AIG names recipients of its bailout money
I'm wondering why AIG would give $4.1 billion and $2.6 billion of US federal bailout cash to European banks Societe Generale and Deutsche Bank, respectively.
Any thoughts?
Michael
Here's a hint: what is the usual reason for an insurance company to hand out money?
Contractual obligations? Rule of law? The consideration that a lawsuit ending with an adverse judgment may be worse than just paying what they owe, up front?
-- http://www.wescottdesign.com
We are witnessing the rise and fall of the Fourth Reich.
Cheers! Rich
Insurance is the weirdest gamble of all - the only way to win is to lose.
Hope This Helps! Rich
of US federal bailout cash to European banks[...]
Tim Wescott wrote:
This reminds me of the way M$'s business decisions are about to make Iceland to an all-Free Software environment:
uit
Sure but it just looks bad. Surely using internal company cash to pay off international debts would have been wiser than using the federal funds directly?
Michael
If they had the cash to pay their debts they wouldn't need bailout in the first place
-Lasse
skrev i meddelelsen news: snipped-for-privacy@s38g2000prg.googlegroups.com...
1) They lost their bets so they have to pay in order to keep the morons buying USD-denomited crap paper; 2) If they manage to lose enough they will get another bailout, triggering another bonus so they can "retain talent".
Why are Europeons so ignorant? Maybe due to long-term suppression by an elitist class... much like as now happening in the US?
AIG is an insurance company. It has to pay claims on loses it insured. Otherwise it would default and go bankrupt. The US government falsely thought that bad, and infused money. They should have let nature take its course.
Now these fruitcake politicians want to deny salesmen their primary source of pay... bonuses.
Obama and his Congressional lackeys are in for a big shock when the courts whack them for tortious interference (*) in a contract.
(*)
Several times I've wanted to be nasty... imagine that ;-) And my attorney cited the above phrase as treacherous water.
...Jim Thompson
--
| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona 85048 Skype: Contacts Only | |
| Voice:(480)460-2350 Fax: Available upon request | Brass Rat |
| E-mail Icon at http://www.analog-innovations.com | 1962 |
Why are Europeons so ignorant?
They think they know it all about the U.S.A.
But never have bothered to visit
Why are you making a generalisation about an entire continent based upon one poster?
Judging from some of the responses to the AIG payouts, it seems that no small number of Americans had trouble understanding why an insurance company would be paying out money.
It would be bad. If lenders can't effectively insure against risks (e.g. if they can't rely upon insurers actually paying out), they're likely to become even more risk-averse.
In a developed society, banking and insurance are critical infrastructure; they *genuinely* cannot be allowed to fail.
The problem isn't that the state is now bailing them out, it's that it never collected the premiums for the insurance it was effectively bound to provide.
If they let the company go bankrupt, that will also deny salesmen their bonuses. And their basic salary as well. However watertight your case, there's no point in suing someone with no money.
"Jim Thompson" skrev i meddelelsen news: snipped-for-privacy@4ax.com...
Your speling is out too. Learn please:
Nope: AIG Financial Products is one of the largest and, possibly, the most retarded writer of naked derivatives; it's specialty is Credit Default Swaps, an Over The Counter (as opposed to exchange traded) option that will pay if the loan covered by the CDS defaults.
AIG charge money for that service - but they forgot a few other things of consequence like hedging and risk management probably because they are hard to do for OTC options: AIG probably hedged by buying other CDS on the debt they were writing CDS on creating a nice tight ball of entangled risk
But the worst part is that because CDSs are not exchange traded nobody knows what the total outstanding amount of CDS on a particular debt is and how much the CDS itself should be sold for.
Compared to real insurance, on a car or a house, a CDS does NOT require a material interest in the item one buys insurances for; it is quite possible that the debt of that retarded bank that is GE has been covered several times over by all the CDS written on it - it is also likely that IF f.ex one was a bank holding enough CDS on GE's debt it might be most profitable if one could push GE into insolvency because the CDS would pay more than GE owed (courtesy of Uncle Sap's guranteeing AIG)
Yes they should. They cannot do that because once a single case hits the bancrupcy court it will expose massive, systemic corruption and fraud involving at least the SEC and possibly the FED too (how else did Bernie Madoff happen to go undetected for 20 years)- and the loss will piss off China and Saudi Arabia who are already down about 60% on their US paper.
Of course any action taken by the gubmint merely delays the inevitable: The total amount of CDS outstanding is at least USD 60 Trillion - quite neat to write all those options with a BNP of only 10-12 Trillion to cover with ;-).
[snip]
My "speling" is on purpose... think about it ;-)
...Jim Thompson
-- | James E.Thompson, P.E. | mens | | Analog Innovations, Inc. | et | | Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus | | Phoenix, Arizona 85048 Skype: Contacts Only | | | Voice:(480)460-2350 Fax: Available upon request | Brass Rat | | E-mail Icon at http://www.analog-innovations.com | 1962 | Obama is about to make Herbert Hoover look like a financial genius
Thats what The Experts claim - i.e. Bankers and Insurance people! Taxpayers will disagree!!
They did collect premiums - the problem is that there is not enough money in the entire world to cover all the naked options they wrote and they just got called on them!!
Of course they will. And they would have disagreed equally vehemently if they government had allowed them to fail. The grass is always greener on the other side.
If they had insisted upon collecting premiums commensurate with the actual risk, the insurers wouldn't have been able to take such risks. OTOH, the bubble would have just burst that much sooner.
It's in the nature of the system that the politicians don't care whether the economy is headed for a train wreck, so long as they can delay it long enough that it doesn't happen on their watch.
It's MBAnomics: maximise short-term profit at the expense of long-term security, then use your "success" to get a job elsewhere before the chickens come home to roost.
Heartily agreed. More banks should have failed and the executives pauperized as a consequence of bad judgment. Otherwise the self correcting properties of capital based systems are compromised.
Much of the bonuses were going to the management in business units that were helping to cause the problem. What in the hell is going on that they are giving bonuses to mega loss managers / creaters. Where are the corrective properties for failure?
Actually it is a feeling of being blindsided by seeing our bailout dollars unexpectedly going overseas. Some proper disclosure before hand would have been appropriate, or some defaults.
True, but it should have happened almost 4 years ago by not insuring things that were such twisted instruments.
As a whole, yes. But sometimes (several large) individual firms must go belly up. Call it toxic shock treatment, like you might use to maintain a swimming pool, bothered by an algae bloom.
You are confusing the role of FDIC here (on savings deposits) with the stock market. They are quite different things.
The sales staffers were not getting the bonuses, the management of the failed operation are. See alos that we are going after all of the wealth of the Madoff family, and justly. See the RICO laws. .
Freddie MAC and Fannie MAE _guaranteed_ those "toxic assets".
...Jim Thompson
--
| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona 85048 Skype: Contacts Only | |
| Voice:(480)460-2350 Fax: Available upon request | Brass Rat |
| E-mail Icon at http://www.analog-innovations.com | 1962 |
I love to cook with wine Sometimes I even put it in the food
The problem with that is that many of the banks' customers would also have been pauperised. Even if all deposits are insured, businesses needing even modest operating credit are going to be SOL when the rest of the banking system is cutting lending rather than looking to take on new borrowers.
One bank fails, some of its customers fail, some of their suppliers fail, the suppliers' banks are pushed closer to failure. Assessing the risk of such a cascade isn't an exact science even for an experienced economist with access to all of the relevant data (which I doubt applies to anyone here).
Unfortunately, there doesn't seem to be any mechanism whereby the government can protect the banks' customers without substantially letting the guilty parties off the hook. Even if they could hold the banks' management accountable for the losses, their (substantial) personal assets would be a drop in the ocean by comparison.
How about Congress?
What about Dodd, Franks, and Geithner? Why let them off the hook? You did notice that Fannie isn't going to be outdone with the bonuses.
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