OT: AIG

For what crime? AFAIK, incompetence isn't criminal, no matter the extent.

The shareholder might be able to sue the senior management, but most of the shareholders are probably other financial corporations, none of whom would be in much of a position to cast the first stone.

Even if money could be recovered, it's likely to be a drop in the ocean compared to the losses.

Really, this is all shutting the gate after the horse has bolted. It would be nice to think that at least lessons will be learned for the future, but I'm none too optimistic about that, either. The political system just doesn't reward long-term thinking.

Incompetence is not a criminal issue, but fraud is. Somebody knew that the picture was way to rosy to be real, and went for it anyway for the bonus, that is a fraud.

All we need is one 5%'er to start the cascade, wait a minute that has already happened.

Even that poor drop helps, just the same: Not the point at all, they pauperized many others, they get first hand experience with the situation as a training exercize.

Nor does so many individual investors (both large and aggregates of small [including retirement funds]) serious overexcitement with this quarters income. .

When elected officials help the "incompetent", then it becomes Conspiracy .

don

With the zinger being that no such case can ever be made worthwhile is any reasonable court, as it is impossible to demonstrate the communications related to any normal conspiricy charge. .

.

Funny, the New York Times articles of the day credit Clinton.

Phil Graham sounds pretty amazing though. Apparently he personally got the entire Congress to pass all those changes, Clinton to sign and promote 'em, Freddie and Fannie, Barney Frank, Maxine Waters...

He's Superman.

Oh, let's not forget Rahm Emanuel, who served on Freddie Mac's board of Directors presiding over the swindle while is was being engineered.

I guess Phil Grahm got to him too.

James Arthur

I guess you did not read that article, so I will highlight for you:

"Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act."

Sounds like a bait and switch or "wag the dog" type of politics.

This article is just one of a long line of articles about how Gramm has "fixed" the long standing laws that help pull this country out of the

1930's. And now were back, Hmmm makes you wonder what would have happened if congress would have read that 262-page amendment first.

But, it politics as usual in Washington.

Obama says he will not look back, I am sure he is talking about this very issue.

Once the flood gates are open for past mistakes to be tried in court, this government would fall like the deck of cards that it is.

don

acy .

.

I read that attorney's blog entry, I just rejected it as bigoted and misinformed.

There's nothing wrong with derivatives--they're perfectly legitimate and useful.

They can be misused and they can reduce stability, but that's NOT the base cause of the troubles.

The base cause, the ultimate, was that the LOANs the derivatives insured were no good. They were bad loans, written to non-credit-worthy people, on inflated appraisals.

The derivatives were just insurance. Along with securitization, they were intended to make it less risky for investors to buy bundles of crappy loans.

Specifically, the crappy loans that came from the government's "affordable housing initiative," which got started under Clinton.

Less risky for investors =3D easier to sell at lower interest rates =3D "more affordable" mortgages for low income clients.

So, what you miss was that the Phil Graham-sponsored change was endorsed by Clinton and the Congress as an essential part of implementing THEIR plan. They needed buyers for the loans that were to result from THEIR low-quality "affordable housing" initiative, and this legislation was a necessary enabling step.

It's not Gramm's fault. If the loans were good loans to credit-worthy borrowers, there'd be no collapse. Blame the loans, and the government that spurred their issuance, then bought them from banks, guaranteed them, and re-sold them to investors.

Cheers, James Arthur

The derivatives sold were not allowed before Gramm got his finger into the act.

This is the center of the meltdown, the mortage holders did not sell that insurance. The just got loans they should not have gotten.

Along with

yes, Gramm has been denying his involvement for years.

But the more you look into what was done you find his fingers all over it.

Politicians can no longer be road-out on a rail, but Gramm would be the first one I would vote for.

don

The term is "Rode out of town on a rail" and you can get rid of bad politicians, if you really want to. I did it in Ohio, 20+ years ago. I sued one, got a settlement & kept him from being re-elected.

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Gramm is in Texas, a state that wants to kill of science for religion.

don

You're illiterate. How would you know?

...Jim Thompson

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If Bush was a MORON, what does that make Obama... an IMBECILE ?:-)

James, Actually, you are not entirely correct. While derivatives are not, in and of themselve, bad, these were.

A derivative needs to properly reflect the underlying security, and needs to be back up by risk assessment and dedicated funds to 'hedge' the risk. In this case, the boys in the back room just 'assumed' that the risk was zero, did nothing to back up the paper, and then sold more paper than even an unreasonable man could justify based on the original notes!

So, they took X amount of loans, bundled them, and then sold 2X derivatives, and then sold 4X backing derivatives of the derivatives... Sounds crazy, and it was. As soon as there was any doubt about X, you got 8X amount of trouble!

It wasn' that there were that many original defaults, it was the realization that no one could know WHICH bonds HAD the defaults in it, that brought down the system.

Charlie

Duh, would you red ths fr me.

And if you bother to read the "Gramm-Leach-Bliley Act" you will see that the old laws for disclosure were gutted.

don

Duh, Wht dos this prt mean.

"This is the most specific assault I've seen against evolution and modern science," said Steven Newton, a project director at the National Center for Science Education.

What does that, and your inability to type a coherent sentence have to do with designing electronics?

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I didn't mean to defend the issuance of defective derivatives, just the idea of such hedges.

These particular derivatives were unsound--insurance from an insurer with no ability to pay--but that's on AIG and the GSEs, not Gramm.[1]

[1] for fun, try text-searching this .PDF for "swap". (Freddie Mac's 2007 Annual Report) It's mindbogglingly dumb.

I've no quarrel with your telling of the subsequent cascade failure, amplified by ridiculous leverage. That happened.

But, if the loans had been good to start with--appropriate amounts loaned to responsible borrowers of adequate means-- the first domino would never have fallen, smiling AIG computer-modeling geniuses would've pocketed their fat premiums, and we wouldn't be here today.

So, when assigning causation, look to the loans, and how they came to be. Follow the dummies.

Cheers, James Arthur

So? We just had a Democratic House pass an ex-post-facto Bill of Attainder. I find that far more frightening: angry legislators capriciously confiscating private wealth.

But both will be unraveled through due process, in due course. That's the system.

Cheers, James Arthur

Oh, for even more fun: search that same report for "derivative."

It only takes a second, and it's an eye-opener.

Cheers, James Arthur