxpayer money that directly rewards cronyism for Goldman Sachs, while hiding they were doing it through AIG, is the poster child for the entire collapse of our ponzi scheme financial system we are currently reinflating. GS and AIG should have been dismantled, not rewarded for ignoring risk and gambling with other peoples money. Modern day capitalists love to yammer about the free market until it time to pay the piper, then they make the worse welfare recipient look fair and reasonable when it comes to their sense of entitlement to get their taxpayer dollars to keep this scam going.
The irony or paradox here that you either fail to mention or simply and blatnatly do not wish to acknowledge is that there is a distinct difference between money and becomeing rich legitimately and money and becoming rich through varying vehicles of corruption.
As such, those who have gained such via corruption can go to hell, especially since most of them are responsible for putting us in the predicament that we are currently experiencing...that includes AIG, Goldman Sachs, etc.
House of cards and building a house on sand; nothing more, nothing less. They both implode at the cost to the American taxpayers neither of whom have provided one frakin job or food on anyone’s table but the already corrupted rich. As was mentioned by another FReeper, AIG, as with others, should have been allowed to fail and fail HARD! They knew the risks just as anyone else. But nope, to big to fail BS Government mentality intervened, not God.
Be sure to thank your government god.
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