They better hope.
i'd be cranky watching bones too, but seriously, i don't think ill of you, in fact very much the opposite.Dammit, it is a lot easier to be cranky with you when you are being cranky right back.
Here I go off on a tear, and you go being halfway decent. Dammit. How can I be cranky now?
Anyone watching Colbert? I'm starting to like his angry pitchfork-wielding mob idea ...
:hack should bring up an AHF icon.
whf is the gov. getting a free pass on this they've already giben this company money twice and each time they could have put stipulations on the injections.
barak obama administration = AIG = fail
his administration continue to pump money into this company which is continue in the red, which has not shown any favorable results why it should continue asking for bailout money.
so far he has spent so much on bailout companys, yet he has done nothing to stimulate the economy, whatever happen to approving infrastructure projects, creating jobs? bro you already spent 1/10 of the allocated budget available on something that isnt doing to the economy. Watabout the SME and small businesses who are struggling to attain credit to keep their business going or keeping employees, keeping jobs....where are the incentives that these struggling businesses should be getting to keep jobs.
im sure his going to ask for another bailout package when his admin runs out of money to start funding projects.......
Last edited by TDMVPDPOY; 03-17-2009 at 06:12 AM.
This is pissing me off more each day. $@!$!@$%!#&^%#%@@$@^%#%$^%%(*&^))!@%!%!$%!$!#$^^(^ )&#$!@$%!5
Hari Kari?:
Pretty funny, but in one of the most ironic statements I've read in a while (coming from a Senator):Senator suggests AIG execs should kill themselves
By NIGEL DUARA p {margin:12px 0px 0px 0px;} IOWA CITY, Iowa (AP) - Iowa Sen. Charles Grassley suggested that AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.
The Republican lawmaker's harsh comments came during an interview with Cedar Rapids, Iowa, radio station WMT on Monday. They echo remarks he has made in the past about corporate executives and public apologies, but went further in suggesting suicide.
"I suggest, you know, obviously, maybe they ought to be removed," Grassley said. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide.
"And in the case of the Japanese, they usually commit suicide before they make any apology."
Grassley spokesman Casey Mills said the senator isn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.
"Senator Grassley has said for some time now that generally speaking, executives who make a mess of their companies should apologize, as Japanese executives do," Mills said. "He says the Japanese might even go so far as to commit suicide but he doesn't want U.S. executives to do that."
The senator's remarks added to a chorus of public outrage over the disclosure that AIG intends to pay its executives $165 million in bonuses after taking billions in federal bailout money. President Barack Obama lambasted the insurance giant for "recklessness and greed" on Monday and pledged to try to block payment of the bonuses.
those who accept tax dollars and spend them on travel and bonuses do so irresponsibly
In any halfway decent country that had any respect for itself, those executives would be long since dead.
This isn't the first time in American history Wall Street richers have regarded themselves as above the law. The last time it happened class warfare became literal.
One building on Wall Street still bears scars from the shrapnel.
Just sayin'.
I liken a lot of the bailouts to stopping the bleeding for an accident victim. Stopping the bleeding will not in and of itself heal injuries, but if you don't do it, the injuries will never have a chance to heal, because the person will bleed to death first.
As I have said before, and explained here in this thread, stopping a large ins ution from going under and winding it down is better for all concerned than letting it fail.
If one goes back to our notional bank:
Assets = 100
Liabilities= 90
Equity/Surplus=10
This company was vulnerable to an 11% drop in asset prices.
Now, lets assume that regulators relaxed the reserve requirements from a minimum of 10% (of assets) to, say, 2%(of assets).
The bank can now go out and borrow (leverage) itself even more to maximize returns.
Since it only has to have 2% reserve, it can instantly "grow" itself by borrowing somebody elses assets and promising to pay that back at a future date.
On the books, that transaction looks like this:
Assets = 100 + 400 = 500
Liabilities = 90 + 400 = 490
Equity/Surplus= 10
On paper the bank has gotten FIVE times larger in terms of assets.
BUT
What happens if those assets take drop now? Before the banks assets would have to drop by 11% to make it insolvent.
Let's assume that the drop now is only 4%.
Assets = 500*.96 = 480
Liabilities = 490
Surplus = -10
With this leverage, a smaller percentage drop equals a MUCH larger negative surplus (loss) in absolute terms.
Before the bank was -$1 in the hole, with an 11% drop, but now with a 4% drop it is -$10. The scope of the losses is TEN times larger.
What happens if that new, bigger bank had actually exeperienced a similar 11% decline in assets as its smaller, better capitalized cousin?
Assets = 500*.89 = 445
Liabilities = 490
Surplus = -45
Same percentage drop in asset value, but the losses are FORTY-FIVE times larger.
Oops.
Last edited by RandomGuy; 03-17-2009 at 08:48 AM. Reason: accuracy and clarity
That new -$45 loss is bad.
That is where your bailouts are going, to cover those kinds of losses.
Remember, that the over-extended bank you are helping has outstanding bonds and stock held by OTHER banks.
If that bad bank fails, then the assets of the other banks take a hit too, multiplying the losses in a nasty cascade of failures.
Remember, banks CANNOT loan money if they do not meet the minimum reserve requirements.
So, if the losses in a bank don't make it insolvent, it still might not be able to loan out money, until it unwinds (read: shrinks over time) to a point where it has the mininum percentage surplus.
Hence the "credit" crunch.
The governemnt + management of AIG before estimated that the legal costs in going back on the contracts would cost more than the bonuses themselves.
Now, if I were AIG's management, and I guess I am in a way, I would say to the executives:
"We aren't paying you . You can sue, but we WILL publish your name and the amount of the bonus and make that as public as possible. At the very least, you will be hounded by reporters looking for some cheap ratings, at worst... well, let's just leave it at that."
I think that the leverage we have to cancel those bonuses is a tad greater than it was a month ago for that reason.
Further,
Someone used the argument that it would "chase away the talent" at a time when we need their skills to wind down the complicated transactions.
To that I say: Oh really? Would YOU hire an AIG financial arm executive?
These people's job prospects should they choose to leave AIG, would be... limited. I think that the person making the argument about "chasing away talent" doesn't seem to realize how bad the job market is for finance people at the moment.
Fine, we own the place. But has that given us any control? None that I've seen. Has the Board of Directors been replaced by administration appointees who are going to look out for Our investment? Can anyone tell us where the money is going? How is Our company that we own accountable to us? Judging from the bonus scandal, it sure looks like it isn't. It looks like business as usual, only that AIG gets to burn our money instead of theirs.
RG, I get your point about the credit crunch, and it is quite valid. My concern is twofold.
From a realist standpoint, will bailing these banks out support our extended, debt-run economy in the long run, or will it only extend an artificial bridge until the next collapse? Is a crunch inevitable? Or do we hope to sustain our economy until America discovers the next "Big Thing" to sustain it?
From an ideological standpoint, is it correct to support the economy (and Wall St) on the backs of workers? Should we just take this financial hit and crunch our spending back to where it should be, free market style? Or is it a better good to prevent the loss of established wealth through unfair means, by rationalizing that the ends will be worth the means? Is it right to tax the majority of citizens unfairly to support a failing structure, even if supporting that structure would theoretically help citizens much more than letting it collapse?
(I know, it's wordy, but I have trouble explaining things without a white board and markers.)
Yes, it has given us control. We are in the middle of exercising that control.
The money used to fund the losses are going to the holders of the deriviatives contracts, whoever they are, and yes, that includes foreign banks, and companies.
It is accountable to us, just as any management is accountable to us. We can and probably will, fire a few people.
Remember that the bonuses were allocated last january or so, well before the losses and bailouts. We weren't in control, and they weren't in trouble at this time last year.
You CAN bet that going forward some, if not all, of these asshats WILL lose their jobs, and WILL find it almost impossible to get jobs someplace else doing the same thing they were doing.
The most probable outcome is to break up the company into the sound parts ( the stable, profitable insurance companies), sell them, and for the investment arm, we will simply wind that down.
AIG will pretty much cease to exist, and the government/shareholders will get money from the sale of those subsidiaries.
Think about it this way. When you have a sore throat you don't run to the emergency room and you simply wait it out because the consequences aren't great.
But when you have a cancerous tumor you don't avoid chemotherapy because the chemo hurts your body. You take the short term pain because as much as it hurts and damages your body it sure beats the alternative of dying.
The bailouts are an imperfect solution where there was no perfect solution to be had. We can fix our economy in the long term but it will involve changes. Personally I believe the greatest change that needs to be made has to do with the education of our work force which is why I really think Obama's long term plans are on the right track.
I think your last statement clearly answers itself. Is it better for us to experience short term pain to avoid what amounts to financial death? Yes. I sincerely believe that people cannot fathom what the collapse of the United States financial system means to the world. If such an event were to occur, it would be the defining moment in our lives and would make 9/11 look like a wonderful day in comparison because of all the death and destruction that would result.
Bailing out these banks will sort of support our "debt-ridden" economy, but I think this episode will probably change people's willingness, and certainly their capacity to borrow. I think that is a good thing overall.RG, I get your point about the credit crunch, and it is quite valid. My concern is twofold.
From a realist standpoint, will bailing these banks out support our extended, debt-run economy in the long run, or will it only extend an artificial bridge until the next collapse? Is a crunch inevitable? Or do we hope to sustain our economy until America discovers the next "Big Thing" to sustain it?
From an ideological standpoint, is it correct to support the economy (and Wall St) on the backs of workers? Should we just take this financial hit and crunch our spending back to where it should be, free market style? Or is it a better good to prevent the loss of established wealth through unfair means, by rationalizing that the ends will be worth the means? Is it right to tax the majority of citizens unfairly to support a failing structure, even if supporting that structure would theoretically help citizens much more than letting it collapse?
(I know, it's wordy, but I have trouble explaining things without a white board and markers.
It is an "artificial" bridge in the sense that a patch on a cracked dam is artificially keeping that dam from bursting.
As I noted in my post this stuff will wind down eventually. The result WILL be a smaller economy that won't grow as fast as it had been, but that isn't a bad thing, because that past growth was unsustainable.
History has shown that economies will have some sort of bubbles and that pattern, I would bet, will be likely to continue in the future. I think it is simply a feature of free-market capitalism.
One can limit the damage, and or risk-taking using regulatory levers, such as requiring the banks to keep a larger % surplus, and you can be that is what is going to happen.
It happened in the insurance industry in the 80's and 90's, and unsurprisingly, the insurance industry (don't think of AIG, because their investment arm was NOT an insurance company, it was more like a hedge fund) has proven remarkably resiliant.
Bottom line Realistic answer:
We will be ok. It will suck in the short term. Yes, somehow, somewhere, somewhen, there WILL be another bubble. I think this episode will be fresh enough on people's minds though that as soon as that bubble is recognized, it has a greater chance of being deflated sooner to limit the damage tho'.
On to the ideological part of your question. Next post.
Is it correct, as in moral/ethical?
Yes.
Remember that it is all somewhat interconnected.
If a big bank raises capital on Wall Street through selling stocks to investors, it has money to loan to your small business, and that directly links investors to Main Street.
Remember also that MOST stocks sold are sold to retirement funds, and mutual funds. So Wall Street IS Main Street at some level.
We are now, as we have always done, using something of a hybrid of free-market solutions and governmental policy solutions. There has never been a truly "free" market, and likely never will be.
We will let a lot of the bad companies unwind over time and simply fade away. This process of putting them to sleep will take a bit longer than putting a bullet in their figurative brain, but will cause a lot less disruption.
I think the end of the process will be about the same, it is simply the speed that will be a bit different. It is very hard to say whether dragging it out is worse than letting it collapse totally and getting it over with.
I would prefer the slower stable option, as my gut says that is better overall, but if you were to ask me to back that intiution up with data or any kind of reasoning, I couldn't. On the other side of the coin, the "sharp shock" school of thought has as much data on their side, i.e. little to none.
Personally, I think there will be some rather fundamental changes in a lot of people's thinking after this is all over.
I think we will be a bit more risk-averse, and more prone to saving more, both of which bode well for reduing our overall personal, corporate, and governmetnal debt load.
The next big nastiness will be what we do with Social Security and Health Care, both of which promise to be even more expensive than our current bailout.
I think the result of THAT will be to force us to be: more risk-averse and more prone to save.
I don't want to see the CEO of AIG berated by the likes of Barney Browneye Frank. If there's really this much outrage, then DO SOMETHING ABOUT IT besides grandstanding.
I think RG answered this question appropriately.
A great analogy! I think many on the other side are saying, "Why go through the chemo and pain if there's a good chance that my cancer might not go into remission?"
And yes, I think you're right about the financial crisis. I can not picture it being that bad, to be honest. But I have no background in economics, so my opinions are just that.
So, assuming I'm reading you right, you're saying that it's much better if we support our current economy now, as consequences will be dire if not. By easing slowly into an economic crunch, it will prevent widespread panic/global disarray of finances. And the scare will be enough to ease the people along towards this path.
A true free market economy would involve wickedly jagged es both up and down, which does not necessarily lead to a better economy, as wealth can be taken apart quicker. Hence the regulation, to smooth out the hills and valleys.
Thanks for the nuanced answer. As you said, I think both standpoints have their ethical issues. It's similar to the "Push a man in front a bus" question, which has no correct answer.
The Social Security/Medicare issue provides interesting contrasts with the Bank Bailout crisis as well as the problems that the Auto makers are having.
What's the best way to deal with moral hazard in these situations, where it benefits a person/company to make a guarantee now that they won't have to pay on in the future?
The members of government who made a promise to future generations knew that they'd be long gone when the bill came due.
The members of the automakers who made a promise to union workers knew that they'd be long gone when the bill came due.
The members of the banks who took their money knew they could make enough for life even if it was at the expense of the life-blood of their company.
What is a good way to reduce these sorts of moral hazards, given that humans are in general short-sighted and greedy? Are there good, do ented methods? Are they regulatory in nature or otherwise?
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