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 It was only six weeks ago that the Federal Reserve declared that the American taxpayers would get all their money back from the AIG (American Insurance Group) bailouts.

 If you believed that then I've got a bridge in Brooklyn to sell ya'.
Today, AIG announced another $60 Billion loss and a possible company-wide failure by next Monday unless the taxpayer coughs up some more cash.

 American Insurance Group, the insurance giant that is 80-percent owned by the US government, is in discussions with the government to secure additional funds so it can keep operating after next Monday, when it will report the largest loss in U.S. corporate history, CNBC has learned.

 Sources close to the company said the loss will be near $60 billion due to writedowns on a variety of assets including commercial real estate.

That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn't have.

In addition, if AIG's book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.

Talks between the government and AIG are focussed on how the company can swap some of the debt held by the government for equity in AIG. The problem is that the government's ownership stake cannot exceed its current 79.9 percent, leaving officials to try and find a creative way to transfer value to the US in exchange for AIG reducing its debt so that it can then borrow more from the government to meet its collateral calls.

 If you haven't been following this saga, this is what the American taxpayer has already fronted AIG in the last five months:

  1. an $85 billion loan from the Fed
  1. an additional $37.8 billion loan from the Federal Reserve a month later
  1. an additional $20.9 billion under a new program where the Fed would buy commercial paper -- short-term debt often used for day-to-day expenses
  1. the U.S. government restructured its loans to AIG, giving the company about $150 billion in total as part of a rescue package in November. It included a $40 billion cash infusion from the $700 billion financial bailout

  As part of the package restructured in November, the government is also spending up to $53 billion to buy up mortgage-backed assets and other AIG contracts on debt.

 And yet that still isn't enough!

 To put that in perspective, remember when Hillarycare was too expensive for America? It's cost was $110 Billion to insure all Americans. Now we've thrown $150 Billion at an insurance company, and that appears to be just the downpayment.

 But don't worry. AIG has plans on how to pay back the taxpayer - by selling one of its units. There is just one little problem.

As AIG looks for cash to repay a $60 billion taxpayer loan, one option stands out as a potential way to rake in billions: the sale of American Life Insurance Company, or Alico, a consistent star performer in AIG’s vast constellation of insurance subsidiaries.

But an unresolved tax issue — one the company has not disclosed to possible buyers — could complicate the sale and hamper AIG’s ability to repay the bailout. In a worst-case scenario, it could decimate Alico’s business, according to documents and interviews with company officials.

The tax issue relates to a 2004 Internal Revenue Service ruling that says life insurance and annuity products similar to those Alico sells to foreign clients are subject to U.S. income tax withholding. If forced to comply with the ruling, company officials say Alico’s clients would likely flee to competitors — with potentially dire consequences.

"It is unlikely that Alico’s business would survive, much less be sold for a price that would help AIG repay its indebtedness to the Treasury," David Rosenbloom, an international tax expert hired to advise Alico, wrote in a draft letter to the IRS.

 So they could partially repay the money we loaned them if we didn't tax them by the legal amounts that they owe the government.

 As for all that money we've loaned AIG, we don't know exactly how it has been spent. The Federal Reserve has been refusing to release that information.
  However, a recent court ruling has cracked open a window.

[Update: Inspired by the comments below]

  What does China and AIG have in common? A lot as it turns out.

 Coverage of the 85 billion-dollar AIG bailout by the Fed in the Chinese media has generally been fairly reserved. That's partly because AIG owns around twenty per cent of the People's Insurance Company of China, the country's largest casualty insurer, and the government doesn't want anyone getting worked up about a possible threat to its soundness or that of their policies. AIG also has a special, indeed unique, history in China. It is the only major U.S. company (eighth largest in the world until a few days ago) that was founded here.

 Interesting, but no big deal. Right? Well let's adjust our tinfoil hats for a moment and check out recent news.

 "The truth is the Administration needs China's help. America's stimulus is very expensive and the U.S. wants China to help finance it," Andrews reported.

 Or to put it another way.

 In Beijing, she [Clinton] urged China - - the largest holder of U.S. government debt -- to keep buying to help finance Obama’s plan to revive growth, saying "we are truly going to rise or fall together."

 Is it really too much to suggest that the decisions to bail out AIG might be influenced by our dependence on the willingness or China to fund America's bailouts? And visa versa?
  Or to put it another way: We are bailing out AIG because of their connections to China, who we need to fund our domestic bailouts, in which we are throwing money at AIG, all of which is backstopped by the American taxpayer.

Originally posted to gjohnsit on Mon Feb 23, 2009 at 01:03 PM PST.

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  •  Tip Jar for the taxpayer (289+ / 0-)
    Recommended by:
    Kimberley, Ed in Montana, DeminNewJ, chrississippi, tgs1952, Odysseus, ogre, roonie, Hornito, irmaly, DebtorsPrison, Disillusioned, billlaurelMD, OLinda, ThirstyGator, Pompatus, freelunch, sobermom, object16, MarkInSanFran, concernedamerican, joynow, conchita, SecondComing, highacidity, Pithy Cherub, buckhorn okie, vmibran, taonow, ovals49, oceanview, thingamabob, Ohiocrat, fumie, ctsteve, worldwideellen, scorpiorising, oldjohnbrown, jlynne, DeadB0y, Eddie in ME, superscalar, Drew J Jones, White Buffalo, JimWilson, Sychotic1, Catte Nappe, snakelass, liberte, riverlover, alizard, barbwires, dkmich, walkshills, Bendra, seattledoglover, Matt Esler, econlibVA, tomjones, Clzwld, jcrit, mosesfreeman, kd texan, vacantlook, Daddy Bartholomew, bibble, Marc in KS, decitect, weelzup, luvmovies2000, rapala, Into The Woods, Bluesee, radarlady, 3goldens, NoMoreLies, greycat, Nadnerb in NC, unclejohn, SherwoodB, PBen, Simplify, DocGonzo, truong son traveler, eightlivesleft, stitchmd, Neevah, Dobber, reflectionsv37, majcmb1, GreyHawk, Fury, Hastur, AnotherMassachusettsLiberal, Sharon Jumper, Arctor, wbr, alisonc, zinger99, sodalis, Pluto, Flippant, ohcanada, debedb, Audio Guy, Jennifer Clare, L Boom, BachFan, vigilant meerkat, ej25, dharmafarmer, andydoubtless, Ellicatt, fromer, cliffradz, greenearth, Lefty Coaster, blueoasis, NBBooks, sravaka, tecampbell, global citizen, bubbanomics, agnostic, imabluemerkin, Data Pimp, JVolvo, NearlyNormal, joeshwingding, Preston S, el cid, Unitary Moonbat, doinaheckuvanutjob, middleagedhousewife, James Kroeger, txdemfem, profh, doingbusinessas, Clive all hat no horse Rodeo, Cassiodorus, Jbeaudill, jjellin, crystal eyes, kurious, PatriciaVa, NonnyO, Bobjack23, DBunn, bigchin, One Pissed Off Liberal, old wobbly, tourist305, xaxado, dotsright, willie horton, wa ma, dmh44, california keefer, ColoTim, terryhallinan, RandomGuyFromGermany, Outrider, Wino, terabytes, mommyof3, ilex, joyful, mystic, Unbozo, newpioneer, bnasley, gatorbot, Seneca Doane, manwithnoname, second gen, Heyroot, AznInCali, Newzie, Moderation, gchaucer2, Wreck Smurfy, madgranny, Terra Mystica, Empower Ink, Blue Boy Red State, Dem in the heart of Texas, rogerdaddy, mconvente, sunshineonthebay, wayoutinthestix, rontun, mamamedusa, golconda2, beltane, daddy4mak, Tam in CA, temptxan, Rachel Griffiths, Gemina13, pragprogress, luckylizard, Uncle Bob, msdrown, dont think, sydneyluv, DavidW, 4km, cameoanne, Bule Betawi, multilee, smellybeast, Mr Tentacle, Neon Vincent, An Affirming Flame, jaf49, fearisthemindkiller, viet vet, NYmind, babajimbob, Mercuriousss, prgsvmama26, batgirl71, obscuresportsquarterly, allep10, kevinpdx, deutschluz, notquitedelilah, XNeeOhCon, Losty, desnyder, Houston Gardener, Little Flower, acromagic, ravenlore, ludlow, Super Grover, Colorado Billy, Amber6541, dtruth, appletree, jbjowe, TNThorpe, notcaesar, HKPhooey, Jampacked, p gorden lippy, ArtSchmart, Areopagitica, LaughingPlanet, robertacker13, publicv, fidellio, eponymouse, stunzeed, chrome327, Crabby Abbey, Bmeis, Dingodude, tb mare, Grumpy Young Man, sharonsz, JRandomPoster, addisnana, Publius2008, washunate, roystah, USHomeopath, Anne was here, anaxiamander, derapsofphoenix, BrowniesAreGood, Maximilien Robespierre, PaDemTerry, allenjo, cranquette, Rachel Q, CaliKitty, wahine, muckrakers, island in alabama, princesspat, thethinveil, Go Kid Hugo, muddy boots, sjr1, Edgewater, Myfanwy, psilocynic aka Nick Zouroudis, randomfacts

    Let's all apply for bailouts together!

    "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

    by gjohnsit on Mon Feb 23, 2009 at 01:03:48 PM PST

  •  Is it just me, (4+ / 0-)

    or does this paragraph not make sense?  I'm having trouble with the second sentence here:

    As for all that money we've loaned AIG, we don't know exactly how it has been spent. The Federal Reserve has been refusing to block the release of that information.

    Clarification?

    To say my fate is not tied to your fate is like saying, "Your end of the boat is sinking."--Hugh Downs

    by Dar Nirron on Mon Feb 23, 2009 at 01:06:26 PM PST

  •  It's all amazing. And Corps(e). like AIG (22+ / 0-)

    and Treasury secretaries like Henry paulson, would initially have Americans believe there was solvency to these behemoth financial orgs. and as soon as they turned themselves around with some sort of strategy, we taxpayers would be paid back, I think with interst or something.

    What a crock.  More good paper after bad.

    Experience is a hard teacher because she gives the test first, the lesson afterwards

    by publicv on Mon Feb 23, 2009 at 01:07:45 PM PST

  •  Aloha, AIG (29+ / 0-)

    It was nice knowing you.

    Yes, I know there will be turmoil and pain when they go down.  But they're GOING to go down.  Let's not load their boat with more cash to take to the bottom.

    I am my brother's keeper, I am my sister's keeper. - President Barack Obama

    by ThirstyGator on Mon Feb 23, 2009 at 01:08:00 PM PST

  •  Bankruptcy or Bust! (7+ / 0-)

    And when I say "bust," I mean "bust into the personal bank accounts of AIG Big Macher Maurice Greenberg and the rest of his family of high-life goniffs, and clawback their ill-gotten gains."

  •  When I was a kid, playing card games (35+ / 0-)

    and board games, and I would get whiny about losing, my parents would say:

    If you are old enough to play, you are old enough to lose.

    Correlary for the big businesses:

    If you are too big to fail, you are too large to exist.

    To say my fate is not tied to your fate is like saying, "Your end of the boat is sinking."--Hugh Downs

    by Dar Nirron on Mon Feb 23, 2009 at 01:08:28 PM PST

  •  Your Bankrupt, Your Bankrupt, Your Bankrupt. (9+ / 0-)

    Well, according to the Koran, they should be bankrupt now.  Crisis solved.

    /snark

    Republicans - They Hate Us for Our Freedoms

    by mikeconwell on Mon Feb 23, 2009 at 01:08:54 PM PST

  •  I thought the government essentially owned (18+ / 0-)

    AIG. This sounds like vampires emerging from the grave to suck the blood of the living. I advise wearing wreathes made of garlic.

    The weak in courage is strong in cunning-William Blake

    by beltane on Mon Feb 23, 2009 at 01:10:00 PM PST

  •  Let them go. (13+ / 0-)

    fuck it.  I was for saving these companies but if aig can't get their act together and stop the bullshit then good riddence.  

    http://politicz.wordpress.com/

    by GlowNZ on Mon Feb 23, 2009 at 01:10:38 PM PST

  •  There's More at Work Here (66+ / 0-)

    ...than meets the eye.

    China is calling the shots on this one.

    AIG was founded in China in the 1900s, then kicked out. In the early 90s, AIG wanted back in to China and China wanted to join the WTO. Greenspan make something like 35 trips to China negotiating the deal. China wanted the customary 50 percent ownership of AIG as a foreign company, but they had to give up all ownership to get into the WTO. Now AIG is the only 100 foreign-owned company operating in China. And the largest.

    This is where it gets bad.

    Basically, the Chinese are savers, so AIG captured almost all of China's private money, setting up a pension fund for the Chinese in the late 90s. They're like the Social Security system. AIG also insures China's own banking investments. When AIG faltered last fall, it almost brought down the Hong Kong Exchange.

    We immediately got our marching orders from China on the AIG bailouts.

    You can figure out the rest...

    •  That's interesting (16+ / 0-)

      I didn't know that. And we need China to fund our huge bailouts. No wonder we are bending over backwards for an insurance company.

      "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

      by gjohnsit on Mon Feb 23, 2009 at 01:14:35 PM PST

      [ Parent ]

    •  For the first time a sensible explanation for AIG (18+ / 0-)

      Now I understand why we are going to do this.  And I completely understand why the Chinese are not going to allow us to destroy their pension system.

      I also now understand why the crooks knew they could get away with this.

      It is still fraud in my books and we need to send them to jail--moral hazard my ass.

      •  I've Decided to Stop Writing Economic (12+ / 0-)

        ...Diaries at Daily Kos. Please feel free to do it yourself. That's why I'm posting information in the comments, now.

        •  If you give me a few links (10+ / 0-)

          I would gladly add this to my diary and give you credit.

          "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

          by gjohnsit on Mon Feb 23, 2009 at 01:21:18 PM PST

          [ Parent ]

        •  Why would you do that? (1+ / 0-)
          Recommended by:
          Pluto
          •  Because I Know What's about to Happen (13+ / 0-)

            ...and the denial level is too high and the pain too bright. I'm going to get involved in the rescue phase, instead.

            Consider what happened over the weekend.

            Then, add to that this morning's news that the EU is going to issue Euro Bonds to compete with the Treasury in a reach for global Currency status.

            It's pretty easy to see where this is going...

            •  I sort of understand (2+ / 0-)
              Recommended by:
              Pluto, Terra Mystica

              I realize that a lot of people are not going to want to hear it, but there are people that are coming around to reality.

              "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

              by gjohnsit on Mon Feb 23, 2009 at 01:41:21 PM PST

              [ Parent ]

            •  I think I agree, but I'm not sure a gold backed (0+ / 0-)

              currency is that big of a deal.  

              "The military industrial complex not only controls our government, lock, stock and barrel, but they control our culture." - Mike Gravel

              by Wilberforce on Mon Feb 23, 2009 at 01:57:47 PM PST

              [ Parent ]

            •  Pluto (2+ / 0-)
              Recommended by:
              Pluto, la urracca

              wait. Is there enough gold (and silver) on the planet to make this viable over time?

              As far as AIG goes, the current Chinese average saving rate is what? Around 20 to 25%? That means if AIG goes down, China goes down and there will be no saviors anywhere, eh?

              The future belongs to those who give the next generation reason for hope.
              Teilhard de Chardin

              by exmearden on Mon Feb 23, 2009 at 02:21:52 PM PST

              [ Parent ]

              •  ex, the Chinese People go down. (4+ / 0-)
                Recommended by:
                exmearden, ilex, Terra Mystica, addisnana

                Not China.

                But that's not the point either. The point is, China won't lend us the money for the stimulus packgage. Nor buy treasuries.

                If they stop, we're dead.

                •  so... (8+ / 0-)

                  here's the dynamic I heard this morning on either Bloomberg or CNBC before going to work.

                  The ratio of male to female in China is around 120:100 - for every 100 women, there are approx. 100 men.

                  This population dynamic has driven increased savings in families so that their sons have a better chance of competing with accumulated family wealth for brides.

                  Those that can and have in China, save 20% to 25% of their income. US savings rate - what is it, now?  Theoretically under 3%.

                  If Chinese families are wiped out of their savings by the failure of companies they've invested in - be it AIG, or any number of internal Chinese companies, or foreign investments - I think that means China itself is threatened (as we know it and they know it).

                  The Chinese government is extremely closed-mouth about this because it actually doesn't know where much of that wealth may be invested. Conventional wisdom is that the savings has stayed in China, or has been invested in Chinese companies or holding companies like AIG that court Chinese money.

                  Anecdotally, I would lay bets that a lot of money has been funnelled to investments in Canada, Australia, and the US through family ties and beyond the bounds of Chinese government regulation.

                  When one brick fails in the bottom of the Wall, what happens to the entire structure? There may be a greater trust liability to a government that restricts the flow of knowledge to its citizens. When family structures in China discover their internal as well as external savings are gone, how will politics play out?

                  What happens when male young adults can't afford to marry? We've seen this dynamic before in other countries, for different reasons. Young adult males without the means to marry.

                  Interesting question. Koyaanisqatsi. Life out of balance.

                  The future belongs to those who give the next generation reason for hope.
                  Teilhard de Chardin

                  by exmearden on Mon Feb 23, 2009 at 03:28:17 PM PST

                  [ Parent ]

                  •  That's Exactly Right, But There's More (6+ / 0-)

                    What they are saving for is "old age" because of the one-child rule. Etc...

                    When we collapsed as an importer, China realized that they had to get their own people to spend instead of save.

                    So, they actually started their own Social Security System in just the last year -- to make it unnecessary for people to save so much. They want to trigger a consumer society.

                    AIG figures into this in a big way, because the people's savings are tied up in two ways -- assets and investments.

                  •  I'll go ahead and answer a bit of my (3+ / 0-)
                    Recommended by:
                    Pluto, ilex, Terra Mystica

                    own question.

                    What happens when male young adults can't afford to marry? We've seen this dynamic before in other countries, for different reasons. Young adult males without the means to marry.

                    A country must either beef up its army, or terrorism spirals out of control. A simplified perspective, admittedly, but I don't think an unreasonable one.  

                    In China's case, an army much larger than what they have now would be unsustainable without a real conflict, which they haven't theoretically had since the Korean War (wide-scale, resource intensive, I mean).

                    The future belongs to those who give the next generation reason for hope.
                    Teilhard de Chardin

                    by exmearden on Mon Feb 23, 2009 at 04:05:57 PM PST

                    [ Parent ]

                    •  A wealthy Vietnam vet (1+ / 0-)
                      Recommended by:
                      exmearden

                      that I knew said back in 2000 that the Chinese would have a war due to their oversupply of men to women.

                      •  it's an anecdotal historical correlation (1+ / 0-)
                        Recommended by:
                        ilex

                        that societies with a significantly larger ratio of young men to young women may tend towards militaristic solutions as shadow government policy over time.

                        two factors play into this:

                        • a government must control the populace such that auxiliary and regional types of militia do not become dominant as a societal diversion for bored and disenfranchised youth. When this happens, there is a real danger that such groups grow stronger, with members who are more loyal to the localized group, than the organized and government sanctioned military. This situation seems to be occurring to a certain extent in China. It's certainly happened in Pakistan and other Middle East countries where the imbalance between genders also exists.
                        • resources, resources, resources. With a deficit of natural resources within a country, an oversupply of males makes it easier at the policy level to justify acquisitions and aggression towards the natural resources of other nations. A country uses its bounty to fulfill its perceived needs.

                        There may be some studies going on (Emily Oster at the U of Chicago for one) that underline and justify this theory (or not), but there is very little established research beyond historical reports.

                        I think Pliny the Elder referred to this phenomena as well, but I haven't found the statement. I seem to recall he was the first one who wrote about it in the first century, AD.

                        The future belongs to those who give the next generation reason for hope.
                        Teilhard de Chardin

                        by exmearden on Mon Feb 23, 2009 at 11:19:38 PM PST

                        [ Parent ]

              •  Wait, Sorry I Didn't Read that Right... (4+ / 0-)

                You are entirely correct. China is the only nation (outside of Japan) with enough money to bail us out.

                In addition, they just announced (in the way they do, through newspapers) that they want collateral from now on for their Treasury purchases, which means...?

                •  it means they (4+ / 0-)

                  know they are f**k'd too.  See my prior comment to your comment (Koyaanisqatsi).

                  I referred to one fallout element of this, but I suspect that we are seriously wrong in thinking China is in a position to help.

                  They've held tightly to tradition, Communist and otherwise (foreign relations patterns, etc), because a few in their government understand how seriously out of control they actually are.

                  The growth rate in China has been seriously overplayed. We see it through Western-tinted eyeglasses, but the opacity that they promote makes us think of them as our push-me-pull-yous - that they can both save us and destroy us.

                  We may all be attached to the same hanging belay.

                  The future belongs to those who give the next generation reason for hope.
                  Teilhard de Chardin

                  by exmearden on Mon Feb 23, 2009 at 03:37:39 PM PST

                  [ Parent ]

                  •  Hmmm. (4+ / 0-)
                    Recommended by:
                    conchita, exmearden, ilex, Terra Mystica

                    You just jumped to a higher perspective. I'm going to have to think about this for a bit.

                    Thanks.

                  •  Okay, I've Thought about It (1+ / 0-)
                    Recommended by:
                    exmearden

                    But I don't think I've ever mentally extended the relationship between China and the US so far and into such abstract realms. I fear you've tripped me up, here, but I feel you are right. I refer to your last sentence.

                    All I can say is that when I first began researching this, I discovered differences that would make us invisible to each other. For example, they use the right hemisphere of their brain to decode when reading; we use the left. Also, on a more metaphysical level, as a national/cultural consciousness, we are active as they dream; and vise versa. There are many more, including infant reflexes and the like.

                    •  you might perceive (0+ / 0-)

                      that my perspective is more from the political science/history angle. I'm no economist. That said, the impact of economic philosophies always, always informs the politics. Cart, horse? Horse, cart?

                      You are completely right about differences

                      The age-old idea of "face" plays into this very much. I have to cite another snippet on Bloomberg tonight. Someone (I was paying only half a mind) was interviewed on the subject of the "most hated man in Switzerland" - Marcel Ospel (UBS AG).

                      The term "Americanization" was thrown out as the infection that was allowed to take hold in the Swiss financial world. How disgusted the Swiss people are with bankers and how they've reduced the pride of an entire nation by violating the circumspect and conservative financial precepts that Swiss banking has operated on forever. On the barstools in Zurich, no one admits any longer to being a banker.

                      Extend that to the situation China now finds itself in after opening (read: making vulnerable) much of the Chinese economy to the US, and global, financial morass. Consider how such a culture will react over time as they perceive themselves losing more and more "face" over dealings in the global financials.

                      We'll have a hard time discerning the depth of our own loss of "face" and acting on appropriate strategy. I'd love to be a fly in the wall during Obama team discussions of the way forward concerning China.

                      The future belongs to those who give the next generation reason for hope.
                      Teilhard de Chardin

                      by exmearden on Tue Feb 24, 2009 at 02:31:01 AM PST

                      [ Parent ]

            •  BINGO!!!!! n/t (0+ / 0-)

              "History is a tragedy, not a melodrama." - I.F.Stone

              by bigchin on Mon Feb 23, 2009 at 03:03:24 PM PST

              [ Parent ]

            •  Absolutely. This is just the beginning of the (3+ / 0-)
              Recommended by:
              justmy2, VoteAqui, island in alabama

              competition in bond sales and escalation in interest rates.  The whole world is in net fiscal deficit.  I believe that is unprecedented.

              The big winners will be those, like China, that have been frugal and operated in surplus, trade and fiscal, or energy (incl. renewable)/resource producers (maybe), or strong manufacturing (value-producing) economies.  The losers, well, the countries that bought into the globalization mythology/manipulation without getting any benes.  Like us.

              The question, to me anyway, is what will a winner and/or a loser look like after this is all over in a decade or so.  What will be the new circumstance?  Will we be able to will ourselves back into a strong position in the global economy, or will we struggle to maintain a standard of living that is subordinated to the interests of others?

              I think you're right to concentrate on the transition.

              "Peace be the journey. Cool Runnings!"

              by Terra Mystica on Mon Feb 23, 2009 at 04:35:10 PM PST

              [ Parent ]

      •  That's what I was thinking too (3+ / 0-)

        A little background like this would put things into perspective.

        "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

        by gjohnsit on Mon Feb 23, 2009 at 01:19:48 PM PST

        [ Parent ]

    •  I will repeat for the 100th time here (8+ / 0-)

      Most do not get the interconnected relationship between institutions and these companies, people here who scream let them go bankrupt without knowing what that would entail are silly.

      •  AIG will never survive. Why keep throwing money (3+ / 0-)
        Recommended by:
        gjohnsit, Sychotic1, driftwood

        down this pit?

        RebelCapitalist - Financial Information for the Rest of Us.

        by dennisk on Mon Feb 23, 2009 at 01:18:59 PM PST

        [ Parent ]

        •  because we need them to turn around (6+ / 0-)

          If they don't survive, there is a great chance certain other companies tied in with them don't survive, causing certain dominoes to fall...this isn't about this comapny, it's about entire economies...Here it gets treated like alarmism, do you really think any real economist would even contemplate helping these guys out if this weren't the case?? people who know are aware of exactly what could happen here, hence us being held hostage...Do i like this, no. do i think people should be punished, YES!!! does that change the facts of what could and will happen, not a chance.

          •  The Fed could go bankrupt trying (7+ / 0-)

            I suppose the Fed could print trillions and pass that currency out to cover the credit default swap money pit.

            "It's the planet, stupid."

            by FishOutofWater on Mon Feb 23, 2009 at 01:25:23 PM PST

            [ Parent ]

          •  While I agree with you, (13+ / 0-)

            I'm not sure throwing more money at this problem is going to stop what might be inevitable.

            If we keep throwing money at this (and every other) problem, we're going to wind up just printing money, and that's going to have it's own potentially very dire consequences.

            This "wealth" has all been illusory, it's all been a giant ponzi scheme, all around the globe. Sooner or later we're going to have to hit that giant "reboot" button.

            Diversity may be the hardest thing for a society to live with, and perhaps the most dangerous thing for a society to be without - WSCoffin

            by stitchmd on Mon Feb 23, 2009 at 01:26:14 PM PST

            [ Parent ]

          •  Ummm (5+ / 0-)

            Here it gets treated like alarmism, do you really think any real economist would even contemplate helping these guys out if this weren't the case??

            Yeah, I do, if the economists had an ideological obsession with the idea that what's good for megabusiness is good for everyone. Or if they have a personal interest in whatever corporations receiving more money.

            I think the reason we treat it as alarmism is that we can't particularly see that this domino, as you put it, is really connected to that one - after all, if you cut down a tree, sometimes it falls sideways and knocks down other trees, but sometimes it just falls in between the others. Sometimes if you knock down a building it might fall over and spread debris and destruction all around, but sometimes it might just fall into its own footprint.

            Show us the connections that make the threat real, and we'll stop treating them as alarmism.

            Ask not any question of the Eldar; for they will give you three answers, all of which are true, and all terrifying to know.

            by Shaviv on Mon Feb 23, 2009 at 02:17:05 PM PST

            [ Parent ]

            •  That's tough. (1+ / 0-)
              Recommended by:
              pstoller78

              This is like any big system or organism.  Your tree-fall is a good analogy.  This might just take out a bit of brush, it might start a fall of a series of trees, or it might knock into a stove sitting nearby and start a forest fire.

              I'm not sure anyone knows what will happen if / when AIG falls.  But given that the insurance and benefits industry is pretty competitive and they see companies merge and die all the time, the fact that everyone in it seems to be in complete agreement that AIG must be saved gives me pause.  They don't normally try and help each other so there must be some concern that if AIG goes, the industry itself could be wiped out.

              the third eye does not weep. it knows. Political compass: -9.75 / -8.72

              by mijita on Mon Feb 23, 2009 at 02:46:02 PM PST

              [ Parent ]

          •  I'm not so sure that using this much public money (0+ / 0-)

            to prop up dinosaurs is a good use of public money. That public money might have a better use somewhere else.

          •  due to the default swaps, their liabilities (1+ / 0-)
            Recommended by:
            stitchmd

            are too massive for any kind of bail-out.  The U.S. must step in and rescind the default swaps at the heart of this disaster or we will all sink.

            •  Has rescission of the cds's been mentioned (0+ / 0-)

              By anyone in either party?  Is another alternative to tax the profits at 95%? Is it right that for every loser in a cds transaction there is a winner?  Who are the winners anyway?   Sorry for all the questions.

      •  Should we pay trillions to cover the CDSs? (5+ / 0-)

        How much should the government pour into this zombie company to keep it going?

        "It's the planet, stupid."

        by FishOutofWater on Mon Feb 23, 2009 at 01:23:32 PM PST

        [ Parent ]

        •  That's an entirely different question (0+ / 0-)

          but worth exploring, exactly when/if the government decides to get to the bottom of these instruments will be a tell tale sign of shoring up the entire industry...

          •  not worth exploring -- but it is worth (0+ / 0-)

            exploring what legal avenues can be pursued to have these CDS contracts thrown out and rescinded.  Any court that attempts to stick the U.S. Treasury with this liability should be paved.

      •  I'm willing to take the hit. (0+ / 0-)

        Let the mega banks fail, restore depositors, and watch smaller, regional banks flourish! NO BAD BANK! (for the love of God, Barack, it's not that hard!)

        by Paul Goodman on Mon Feb 23, 2009 at 01:25:08 PM PST

        [ Parent ]

        •  Um... (13+ / 0-)

          ...that's a $600 trillion hit.

          That's bigger than... um... well, there's nothing in this solar system to compare it to.

          •  some people like Russian Roullette???n/t (2+ / 0-)
            Recommended by:
            bigchin, UtopianPablo
          •  It's so big it's worthless. (5+ / 0-)
            Recommended by:
            joynow, JuliaAnn, Pluto, ilex, VoteAqui

            The whole thing is fake.
            $600T is an artificial construct.

            Money is whatever people value. It is a symbol.

            Paper money is worthless without trust.

            Digital money is worthless without trust.

            Money can be anything we deem of value.

            Food would be a good start.

            It's coming, like it or not.

            Oh, and BTW, thanks for making this doomer shit his pants.

            Really fuckin' appreciate it.

            Democracy - 1 person 1 vote. Free Markets - More dollars more power.

            by k9disc on Mon Feb 23, 2009 at 05:26:47 PM PST

            [ Parent ]

            •  Oh Comon... (4+ / 0-)
              Recommended by:
              JuliaAnn, k9disc, ilex, VoteAqui

              You know what will probably happen, don't you?

              We're going to have to reset the global economy and forgive the entire world's debts. We all owe each other a bazillion dollars. It's silly.

              There's talk on the table about this right now.

              The object of the game is to hold out as long as you can. It's like the foreclosure thing -- or ants crossing a stream. The ones that come first are sacrificed and build a foundation for the survivors.

              Make sure you are one of them.

              •  I have thought about that for some time. (1+ / 0-)
                Recommended by:
                Pluto

                But it seemed to be lunacy, surely was treated as lunacy.

                But can that happen?

                Can the powerful throw the market into flux like that?

                You know as well as I do that power investing and power business is all about the sure thing - about ensuring a particular end result, one that pads your pocket.

                Who is going to do this? Who is going to make it happen?

                I've said for a long time that the whole key was to break it now while the masters of the universe hold the powers of production, the information system, the military, government - lose money gain marketshare.

                That's why so many smart people did (and are doing) so many stupid things.

                The alternative is to spend 30 years losing marketshare and to go into the poor house and become pariahs of history.

                And lo and behold blammo! Here it is.

                The thing is, Pluto, I don't think they're going to go tabula rasa (sp).

                I think they're setting us up to be a debtor nation.

                I think it's about slavery.

                Power corrupts and absolute power corrupts absolutely.

                How are they going to be made to give that up?

                Democracy - 1 person 1 vote. Free Markets - More dollars more power.

                by k9disc on Mon Feb 23, 2009 at 07:21:06 PM PST

                [ Parent ]

                •  Are you Talking about TPTB? (1+ / 0-)
                  Recommended by:
                  k9disc

                  Is that what you mean when you say "they?" Because if so, that would change my response.

                  •  Pretty much (1+ / 0-)
                    Recommended by:
                    Pluto

                    masters of the universe, the powers that be, the Establishment...

                    you know, 'they'.
                    ;-)

                    Democracy - 1 person 1 vote. Free Markets - More dollars more power.

                    by k9disc on Mon Feb 23, 2009 at 09:10:28 PM PST

                    [ Parent ]

                    •  The Masters You are Referring to (1+ / 0-)
                      Recommended by:
                      k9disc

                      ...are a handful of corporations and agencies engaged in the capture and explotation of the planet's natural resources and commodities at the global level.

                      Thus, as you say, you are at risk to slavery at any time.

                      There is only one thing that can break their hold. A disruptive technology. That would be something like cold fusion, anti-matter, and the like. A great equalizer.

                      In the event this doesn't occur in your lifetime, you can still be outside their grasp. All you have to do is detach yourself from any nation's economy and become a sovereign individual. Do what they do. Invest in portable wealth that you can spend anywhere. Or, don't invest in the nation that you live in. That's how they trap slaves.

                      •  Funny you mention this: (1+ / 0-)
                        Recommended by:
                        Pluto

                        Or, don't invest in the nation that you live in.

                        I've noticed that there is a great connection between the corporation and the state, and if you are divorced from either you can be much more free.

                        Get connected with both and you get sucked into their game and become trapped.

                        I've existed outside of the corporate system for about a decade now.

                        Of course it's often a tougher go of things without those creature comforts they provide...

                        I also find your explanation of a 'disruptive' technology to be fascinating.

                        I was thinking you were going to say ,"like the internet..." but you threw me a curveball in
                        'cold fusion, anti-matter and the like' - a curveball that I should have seen coming and have seen coming all over.

                        The good ideas, the game changers are always dangerous - they must be mothballed.

                        Anything that doesn't require dependence and that does not produce a persistent profit stream or captive markets.

                        "You can't Monty Burns the Sun!"

                        You also might have convinced me to get smart about investing in 'portable wealth'.

                        Great show, Pluto!

                        Democracy - 1 person 1 vote. Free Markets - More dollars more power.

                        by k9disc on Mon Feb 23, 2009 at 11:06:08 PM PST

                        [ Parent ]

                      •  Could you define portable wealth? nt (1+ / 0-)
                        Recommended by:
                        Pluto

                        Democracy - 1 person 1 vote. Free Markets - More dollars more power.

                        by k9disc on Mon Feb 23, 2009 at 11:07:42 PM PST

                        [ Parent ]

                        •  Well, There Are All Kinds (0+ / 0-)

                          For my ancestors, it was diamonds. I generally like to trade currencies. Commodities work the way currencies do, as far as trading goes. Oil is going to be big, but not yet. These markets are global, not national. National economies don't matter. The value moves around, however, and some of these get unbalanced. Probably the biggest upside right now is in silver. Gold is probably a sure thing for the next year or so. I discussed some gold options on this thread, toward the bottom. You can pretty much trade laterally between them, so you never have to go back to dollars, except for spending money. You just follow the value. A bit of all of these is a good hedge because they will be volatile while economies shrink, but they correlate to one another in pretty reliable ways. There's a difference between trading and holding. Trading is for making money. Holding can be riskier. But for some things, you can do both.

                          •  So funny... (1+ / 0-)
                            Recommended by:
                            Pluto

                            We have about 10 lbs of silver sitting outside our house right now in the snow - an old sculpture my GF made.

                            We were just talking about cashing it in this evening.

                            I appreciate the info.

                            peace...

                            Democracy - 1 person 1 vote. Free Markets - More dollars more power.

                            by k9disc on Mon Feb 23, 2009 at 11:49:52 PM PST

                            [ Parent ]

    •  this deserves a diary of its own (4+ / 0-)
      Recommended by:
      soros, ilex, chrome327, UtopianPablo

      ---
      Fight the stupid! Boycott BREAKING diaries!

      by VelvetElvis on Mon Feb 23, 2009 at 01:28:18 PM PST

      [ Parent ]

    •  You don't understand the Chinese side (7+ / 0-)

      First, while it is acknowledged that AIG came from the go-go capitalist days along the Bund in Shanghai, the capital requirement you mentioned only applies to the domestic Chinese subsidiary of AIG, and not to the parent company in the US.  China had no authority, or intent, to attempt such a move, as it violates international treaty.  The requirement is also a capital retension policy, that would have required AIG China to invest 60% of the subsidiary's profits back into the domestic economy.  So, this assertion is false: Chinese demands 100% ownership of AIG Global.

      Further, the massive majority of Chinese do NOT get pensions and most, make little more than most of us make in a month.  The lion's share of that "savings" being addressed is the pension money for Chinese retirees (which outside of the People's Liberation Army, there is a fairly contained community of people involved who qualify for pensions, and most are former government employees).

      Historically, this was written off against the books of the major Chinese banks, by each artifically carrying more than 1MM employees on it's books.  In essense, the banks were underwriting the army's pensions (via the "creative" accounting method of counting, and paying, them as employees).  It was part of a wider economic problem within China known as the "iron ricebowl".

      If this theory holds water, then what is being underwritten here, using AIG to bypass the international treaties, is the diversion of US tax dollars to underwrite the People's Liberation Army (and other retired government employees, given the funds for their pensions are coming through AIG, and not from their own government).

      Every international treaty has a mandatory term that NO government agency may directly invest in, or even be involved with, the domestic interests of another country.  Even direct aid money cannot be passed directly from government to enterprise.  (Hence, in the States, most of our aid goes through USAID, the World Bank, the IMF and the regional reconstruction banks).

      So if this thoery holds, what is being identified is our government funding directly (through AIG as a shill) the sovereign interests of China. This is not some free market psycho-babble of international markets doing what they do best.  This is a major international treaty violation, and the absolute wrong statement to be making before the global community.

      The assertion that WE must continue this path is wrong, as we will only continue down an irreversible and reckless path of lawlessness, under the untested prospect, that if we don't pay the extortion, China will refuse to buy treasuries.  Frankly, even given how abusive the Bush Adminsitration was, I do NOT buy this scenario, even given, the Bush family are the largest foreign owners inside China, and have been since the days of Daddy Bush being the Chief of the U.S. Liaison Office to the People's Republic of China.

      The secondary assertion made, China will say NO to treasuries, is also false, as our economy and theirs are directly tied together (through our consumption), and that alone, is sufficient motivation for the Chinese to contiune buying, else their economy will continue to shrink in lock step with our own (and everybody elses).  It is now fairly clear, the short to medium timeframe, requires the US economy to become functional for all other economies in the world to follow suit.

      Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

      by rolling thunder on Mon Feb 23, 2009 at 02:55:38 PM PST

      [ Parent ]

      •  Very Interesting Response (4+ / 0-)

        Yes, you are correct. International treaties forbid this, more or less. The Geneva treaty forbids torture.

        In your first paragraph, you write:

        So, this assertion is false: Chinese demands 100% ownership of AIG Global.

        That certainly did not come from me. I doubt that China is interested in owning a rapidly depreciating asset.

        In your final paragraph, you write:

        The secondary assertion made, China will say NO to treasuries, is also false, as our economy and theirs are directly tied together (through our consumption), and that alone, is sufficient motivation for the Chinese to contiune buying, else their economy will continue to shrink in lock step with our own (and everybody elses).  

        And, to this, I say, you are the one who doesn't understand China.

        Unfortunately, I do. I've spent a lifetime doing so.

        •  I built the central bank, lol (1+ / 0-)
          Recommended by:
          conchita

          Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

          by rolling thunder on Mon Feb 23, 2009 at 04:13:20 PM PST

          [ Parent ]

          •  Well! No Wonder.... (1+ / 0-)
            Recommended by:
            conchita
            •   We did it in exchange for (3+ / 0-)
              Recommended by:
              gjohnsit, Pluto, randomfacts

              the PLA backing off from attacking Taiwan, which was on the brink of happening when we went in.  So, frankly, I'm not real fond of your tone.

              Y'all talk a good game about international diplomacy, but some us put up a hell of alot more than just "talk" in order to stop regional military action, which easily could have escalted at the time.

              And if you try to go there (accusing me of creating the current situation), you will demonstrate further you have no clue what is happening now.  

              Proper controls and monitoring were built into everything.  I accept no responsibility because people here got lazy and stopped paying attention (because they were getting rich off of the trade side).

              I certainly didn't profit from it.  It nearly cost me my life on multiple occasions and did ruin my health permanently.

              Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

              by rolling thunder on Mon Feb 23, 2009 at 04:49:54 PM PST

              [ Parent ]

              •  I'm Sorry I Could Reply Earlier (1+ / 0-)
                Recommended by:
                rolling thunder

                I had to go to Escrow and take a six figure loss.

                I've read your comment several times. And, believe me, I could go there.

                But, I also know what you've been through. Take care of yourself.

                •  Oh, and One More Thing (2+ / 0-)
                  Recommended by:
                  JuliaAnn, rolling thunder

                  You're just going to have to overlook my tone.

                  As another Kossack told me, I have a lot of "starch."

                  And, it's true.

                •  I'm sorry about your escrow news... (2+ / 0-)
                  Recommended by:
                  Pluto, ilex

                  Thanks for your concern, I appreciate that.

                  Maybe later we can argue this properly.  I'm not a Chinese ally, by the way, I always believed this was headed toward hard conflict.  Modernization was a 'kick the can down the road' strategy to avert near term military conflict.  Unfortunately (wow, can't believe I said that), when you put an American engineer in front of a problem, and tell him to go, he will ALWAYS succeed, if not impeded by politics.

                  I met many of the people from the Tiananmen Square protest and was asked to bring their written story out to the western press (they showed me the wounds, mostly gunshots in the back).  I was almost arrested for the contact, but did memorize the details.  I had secret police on top of me for almost the entire time I was there (rooms bugged and wired for video).  If you were there, you may recall a colonel in the secret police who always introduced himself as "Just call me Joe".  He was my [cough] "friend" for over a year.  He was re-assigned to some of the Boeing guys working on air traffic control after he left me.  After that, he was on some of the rocket engineers from upstate NY.  Lost track of him after that.  (we used to trade stories at the Tokyo Red Carpet on the way out, lol)

                  I did manage to take the I Ching back successfully prior to Falun Gong emerging on the scene, though.  Climbed lots of large mountains up to the old Buddhist monasteries, too.  Spoke with lots of the old monks.  Whole communities exist high in the mountains, founded on Buddhist beliefs, and are interconnected on some of the most dangerous trails I've ever walked on  (as in 12 inches wide, foot traffic in both directions, close to a sheer drop).  At the time, though, they wouldn't let me go to Shaolin (always regretted that).

                  To say it was intense, would be an understatement.

                  Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

                  by rolling thunder on Mon Feb 23, 2009 at 06:51:35 PM PST

                  [ Parent ]

                  •  Mine had a different name. (1+ / 0-)
                    Recommended by:
                    rolling thunder

                    If you were there, you may recall a colonel in the secret police who always introduced himself as "Just call me Joe".

                    I was furious over the book issue. So much was destroyed during Mao, certainly all the texts I was looking for. The academics had been "re-educated." Taiwan was the only source. They had rescued so much art, but not nearly everything.

                    Frankly, I am surprised you had such encounters with the Tienanmen folks. They are invisible even now, at least the last I've heard. I am so well trained, it never occurred to me to ask the many people here who live there. But I still wouldn't do that over the Internet. I understand there were problems during the Olympics...

                    Once again, your experiences are far more extensive than mine. I have nothing to argue about. I am a fundamentalist where banking matters are concerned. You are a designer of intricate systems. I just subtract the debt from the assets and if I get a negative number, then I follow the dollar and look at fiscal strategies. Very often, I find revenue "leaks" (such as the TARP/AIG issue). More common is what you call "kick the can down the road." And, tragically, as is the case in the US, I discover there is no more road.

                    As for China's fundamentals, I see them as extremely strong and sound. Not only because of their wealth, but because of their control over every single cent. They can revalue the Yuan and grow or shrink the size of their Treasury exposure at will. When we devalue the Dollar at 4:1 or even 10:1, they are flexible enough to roll.

                    Money as a martial art. They have that. They are not the ones who are going down. If you look at the whole thing, they played it perfectly. Sun Tzu all the way.

                    •  I asked the monks about the transcripts... (0+ / 0-)

                      they saved a few of them by fleeing up into the mountains, but, unfortunately, most were burnt in the old temples.

                      3000 years of history, poetry, and philosophy lost in the heat of revolution.  Simply outrageous.

                      Most of the western translations have serious holes in them, preventing us from fully understanding.  That's what I was looking for up there at high altitude.  The monks were very receptive, even pleased, that I asked about the old writings.  They called me the "monk from the west", I was honored, but not worthy of their designation.

                      The Taiwan translation of the Art of War is much better than any of the other manuscripts floating around.  I still have the electronic version on my computer.

                      Ah, the folks from the incident, you know I cannot say much about them.  Many did get through though.

                      On Chinese money management, I agree to a point (there is a weakness though).  When we studied their existing methods, if a bank clearing was off by one penny, they sent runners back to the involved banks and resolved it (even if it took all day).  Incredible to watch (the sound of thousands of abaci beads clacking together, approaching the speed of a small computer...).

                      And your right about the meticulous and studied nature of the way they approached this.  They started in 1979, in a field outside of Hong Kong (Shenzhen), and built it into a city, then a Special Economic Zone (SEZ), then a metropolis, before spreading economic reform throughout the country.  Pudong New Area, too.  Same thing.  Studied, controlled, methodical, then:  all out assault.

                      To underestimate this, is to lose before beginning (Sun Tzu style).

                      Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

                      by rolling thunder on Mon Feb 23, 2009 at 08:35:11 PM PST

                      [ Parent ]

            •  What has always fascinated me about this is: (3+ / 0-)
              Recommended by:
              Sychotic1, Pluto, ilex

              We helped turn one of the most technically backward countries in the world into a powerhouse, using modern infrastructure development, financial reforms based on US law and regulations (pre-Gramm), and modern accounting practises.  At the time (circa 1991), China was rated 104th worldwide by the ITU for telecommunications.  Now, they have an incredible fiber backbone network which continues to spread.

              What we started with has no analog in the US (maybe circa 1930).  But I do remember using examples from the Pony Express as an inter-city carrier in many early meetings (seriously).  There was no inter-city highway system.  Almost no air freight.  Limited rail freight (most was single track).  A fairly decent water freight network.  On average, each telephone line was shared by over 100 people.  Meanwhile, each person here had access to over 2 lines.

              While at the same time, folks here allowed the infrastrucuture to decay, abandoned proper practice and regulation, hacked the laws in bias toward corporations, absolutely brutualized professional accounting, and left the country in a smouldering ruins.

              And not once.  Did anybody ever ask us to start doing it here.  In fact, most of us that threw down for real, have basically been told to just fuck off and die.  We've been called traitors, spies, commies, and just about every vulgar thing you can name.

              So whatever you call me now has zero probability of affecting me, lol.

              But you have a nice day, ok

              Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

              by rolling thunder on Mon Feb 23, 2009 at 05:36:59 PM PST

              [ Parent ]

              •  China's rapid response to unemployment (0+ / 0-)

                I heard from a Chinese businesswoman from Shanghai last week that the Chinese workers from the countryside who returned to the cities after Chinese New Year to find that they had no jobs because something like 600,000 small factories had closed - these workers went back again to the countryside where . . . they will now have jobs because in the space of a week or so the Chinese government has decided to launch massive new infrastructure projects in the countryside, re-employing all these workers.

                And what have we done for our unemployed?

                •  What you say is true, however... (0+ / 0-)

                  they won't be able to compensate them at a level they were making in Guangdong Province, doing light manufacturing for export to the world.

                  They have their own trouble now; people got a taste for the life, and are now dealing with losing it (in spite of the rapid response).  Economic expectations are real factors no matter where somebody lives.

                  I think it was the BBC (have to check on it, but I saw it) who ran a series of interviews during Spring Festival, and talked not only with the kids, but also their parents and grandparents.  The old folk stated the kids would never be happy on the farm now, as they couldn't make the money in a year, that they were making in the cities in a week.

                  But you're right, the Chinese government (as most socialist governments do) sees full employment as critical component of their responsibility.

                  Idle minds, idle hands, lead to revolution...

                  Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

                  by rolling thunder on Mon Feb 23, 2009 at 07:50:31 PM PST

                  [ Parent ]

          •  Well, at least the electronic modernization of it (3+ / 0-)
            Recommended by:
            Pluto, ilex, pstoller78
            - lived there for about 8 years (3/4 of the year, anyway)

            - first private US citizen back in after Tiananmen Square incident (though 5 US Citizens stayed.  Frank from Frank's Place, Miles Davis' nephew, and 3 nurses working on sterilization procedures).  Which were you?  I knew Frank and Miles' nephew.  Could never find the nurses...

            - fought inside the government for western reforms in their banking and accounting systems.

            -  interfaced with international central banks from Japan, Switzerland, England, Germany, Hong Kong, and the US in order to get approval for everything I did.

            - drafted many of the underlying laws on electronic instruments and payments.

            - designed the electronic infrastructure for their high and low value payment systems.

            -  had access and studied their entire demographic data back to 1955 (though I had spotty access tyo data going back to 1949).

            -  interfaced with all major divisons of the government (including Treasury, the central bank, State Planning Commssion, Ministry of Railroads, etc.)

            - pushed for widescale telecommunications infrastructure improvements to allow nationalwide high speed networking.  Worked this from the rice paddies in Sichuan Province to Shanghai and the government halls in Beijing.

            -  was there when the country was converted over from barely getting by to the powerhouse it became (based on the reforms pushed through by many others from here in exchange for demilitarizing the Taiwan Straits)

            So I guess you're right.  I don't anything about the Chinese.  And I probably shouldn't have said anything here (given I can now be IDed, lol).

            Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

            by rolling thunder on Mon Feb 23, 2009 at 04:33:11 PM PST

            [ Parent ]

            •  You Have a Fascinating Perspective (4+ / 0-)
              Recommended by:
              mijita, JuliaAnn, rolling thunder, ilex

              To tell you the truth, I've never heard any of this from a Taiwan perspective. I mean, you may be American, for all I know, but I sense the Taiwan angle. I have some familiarity with that.

              You have a wealth of knowledge and experience and I hope you Diary about this. I think we both know that we need to understand the Chinese mind here in the US, because... well... we're going to be having a lot of up close and personal interactions pretty soon.

              We share some experiences, actually. I'm not going to get into it here, but just so you know, I'm coming at this from the Sun Tzu perspective. It has never failed to be a completely accurate predictor of Chinese economic behavior -- except for one strange phenomenon -- the recent actions of the Chinese Central Bank and particularly their investment arm.

              Take that as you wish. Thank you for your candor and for explaining so much. Again, I would really hope to see this in a Diary and would like to hear more from you on topics such as this.

              •  I'm more oriented toward the I Ching (1+ / 0-)
                Recommended by:
                Pluto

                But I have respect for Sun Tzu, as there is much overlap.  I like the writings of the Taoists, too.  I started studying the I Ching in 1970, and given 10 or 20 more years I just might start to understand it.

                The People's Bank is a very complex organization.  You will understand why I'm somewhat guarded about what I say in public.

                I agree completely about our need to understand the Chinese mind.  When I was younger and struggling there, alone in a cold hotel room, typing my designs wearing fingerless cloth gloves, somebody once told me over a cup of green tea, that the Chinese ARE sweet and sour.  That you could simultaneously see the most incredibly charming thing, but if you look nearby, you could also witness horror of an unfathiomable depth.

                I saw this many times over.  

                Even the Tiananmen Square incident itself, was a sweet and sour event for Dung.  Most here have pillored him for the violence, but never understood, that the city was surrounded by cadres of PLA regulars (backing Li Peng), ready to level Beijing if he didn't do it.  Sweet and Sour.  He went for liberty, but had to kill his own, to save his city.  We in the west typically cannot comprehend it, or the scale of destruction the hardliners were prepared to inflict.

                I would be happy to discuss this with you, especially now, based on what I've said this evening, I no longer have the cover of being just rolling thunder, lol.

                Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

                by rolling thunder on Mon Feb 23, 2009 at 07:29:27 PM PST

                [ Parent ]

                •  Heh (1+ / 0-)
                  Recommended by:
                  rolling thunder

                  Which hexagram is Rolling Thunder? Or is it the 65th ;-)

                  •  The Palace of Zhen is filled with thunder! (2+ / 0-)
                    Recommended by:
                    conchita, Pluto

                    (not from Wilhelm, but from the original translations where the book is named Yijing, and the houses are defined by family relationship)

                    House of the First Son (6,7 in list by transform)
                    51, 16, 40, 32, 46, 48, 28, 17

                    Thunder over Thunder (51).  Growth on top of Growth. Just love the thunder, always have.  Anything strong enough to wake the earth from winter (it approaches soon, the time of thunder.  We're still under the mountain now, though.  Soon though, I already feel it coming.  Wild onions are coming up, too.)

                    Have a good one Pluto!

                    Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

                    by rolling thunder on Mon Feb 23, 2009 at 09:42:28 PM PST

                    [ Parent ]

      •  If the problem is China, then the U.S. should (0+ / 0-)

        negotiate a settlement directly with China instead of honoring these CDS instruments.  The notional exposures on all of the swaps is simply unaffordable and we will therefore need to rescind and unwind these infernal documents.  Also, China must bear some responsibility for entrusting its pension obligations to a private entity like AIG.

        •  The problem is not China... (0+ / 0-)

          First, what we need to do is figure a coherent policy for dealing with AIG (separate from the swaps).  If Pluto is right, he has uncovered the fact that Greenspan re-negotiated the Chinese treaty without authority, or the involvement of Congress (which does have the authority to amend treaties).  This would be stunning, as it would signal to everybody in the world, that our treaties aren't worth the paper they are written on.  I hope he's wrong (but given the parties involved, who knows for sure anymore).

          Second, until all financial parties submit to an independent audit, there is really no way to figure out what is a proper solution to the swap problem.  We are being held hostage by people who went renegade and "manufactured" more money than has been released by the US government into the system.  

          That's the heart of the problem, and nobody wants to admit it (the "free market" turfed the US Treasury for control of the money supply).  Until we do, I think we will continue to twist in the wind.  But when commercial liabilities greatly exceed money supply (and greatly exceeds the combined GDP of the EU and the US), something is horribly amiss, and there will be no easy, painless solution.

          I truly wish the economy had a reset button.

          We just have to keep digging and pressuring (and well, hoping really, that somebody in power finally says "STOP, everybody gets an independent, public audit NOW").  Then, at least, we would know exactly what we're up against (and we all know it's going to be really bad).  Provided, of course, we can find honest auditors (I never thought I'd say that either).

          Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

          by rolling thunder on Mon Feb 23, 2009 at 09:19:55 PM PST

          [ Parent ]

    •  So, the bottomline is that now, America taxpayers (2+ / 0-)
      Recommended by:
      JuliaAnn, Pluto

      are going to be called upon to payout the Chinese pension funds because Wall Street pilfered the American wealth?

      And Republican's solution was to privatize social security in order to put more skin in the game?

      •  It Gets Better (2+ / 0-)
        Recommended by:
        ilex, driftwood

        We've changed our minds about privatizing Social Security. We're going to do the opposite.

        It is very likely, before the end of the year, you will see all pensions, 401Ks, and IRAs seized and rolled into the Social Security Trust Fund. (And, under the circumstances, we will thank them.)

        In return, the government will guarantee a three percent return.

        This is the buzz among the central bankers of the world.

      •  Any Congressman or Senator that approves more (1+ / 0-)
        Recommended by:
        driftwood

        bailout funding for these banks must be thrown out of office.  They will bankrupt the U.S. Treasury if we let them.

    •  Really? Do you have any references to that? (0+ / 0-)

      This is very odd information.

  •  you're falling into the same trap (13+ / 0-)

    As the right wingers screaming against bailing out homeowners in foreclosure - we are bailing them out not because they are good, or bad, or we like them, or we don't like them, or because it's their fault, or it's not their fault. Those are all childish reasons to hold somebody's hand, not to use treasury funds to backstop them. The survival of the homeowners, and AIG, are vital to the economy is a whole, so we are just trying to save the economy by saving these essential cogs. Regardless of how we feel about them personally, or how blamewothery they are for tehir own condition. AIG is the insurer for so many various CDSs that their collapse would trigger a chain reaction of collapse throughout the economy, as debt insured by AIG gets downgraded and the debtors and creditors both go bankrupt.

    So forget how much the AIG execs get paid, what their private jet looks like, or whatever your pet peeves are, this isn't a popularity contest.

    Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

    by Marcion on Mon Feb 23, 2009 at 01:12:58 PM PST

    •  This is not about greedy incompetent financial (6+ / 0-)

      conglomerates.  It is about saying enough is enough.  Stop throwing money down a bottomless pit.  They cannot survive.  Now, what do we do to fix this mess?

      RebelCapitalist - Financial Information for the Rest of Us.

      by dennisk on Mon Feb 23, 2009 at 01:17:42 PM PST

      [ Parent ]

    •  Why is an Insurance Cmpany (8+ / 0-)

      vital to the economy as a whole?  Banks I understand but AIG does not support enough employees in the US (both primary and secondary through suppliers like the Big 3) to justify it being vital.

      Sorry, try again.

      "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

      by Mister Gloom on Mon Feb 23, 2009 at 01:17:56 PM PST

      [ Parent ]

    •  It's a paper money (1+ / 0-)
      Recommended by:
      truong son traveler

      AIG's insurance companies are all independent subsidiaries with their own finances, regulated by the states. They will survive the collapse. Yes, the parent company has trillions of unregulated CDS's written against it, and when you remove the otherwise encumbered assets (see above) not much in the way assets to cover them.

      But ultimately, who cares? A small number of people and institutions were trading off-market instruments at a scale that was totally outside of any reasonable bounds, but the numbers looked great on computer screens. It was all a fantasy though; they never really had the money that they're now "losing." In the "real world" back on earth, people are still buying and selling houses, and collecting on insurance payments when unexpected things happen and as long as that continues, we can the numbers on the computer screens evaporate.

      •  AIG Sold CDS's To Literally Everyone (6+ / 0-)

        Yes, the parent company has trillions of unregulated CDS's written against it, and when you remove the otherwise encumbered assets

        It is not AIG that the government is trying to save, it is the counterparties in those CDS sales that the government is trying to save.

        It has been estimated by RBC Capital that AIG's failure would cost its swap counterparties $180 billion.

        <div style="font-size:10px;text-align:center;background-color:#ffd;color:#f33">If the terriers and bariffs are torn down, this economy will grow - G. Bush

        by superscalar on Mon Feb 23, 2009 at 01:27:01 PM PST

        [ Parent ]

        •  exactly (3+ / 0-)
          Recommended by:
          mijita, mspicata, Irixsh

          As long as AIG is still alive, there's a chance that a lot of these policies will remain dormant. If AIG goes away, everything implodes at once.

          Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

          by Marcion on Mon Feb 23, 2009 at 01:33:56 PM PST

          [ Parent ]

        •  But it's almost all funny money (3+ / 0-)
          Recommended by:
          mmacdDE, truong son traveler, Clio2

          that never really existed. Let's say I have a $100,000 house. Somehow I convince a bank that it's worth $1,000,000. I take out a $900,000 loan, but not in cash, I immediately make other $900,000 loans on $100,000 houses. The people I loan money to, do the same thing. I lose my job and I need to sell the house; I can only get $100,000 for it. Have I "lost" $900,000?

          •  The Problem(s) Being That (3+ / 0-)
            Recommended by:
            mijita, Marcion, UtopianPablo

            1.) A CDS is a binding contract
            2.) Because a CDS clears through the OTC market there is zero regulation and zero accurate understanding of the total value outstanding.

            <div style="font-size:10px;text-align:center;background-color:#ffd;color:#f33">If the terriers and bariffs are torn down, this economy will grow - G. Bush

            by superscalar on Mon Feb 23, 2009 at 02:00:26 PM PST

            [ Parent ]

            •  Void 'em (1+ / 0-)
              Recommended by:
              Disillusioned

              All contracts can be voided if found contrary to the public interest, which these clearly are.

              •  Oh, that is much more difficult (0+ / 0-)

                than you make it sound.  Do you think there's a Voiding Fairy who waves a wand?

                •  Yeah, his name is Barack Obama (1+ / 0-)
                  Recommended by:
                  bigchin

                  and he could do it if he wants to.

                  If you buy an insurance policy from "Cousin Vinny", you are taking your chances that he might not actually be able to make good on it. That's the way it goes.

                  •  what about the rest of the world (0+ / 0-)

                    Don't you want to at least pretend to consult them before Obama waves his wand in D.C. and London ceases to exist as a financial capital as Britain goes into default? This is a global problem, but all I've heard from Obama are small parochial solutions.

                    Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

                    by Marcion on Mon Feb 23, 2009 at 02:58:09 PM PST

                    [ Parent ]

                    •  Government resources in this time of need (1+ / 0-)
                      Recommended by:
                      JuliaAnn

                      should be focused on the essentials:

                      1. Alleviating physical suffering, i.e. homelessness, hunger, curable sickness, etc.
                      1. Building an environmentally sustainable economy to sustain us into the future.

                      If we let the credit-global-financial system collapse of its own weight, while focusing our government's resources on these two things, IMHO, we will end up with a net benefit in terms of alleviating suffering in the short-term and fomenting peace and prosperity in the long-term.

                  •  By executive order or by legislation? (0+ / 0-)

                    And why?

                    Your "Cousin Vinny" example overlooks things like accounting standards.  Cousin Vinny didn't have the rating or state imprimatur that corporate insurers had -- rightly or wrongly.

                    •  That's the whole point (0+ / 0-)

                      These CDS contracts were unregulated, as in they had no government "imprimatur". They weren't sold to the public; they were only sold to those who were deemed rich and sophisticated enough to know the risks.

                      •  So what happens if entities who think (1+ / 0-)
                        Recommended by:
                        mijita

                        that they're insured based on CDSs, and who are relying on them for their solvency, learn that they can't collect under the conditions on the insurance contract?  You're not saying that we should let them fail; you're saying government should step in and abrogate these agreements.  Was that supposed to be a "known risk"?  If that is a known risk, how can one do any business that requires insurance?

                        •  Well, that's why I said in the first instance (1+ / 0-)
                          Recommended by:
                          JuliaAnn

                          we should just let them fail; AIG goes bankrupt and defaults on its obligations. But there will be fallout from this, as other entities will be pushed to the brink for no other reason than that they were owed money by AIG. As the damage spreads further out into more and more innocent parties, I think the government should step in at some point and void the contracts to stop the bleeding.

                          But it's a technical distinction anyways; what is the effect of voiding a contract that cannot be fulfilled in any event? For an example of how all of this works, see hundreds of years of bankruptcy law and practice in the U.S. and U.K. Judges void unfulfillable contracts all the time.

                          But the bigger point is whether we allow defaults or void contracts is less important than that we do not take public dollars and throw them down these bottomless pits. The losses are too big; the federal government cannot cover them without itself going bankrupt.

                •  You call up the traders; you tell them to put the (0+ / 0-)

                  f'in default swaps on a big conference table; you read each one; you get the counterparty on the phone; you get the two counterparties to unwind/rescind the swap; you put a bit "VOID" stamp on the swap document (right beneath the ISDA disclaimer); and then you go on to the next swap until the conference table is bare.  If any counterparty objects to this process, you take necessary recourse against the recalcitrant counterparty.  Sound harsh, too bad.  And by the way, if any wall street trader complains about their 5th amendment property rights, try to keep your laughter under control.

      •  It's not just paper money (2+ / 0-)
        Recommended by:
        askew, UtopianPablo

        (though I like that kind, especially the large bills.)

        AIG also writes benefits for health, life and retirement that people (individual and group plan holders) currently believe are MORE than just paper but actually think are promises for services.  And they don't just write them directly, other companies "offer" benefits that in reality are contracted through AIG.  

        If we decide AIG is going down, we need to figure out who, if anyone, picks up this obligation.

        the third eye does not weep. it knows. Political compass: -9.75 / -8.72

        by mijita on Mon Feb 23, 2009 at 02:10:52 PM PST

        [ Parent ]

        •  None of that is going to be affected (2+ / 0-)
          Recommended by:
          mmacdDE, Marcion

          For regulated insurance, the government enforces certain standards relating to the amount of assets that have to be kept available. For that reason, all of AIG's regulated insurance companies are subsidiaries with their own assets, and those assets are by law sufficient to cover their obligations. Even if they go bankrupt, those companies will continue to operate, and most will find willing buyers (after all, they have assets, customers, you know, a profitable business).

          It's the unregulated contracts that are at issue. Certain units of the parent company wrote billions (trillions?) in contracts backed by nothing other than AIG's good name (and who would've demanded more?), and because they were unregulated, there was no government agency demanding that X amount of capital be set aside to pay them off.

          Now, these contracts are being called and AIG simply does not have the money (actually they never did, they just had their name). The "counterparties" of course would love for the taxpayer to make good on AIG's obligations, but when they entered into those contracts, they had no such guarantee and I don't see why we should provide one. Again, this was money that never really existed outside of their computer screens.

          •  Yes, but AIG is the re-insurer (0+ / 0-)

            they're the ones that have promised that everyone else's insurance guarantees are sound.  Yes, all these are separate little entities under the AIG umbrella corp, but it's actually other companies insurance, pension and benefit schemes that are ultimately all insured via AIG.

            It's possible that you're right that there are sufficient assets all around to make good on all guarantees.  And there are state regulations as well.  But in this economy with the value of assets dropping daily people in the insurance industry aren't betting on that.  The only thing they seem sure of is uncertainty and panic.

            the third eye does not weep. it knows. Political compass: -9.75 / -8.72

            by mijita on Mon Feb 23, 2009 at 03:44:56 PM PST

            [ Parent ]

    •  I agreed with you once. (1+ / 0-)
      Recommended by:
      mijita

      And seriously, if you look through my comments in September of last year you would see me berating people who were making the arguments you're complaining about here. And the arguments you are making would be all well and good if we were talking about a $10b of even $20b infusion that we could be relatively certain would cover the liability. But let's be honest here: we don't know how big this sea of red ink is precisely, what we do know is the size of each individual bill that comes, and what I can tell you now that at this point it is too much.

      We are going to have to make tough choices. Unlike the homeowners, many of whom had perfectly good mortgages when the economy was doing well, unlike even the automakers, that made and sold real products, AIG was involved in a business the meat and potatoes of which was complex calculations of risk. And they have now struck out on such a scale that no one, not you, not anyone, can give a precise number at what the total cost of taking care of this would be. What we do know is that we are well into the twelve digits.

      That's enough. It's time to walk away, let this one die, and let the counterparties bear the cost.

      As progressives we do not submit ourselves absolutely to the market. But as rational people we cannot stuff our ears and pretend the market does not exist.

      "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

      by andydoubtless on Mon Feb 23, 2009 at 01:22:05 PM PST

      [ Parent ]

      •  We know something about the size of the market (4+ / 0-)

        On Thom Hartmann's show, he is always saying that the derivative market is somewhere between $600-1000 TRILLION.

        That is somewhere around 4-6 times the WORLD GDP per year.

        This is what happens when you leverage your leverage which was leveraging some other leverage.  At the end, you have generated 1000x the dollars out of thin air, just like banks do when they loan out money based on fractional reserve.  Except this was completely unregulated and became a fractional reserve of over 1000:1.

        That is f***ing crazy.

        (This is how I understand how CDS and CMS worked, and I have heard that consumer credit (i.e. credit cards) debt has the same thing applied to it, but it hasn't hit yet.  Can anyone corroborate that?)

        Need something new here...
        This Space for Rent! (Keith? Your name could be here!)
        (-4.88, -4.15)

        by DrSpalding on Mon Feb 23, 2009 at 02:03:40 PM PST

        [ Parent ]

      •  We can't just walk away -- the government (0+ / 0-)

        must use the downfall of AIG as an opportunity to finally deal with the default swap mess at the heart of this disaster.

    •  What would really happen? (2+ / 0-)
      Recommended by:
      Disillusioned, addisnana

      I actually begin to get interested in a detailed description, what would really happen, if AIG would go down.

      If we'd really went through it, those could be basically two:

      (1) Some people temporarily lose their insurance.
      (2) Some people might not be able to realize their over-inflated expectations for a return on their investment.

      Now, government could serve as a stand-in for (1) i.e. if - and only if - there were some sort of disaster, government would need to pay.

      But right at the moment, we cannot distinguish whether taxpayer's money is put to a real use or just funneled to some greedy assholes.

      Bottom line: Letting them go down and only stand in for real insurance claims could actually be cheaper, because you get rid of the ROI bloodsuckers in the process.

      Reality is that which, when you stop believing in it, doesn't go away. -- Philip K. Dick

      by RandomGuyFromGermany on Mon Feb 23, 2009 at 01:23:37 PM PST

      [ Parent ]

      •  AIG's counterparties--instittutions that bought (9+ / 0-)

        various financial products from AIG--would be out billions, perhaps hundreds of billions of dollars. And they would go bankrupt with AIG. It would be, in short, a cascade.

        You can see above the argument I'm making about this policy-wise. But at the same time it will be an immense hit. We can't lie to ourselves about that.

        "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

        by andydoubtless on Mon Feb 23, 2009 at 01:27:30 PM PST

        [ Parent ]

        •  Bankrupt *if* the current rules apply. (6+ / 0-)

          That's what I don't get. The money we throw at the problem gets annihilated by the same broken and twisted set of rules that created the mess in the first place.   So why not temporarily change the rules, so no-one goes bankrupt - they just don't get to cash in on their irrational interests. Cut the cascade.

          (FYI: I'm under no illusion how hard that might be, but we should get into the habit of actually spell out alternatives and then decide on their relative favorability. Which means that a hard-to-imagine solution is actually preferrable to an impossible one...)

          Reality is that which, when you stop believing in it, doesn't go away. -- Philip K. Dick

          by RandomGuyFromGermany on Mon Feb 23, 2009 at 01:35:06 PM PST

          [ Parent ]

        •  Just ask the young lady (0+ / 0-)

          handling the alleged bankruptcy of AIG.

          I'm sure she'll be able to determine if AIG is truly bankrupt by the time she retires in 2052.

      •  you're not getting it (9+ / 0-)

        They insured multi million or billion dollars operating loans for major corporations. For example, Corporation A goes to Bank B to get a loan for $100 million dollars to operate the company. That's a big loan, there's risk that in a downturn, the corporation will go bankrupt and there's not enough security to make sure the bank gets paid. This is a normal transaction, it's not some greedy bank pushing bad mortgages, this is a transaction vital to the econimic development of the country, and thousands of such transactions and bigger ones take place annually in a good ecomomy.

        But the lenders came up with a way to minimize their risk on these big loans, so they bought default insurance from AIG. Which allowed them to make more of these loans. Now if AIG goes away, then the corporate loan portfolio, which now is the remaining good spot on many bank credit sheets, becomes toxic as well -- too much credit lent out with too much exposure, the bank is all the way out there. So they either have to call in the loan, bankrupting the debtor corporation, or the government has to take the bank over because it's insolvent. Either scenario, repeated over thousands of banks and debts worldwide, would cost us hundreds of times more what it costs us to keep AIG afloat, so that the policies remain where they are and the loans don't get called in.

        Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

        by Marcion on Mon Feb 23, 2009 at 01:32:00 PM PST

        [ Parent ]

        •  Aren't you confusing (1+ / 0-)
          Recommended by:
          Wilberforce

          event (1) the occurrence of default on the part of the company that triggers AIG's responsibility to pay, with event (2) the bankruptcy of AIG that invalidates its ability to pay? I understand that AIG's bankruptcy will lower the quality of the debt it insures, but what I don't understand is how that actually yields a mass default by its clients all at once, which is how you seem to derive the figures you're tossing around.

          "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

          by andydoubtless on Mon Feb 23, 2009 at 01:41:34 PM PST

          [ Parent ]

          •  one leads to the other (4+ / 0-)
            Recommended by:
            askew, mijita, davewill, UtopianPablo

            Without the insurance, the loans they guaranteed become untenable. Either the creditor calls it in, and the debtor goes bust, and then we bail them out, or the creditor eats gets downgraded and goes bust, and then we bail them out. Bailing out each of these would be impossible, and the effects would be world wise, as every manufacturer or other producer, even in a healthy secotr, has its credit destroyed overnight.

            Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

            by Marcion on Mon Feb 23, 2009 at 01:45:41 PM PST

            [ Parent ]

            •  But getting downgraded does not mean going bust. (3+ / 0-)
              Recommended by:
              conchita, sabredance, UtopianPablo

              It means more expensive borrowing costs.

              And it seems quite simply the thing to do might be to might be to offer a federal corporate debt insurance service, one that could provide insurance going forward.

              Or one could have the government assume some but not all of AIG's open contracts.

              It seems the logic that you reiterate again and again, that we are faced between a choice of bailing AIG out as we have been, or doing nothing at all, is the fallacy of the unexcluded middle.

              "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

              by andydoubtless on Mon Feb 23, 2009 at 01:59:07 PM PST

              [ Parent ]

              •  Writing down the value of the loans (4+ / 0-)
                Recommended by:
                askew, Disillusioned, exmearden, Marcion

                puts the bank farther behind, and lowers it's reserves probably below the statutory requirement. Which means it is technically bankrupt and can't lend money, or even pay depositors. The bank has no choice but to call the loans in because they cannot operate without reserves.

                ...we reject as false the choice between our safety and our ideals.
                -- Pres. Barack H. Obama, Jan. 20, 2009

                by davewill on Mon Feb 23, 2009 at 02:24:05 PM PST

                [ Parent ]

                •  Then that's what you do. (1+ / 0-)
                  Recommended by:
                  sabredance

                  At some point in this process it becomes cheaper to start insuring corporate debt directly through the federal government, or to fund the creation of new banks tabula rasa, than to pour money into keeping solvent debt that has gone bad not because a meteor has struck the earth or some event extrinsic to the economy has occurred, but because the actual economic conditions in which the country finds itself does not support the terms of the debt.

                  I say we are at that point now.

                  "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

                  by andydoubtless on Mon Feb 23, 2009 at 02:35:46 PM PST

                  [ Parent ]

              •  getting downgraded means attempting to sell (2+ / 0-)
                Recommended by:
                JuliaAnn, Marcion

                off liabilities to improve viability and margin for that all important quarterly report.

                With uninsured, underleveraged loans, whose going to buy the debt? Who, in turn, is out there to insure the sold-off future loan?

                The government doesn't have enough to assume AIGs open contracts. Even a quarter portion of them. Not on top of the increasing debt load already deficited from our previous bailouts.

                AIG is a cancer.

                The future belongs to those who give the next generation reason for hope.
                Teilhard de Chardin

                by exmearden on Mon Feb 23, 2009 at 02:29:22 PM PST

                [ Parent ]

            •  what if we relax the regulations.. (1+ / 0-)
              Recommended by:
              conchita

              ...if you referring to regulations that would require the bank to retract the loan (because there are regulations that limit banks lending and what type of loans they're allowed).  If this is what your referring to wouldn't it be possible to limit exposure by temporarily loosening those regs or specifically insuring some of the largest loans (not necessarily every CDS)?

              "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

              by Mister Gloom on Mon Feb 23, 2009 at 02:05:01 PM PST

              [ Parent ]

        •  So the problem is (6+ / 0-)

          to keep Corporation A going (thereby generating jobs and taxes) by keeping Bank B from retracting the loan.

          The funny thing is that the AIG swaps don't actually keep Bank B from shutting down Corporation A, but just pay them a compensation for their loss. And that compensation is in jeopardy because AIG happened to siphon money not only in such relatively sane transactions, but in wildly irrational and greedy ones, too.

          Now what, if government changed the rules the way, that Bank B wouldn't have to retract the loan, just because the AIG insurance went away (by ways of a direct debt guarantee), but cut loose the web of irrational swap transactions inside and behind AIG?.

          Corporation A could carry on, thus keeping jobs and generating taxes. Bank B wouldn't have to retract the loan simply because of a perceived increase of risk. And the whole money siphon of toxic casino default swaps could be cut off.

          Bottom line: Shield the real economy from the casino economy. Why not try to think that way?

          Reality is that which, when you stop believing in it, doesn't go away. -- Philip K. Dick

          by RandomGuyFromGermany on Mon Feb 23, 2009 at 01:54:53 PM PST

          [ Parent ]

          •  if there was any possibility (1+ / 0-)
            Recommended by:
            j1j2j3j4

            Of a rational international financial reform of the CDS and other markets put at issue in this crisis, I would be all for that. But I'm not seeing even any glimmer of a discussion of that anywhere, it's every nation for itself, saving their capitalist classes. In the absence of that, the best thing to do what be to keep the system stable until it stabilizes.

            Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

            by Marcion on Mon Feb 23, 2009 at 02:36:33 PM PST

            [ Parent ]

            •  Right... (1+ / 0-)
              Recommended by:
              RandomGuyFromGermany

              ... the best thing to do what be to keep the system stable until it stabilizes.

              Keep the patient alive until he's alive. Or, beat a dead horse. Or something.

              This is all so complicated it's actually simple. Worldwide Ponzi, baby. Oldest game in the book.

              This is a speeding rollercoaster that must be stopped so everyone can get off.

              Let's say everyone loses everything - for a day or a week or a month. Salary, pension, retirement funds. Then use those trillions we keep throwing around to make PEOPLE

              •  oops (1+ / 0-)
                Recommended by:
                RandomGuyFromGermany

                to make PEOPLE whole, not corporations. Think that's crazy? Yeah, it is -- because we are so sure that profits and support and help is the natural due of companies and governments. People always get lost in this shuffle -- they get taxed, abused, lied to, herded up, murdered, disappeared ...

                There is a way -- and enough money and resources -- to equitably help every person on the planet. We will resist that at all costs. We will pour everything we have into a chimera ... a mirage ... an intellectual construct without corporeality.

                It is crystal clear in my mind, anyway, but so beyond what we are capable of doing.

        •  thank you (4+ / 0-)
          Recommended by:
          askew, Disillusioned, mijita, sabredance

          you're doing yeoman work on this question.

          bottom line folks is that "sticking it to the man" isn't going to work this time, and not every decision made by the government in the face of this crisis is about "sticking it to us in order to save the man." and that applies to Paulson's efforts in the last 9 months of the Bush Administration as to the things we are doing now.

          it can be argued that Paulson tried to do what some many on DKOS and on this thread are asking for. let the bastards fail. he did, with Lehman. and through the law of unintended consequences he may have tipped the credit crunch into a full blown global financial system breakdown.

          it would have been wildely unpopular here had Paulson backstopped Lehman. but its possible that the damage could have been contained there, or at least we wouldn't be looking at the massive cost of AIG's troubles on top of everything else that is going on.

          just saying.

          •  Actually Paulson did the worst thing possible (3+ / 0-)
            Recommended by:
            blindcynic, sabredance, Marcion

            He established a rule (bailouts or government backed sales for large financial) then broke it by letting Lehman fail.  The uncertainty of this is what kicked off the "present difficulty" not whether he did it or not.  If we had an established policy of A. Bailout or B. Let them fail what happened with Lehman either wouldn't have happened (if bailout) or wouldn't have hurt (if it was already established).  If there's one thing the financial market doesn't like its uncertainty.

            "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

            by Mister Gloom on Mon Feb 23, 2009 at 02:07:17 PM PST

            [ Parent ]

            •  is it that simple though? (0+ / 0-)

              the whole point was that Lehman wasn't too big to fail, and they decided to make that point. what they found out was that it was interconnectivity that spooked the market. if my memory serves, and even that is coming from Frontline and House of Cards, it was the following week when Paulson had to move on the AIG takeover, because without it the Lehman bankruptcy was going to take AIG down with it.

              i defer to others upthread of me on this question. clearly they know more about it.

        •  AIG goes well beyond "insurance" in the (5+ / 0-)

          conventional sense.  As I wrote elsewhere in this conversation...

          AIG is also responsible for individual and group retirement benefits for a number of companies and union plans both directly and indirectly via sub contracts and sub-sub contracts.   They're everywhere.  

          AIG is like a web wrapped around the insurance industry -- which is why there isn't a single insurance company of saying "let them go down" or screaming about it being unfair that AIG gets help first.  Because they can't really imagine what will happen without AIG -- AIG has no direct competition.

          As I said elsewhere, they may well need to go down.  But somebody, probably the government, is going to need to be ready to pick up the pieces and fast.  Otherwise people will panic and even more companies will go down.

          the third eye does not weep. it knows. Political compass: -9.75 / -8.72

          by mijita on Mon Feb 23, 2009 at 02:06:52 PM PST

          [ Parent ]

        •  Here's a question for the savants: (2+ / 0-)
          Recommended by:
          JuliaAnn, RandomGuyFromGermany

          What if the US gov't acts to insure the loans AIG formerly insured?  The loans would have even LESS risk than pre-CDS AIG conferred, so there wouldn't be any downgrade of the corporate loan portfolio on banks' balance sheets.

          Essentially, by backstopping the loans, the US gov't would uncouple any potential catastrophic chain reaction.

          Meanwhile AIG can go down with it's worthless CDSs.  Yes the shareholders take a haircut, but tough beans; that's what you get for failing at due diligence...

          Would such temporary federal insurance for AIG-backed loans cost the US taxpayer less than a bailout of AIG?

      •  AIG's Insurance Units Are Regulated By The State (2+ / 0-)
        Recommended by:
        Disillusioned, Marcion

        Some people temporarily lose their insurance

        This is why Gov. Paterson was trying to change New York's insurance regulations. The plan was to try and upstream some of the capital from the insurance units to the parent holding company.

        The parent company in the form of AIG Financial Services which sold CDS's to almost literally every financial company is the one which created the time bomb.

        It is my understanding that the state regulated insurance units would be largely unaffected by AIG's going poof, as again the capital, and capital requirements, for these units is state regulated.

        <div style="font-size:10px;text-align:center;background-color:#ffd;color:#f33">If the terriers and bariffs are torn down, this economy will grow - G. Bush

        by superscalar on Mon Feb 23, 2009 at 01:32:32 PM PST

        [ Parent ]

      •  Not just conventional insurance (2+ / 0-)
        Recommended by:
        askew, Go Kid Hugo

        AIG is also responsible for individual and group retirement benefits for a number of companies and union plans both directly and indirectly via sub contracts and sub-sub contracts.    AIG is like a web wrapped around the insurance industry -- which is why there isn't a single insurance company of saying "let them go down" or screaming about it being unfair that they get help.  Because they can't really imagine what will happen without AIG -- AIG has no direct competition.

        As I said elsewhere, they may well need to go down.  But somebody, probably the government, is going to need to be ready to pick up the pieces and fast.  Otherwise people will panic and even more companies will go down.

        the third eye does not weep. it knows. Political compass: -9.75 / -8.72

        by mijita on Mon Feb 23, 2009 at 01:54:04 PM PST

        [ Parent ]

    •  We can't cover the bad credit default swaps (4+ / 0-)
      Recommended by:
      andydoubtless, txdemfem, bigchin, Irixsh

      The total liability for the credit default swaps is a large fraction of the size of the housing and asset bubble. The CDSs cover the bursting of the bubble.

      It could take 10 trillion dollars to cover all of those swaps when all is said and done.

      "It's the planet, stupid."

      by FishOutofWater on Mon Feb 23, 2009 at 01:28:20 PM PST

      [ Parent ]

      •  yes, because they wrote the same stupid bet (0+ / 0-)

        over and over and over again -- it would be as though the government was suddenly called in to cover all gambling losses for the Super Bowl.  The most amazing thing is that the government has not yet, to my knowledge, halted trading in these infernal credit default swaps.  Think about that -- $360 billion in losses for Lehman alone -- and we have not yet moved to make this trading illegal.  Wow, how corrupt is Washington.

    •  If AIG is too big and important to let fail (2+ / 0-)
      Recommended by:
      andydoubtless, Knarfc

      Then it is too big and important to be left in the hands of the wealthy gamblers whose business "acumen" has brought us all to the brink of global catastrophe.

      It is not unfair for taxpayers to look at these people as crooks.

      •  irrelevant (2+ / 0-)
        Recommended by:
        askew, Seeds

        See, here we go again. I'm talking about the financial state of the world economy, and you are talking about judging these people as crooks. I don't care if you call them crooks of baby Eichmanns, that doesn't tell us what financial strategy to take to keeping the CDS house of cards from imploding. You can try them all later if you wish, I don't think too many will come to their defense.

        Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

        by Marcion on Mon Feb 23, 2009 at 01:48:34 PM PST

        [ Parent ]

        •  The purpose of the proposed cash not irrelevant (2+ / 0-)
          Recommended by:
          JuliaAnn, andydoubtless

          The bailouts are not just taxpayer money being thrown at the black hole of bad bets in an attempt to stanch the global bleeding.

          This is money that is also designed to keep the owners (management and shareholders) the owners, and living in the style to which they have become accustomed.

          Wipe out these investors, have the government liquidate what can be profitably liquidated, and restructure what can be realistically restructured to perform any necessary functions of a big insurer.  As you note, even that will be costly, but just giving money to AIG has clearly not resolved the issue and is calculated to make ordinary citizens really, really angry.  Being taken to the cleaners by bad businessmen -- even if some of the functions their businesses are meant to perform are deemed necessary to the economy -- is not a negligible consideration.

        •  Does Wall Street and Pennsylvania Avenue (2+ / 0-)
          Recommended by:
          JuliaAnn, notcaesar

          want the American taxpayer to think they are supporting "crooks" who are running the global economy. If they don't, it's too late.

          Most Americans by now think these major banks and insurance companies repeatedly asking for bailout funds, without giving much public disclosure and without changing much of their behavior, are run by crooks. This is the judgement of the court of public opinion. Think about what implications are likely to be derived from that concept.

        •  paying off these swaps will bankrupt the U.S. (1+ / 0-)
          Recommended by:
          notcaesar

          Treasury.  Do you care? I do, and I don't think the federal taxpayers should put up another cent to pay for these illegal instruments.  There are other ways to address this mess, but they are not receiving serious discussion right now since the Washington politicians are still afraid they will piss off their wall street masters.

    •  Maricon (2+ / 0-)
      Recommended by:
      askew, notcaesar

      This is my understanding (posted up above) of the unique role of AIG in the system.  Please feel free to reject, critique, amend, and/or approve as you will.

      I think that the reasonable path -- which is what I wonder if Obama's team is preparing -- might be to build some publicly owned system to do with AIG does and some Saturday afternoon to just transfer everything to that operation, allowing the economy to recover, but allowing AIG to die.  Does that make sense?  Why or why not?

      •  Not Maricon, but that is an interesting idea. (1+ / 0-)
        Recommended by:
        Seneca Doane

        I've worked in insurance with AIG products but am not an expert by any means. I would love to get an expert in the insurance industry to weigh in on your idea.

      •  internatioanl (3+ / 0-)
        Recommended by:
        conchita, sabredance, Seneca Doane

        I keep saying this becuase people seem to be forgetting. No solution to this problem is remotely credible if it is carried out by one nation on its own. AIG is a world instittuion, the CDS market is international, the US cannot simply reinsure some of the debts of major national significance and then walk away in mid game, with other governments standing flabbergasted since their own baliout strategies were structured in reliance on America leading the way. Until there is an international conference on this on par with Bretton Woods, all we are doing is throwing money at the problem. I do think some soft of glboal bank/regulator/insurer will need to be created, guaranteed by all of the world's wealth, to underwrite the debts and CDSs and calm the markets once and for all, and control interest rates and currency policies going forward so this situation (capital jumping from market to market, beneifting by interest rate discrepancies, borrowing in the US, lending in Iceland, for example, and creating bubbles) does not recur.

        Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

        by Marcion on Mon Feb 23, 2009 at 03:04:26 PM PST

        [ Parent ]

  •  If ordinary Americans (2+ / 0-)
    Recommended by:
    conchita, j1j2j3j4

    can make it without health insurance, then some not so ordinary Americans sure can make it a little while without their former insurance company, too. Right?!

    Reality is that which, when you stop believing in it, doesn't go away. -- Philip K. Dick

    by RandomGuyFromGermany on Mon Feb 23, 2009 at 01:15:40 PM PST

  •  In other words (8+ / 0-)

    AIG has taken itself hostage, put a gun to its head, and said "this is a stickup! If you don't give me all your money, I'll shoot!"

    Go ahead. Make my day.

    Let the mega banks fail, restore depositors, and watch smaller, regional banks flourish! NO BAD BANK! (for the love of God, Barack, it's not that hard!)

    by Paul Goodman on Mon Feb 23, 2009 at 01:16:31 PM PST

  •  We need to start figuring out how to do an (5+ / 0-)

    orderly de-leveraging of this whole mess.  AIG is done.  

    RebelCapitalist - Financial Information for the Rest of Us.

    by dennisk on Mon Feb 23, 2009 at 01:21:15 PM PST

  •  Let them eat cake. (3+ / 0-)
    Recommended by:
    SecondComing, mijita, unclejohn

    How the hell can the taxpayers afford all these bailouts?
    Fork em!!!!!

    St. Ronnie was an asshole.

    by manwithnoname on Mon Feb 23, 2009 at 01:23:29 PM PST

  •  we shouldn't have bailed AIG out at all (3+ / 0-)
    Recommended by:
    cotterperson, andydoubtless, publicv

    Private investors were perfectly willing to take over AIG. They of course just wouldn't offer terms as sweet as Geithner, Bernanke, and Paulson would offer.

  •  Dude; I'm a bit short right now. (3+ / 0-)
    Recommended by:
    Disillusioned, gjohnsit, unclejohn

    If you can just front me another $50 Billion bag of drugs cash, I'll try to turn it over and, ya know, pay you next time.

    The best way to save the planet is to keep laughing.

    by LaughingPlanet on Mon Feb 23, 2009 at 01:25:32 PM PST

  •  Good diary. Thanks for this bit of (0+ / 0-)

    information.

  •  Wasn't this a bit in Blazing Saddles? (9+ / 0-)

    "We have always known that heedless self-interest was bad morals; we know now that it is bad economics." Franklin Delano Roosevelt, March 4, 1937

    by Pangloss on Mon Feb 23, 2009 at 01:28:02 PM PST

  •  Are we accelerating towards a major crisis (2+ / 0-)
    Recommended by:
    Knarfc, island in alabama

    AIG is going to be downgraded and so needs more money or else they go out of business.

    Citibank needs more money or else they will go out of business.

    I feel like we are heading for a disaster.

  •  To AIG: go ahead and declare, make my day! (3+ / 0-)
    Recommended by:
    unclejohn, Paul Goodman, FishBiscuit

    Time for the Dirty Harry of financial regulators, armed with a .44 magnum, a team of auditors, and nothing left to lose, to give them our answer.

    Democracy becomes a government of bullies tempered by editors. Ralph Waldo Emerson [So where have all the editors gone? rolling thunder]

    by rolling thunder on Mon Feb 23, 2009 at 01:31:38 PM PST

  •  there goes my life insurance policy (6+ / 0-)
  •  Misstatement (1+ / 0-)
    Recommended by:
    Rachel Q

    End of diary -

    if we didn't tax them by the legal amounts that they owe the government.

     From the article cited -

    The tax issue relates to a 2004 Internal Revenue Service ruling that says life insurance and annuity products similar to those Alico sells to foreign clients are subject to U.S. income tax withholding.

     Mandatory income tax withholding on the company's clients is NOT the same as taxing the company's own income.  Ie. taxing the company's income is not what would potentially drive their annuity customers away, it's taxing the customers' income from the annuities.
     

    My Karma just ran over your Dogma

    by FoundingFatherDAR on Mon Feb 23, 2009 at 01:38:50 PM PST

    •  True, but it means the same thing (3+ / 0-)
      Recommended by:
      Marie, bigchin, Go Kid Hugo

      In the end it's a matter of giving up tax revenue in order to salvage the subsidiary.

      "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

      by gjohnsit on Mon Feb 23, 2009 at 01:43:20 PM PST

      [ Parent ]

      •  A lot of countries are doing this now (1+ / 0-)
        Recommended by:
        liberalconservative

        the withholding thing for foreigners that is. All it means is that unless a foreigner gets some sort of waiver or exemption, they will have to fill in a US tax return to get the money back at the end of the financial year. It's a bit of inconvenience and paper-shuffling but its not enough to mean the business is worth nothing. People who are wealthy enough to do foreign stuff like this usually have lawyers and accountants to take care of their paperwork. And remember, this is just for foreigners, not Americans with ss numbers. I think you are being too alarmist here, unless you can tell me what I'm missing?

        •  The Japanese government takes 15% of my (0+ / 0-)

          Japanese automaker dividends.

          I generally haven't had enough income to pay 15% in American taxes to make the foreign tax credit counterbalance this. GWB hasn't been good for the market or my income.

          For most annuityholders, I think foreign taxes are high enough that their foreign tax credit would cover the American tax.

  •  Not three weeks ago - (1+ / 0-)
    Recommended by:
    island in alabama

    That statement by the Fed was made Jan 12 - that is, during the Bush Administration.

    •  True, but... (0+ / 0-)

      the article was published three weeks ago. I just went with that. Maybe I shouldn't have, but I wanted to be safe.

      "The people have only as much liberty as they have the intelligence to want & the courage to take." - Emma Goldman

      by gjohnsit on Mon Feb 23, 2009 at 01:44:13 PM PST

      [ Parent ]

  •  Hrm...nationalize? (NT) (2+ / 0-)
    Recommended by:
    fumie, True Independent

    Ignorance makes the world go flat

    by sleipner on Mon Feb 23, 2009 at 01:42:15 PM PST

  •  So sorry they've got to go. (0+ / 0-)

    Can we Nationalize them?

  •  Only if you name names (0+ / 0-)

    ALL OF THEM.

    "Right wing freak machine" General Wes Clark

    by Tracker on Mon Feb 23, 2009 at 01:43:43 PM PST

  •  Serious Fraud Office Investigates AIG (13+ / 0-)

    In a 2/12/09 report, the Guardian states: (emphasis mine)

    The Serious Fraud Office has started a "preliminary inquiry" into American insurance firm AIG's London operation, founded by Joseph Cassano who spearheaded the group's ill-fated move into complex debt derivatives.

    The insurer...last September...was forced to seek an $85bn emergency credit facility from the Federal Reserve. Democratic congressman John Sarbanes later said of Cassano: "It seems he single-handedly brought AIG to its knees."

    The

    SFO's inquiries are being conducted in co-operation with the Financial Services Authority and with US authorities, which are probing the same business

    ..."certain public disclosures, transactions and practices of AIG and its subsidiaries" were being reviewed by the SEC and the Department of Justice. Investors were told attention has been focused on "AIG's valuation of and disclosures relating to the AIG-FP super senior credit default swap portfolio".

    So, AIG wants more money.  Yet, we haven't yet heard the results of investigations, some of which have been ongoing since Oct.-Nov, 08.  We still don't know what they've done with the money they already got.  Doesn't sound like a sound investment for the US taxpayer, IMHO.

    •  SFO (1+ / 0-)
      Recommended by:
      kurious

      I still want to know if the Brits have a Non-Serious Fraud Office.

      Or at least one that's distinct from Parliament, of course.

      "Words ought to be a little wild for they are the assault of thought on the unthinking." - John Maynard Keynes

      by Drew J Jones on Mon Feb 23, 2009 at 06:41:06 PM PST

      [ Parent ]

  •  Three steps. (14+ / 0-)
    Declare bankruptcy.

    Open them books.

    Prepare for jail.

    I survived the Bush Administration, 2000-2008

    by Publius2008 on Mon Feb 23, 2009 at 01:45:20 PM PST

  •  wish you had a poll. (3+ / 0-)

    I'd like to see how the folks here think about letting them fail.

    Hmm. In tomorrow's sermon, I will post just such a poll and link to this fine diary.

    What we call god is merely a living creature with superior technology & understanding. If their fragile egos demand prayer, they lose that superiority.

    by agnostic on Mon Feb 23, 2009 at 01:48:39 PM PST

  •  time to round up these guys for the cell. (3+ / 0-)
    Recommended by:
    agnostic, FishBiscuit, jazzence

    Jail cell that is. these guys aren't going to lose that attitude until they have to eat prison food, shower with fellow inmates, and sleep on those prison beds. And a few other unpleasant experiences as well.

    Get them in jail and charge them with fraud or conspiracy or whatever then wait this out about four years for the trial. They'll be changed people. Just ask the detainees in Gitmo. It works.

    15,000 CA diabetic school kids in danger due to recent court decision.Shame on the ANA,CNA,CSNO. Info http://tiny.cc/uVmZF

    by foggycity on Mon Feb 23, 2009 at 01:48:56 PM PST

  •  STUPID WASTE OF TAX DOLLARS (1+ / 0-)
    Recommended by:
    TNThorpe

    Those guys are bankrupt just like all the rest - they need to come clean on the crap their holding so we can get started rebuilding. As long as we crutch this stuff we're just buying into the lies told by compulsive gamblers.

    I'm an Emersonian Transcendentalist. What's your excuse?

    by Stranded Wind on Mon Feb 23, 2009 at 01:54:18 PM PST

  •  Sounds like we own them now, (3+ / 0-)
    Recommended by:
    Marie, SecondComing, JuliaAnn

    so let's downsize AIG, split it up, and let them see if they can survive. That's what they've done to us, no?

  •  There are folks that are screaming about (5+ / 0-)

    nationalizing the banks; there are people that are insisting that they be allowed to declare bankruptcy and restructure (or just implode).  I've always hated the banks - I always will.  If there was a way that I could do business in today's "technologically advanced" economy, without having to use a financial institution, I'd do it in a heartbeat.

    Personally, I'd love nothing more than to see these greedy fuckers go down with their sinking ship.  Captain Smith didn't think the Titanic would ever sink, and on a cold night in April, God, Mother Nature, and human stupidity conspired together to prove him wrong.  Unfortunately, it cost the lives of 1500+ people.

    I know it's probably not the best analogy in the world, but that's what this looks like -- alot of people running 'round saying "no, this can't happen to us, it's impossible.  This bank is too big to fail."  Got news for you - it isn't.  And eventually, it will.

    In a way, these guys remind me of White Star's CEO, Bruce Ismay, and the conversation that he had with Thomas Andrews, Titanic's builder, just after they hit the iceberg -

    Andrews: "The pumps will buy you time, but minutes only. From this moment on, no matter what we do, Titanic will founder. "
    Ismay: "But this ship can't sink! "
    Andrews: "She is made of iron, sir. I assure you, she can. And she will. It is a mathematical certainty. "

    I think it's time to start considering filling the lifeboats -- AIG is going down, and there's no telling who or what else they're going to drag down with them.

    "What, then, is the legacy of the Royal Navy? I shall tell you. Rum, Buggery, and the lash! Good Day, Sirs." - Sir Winston Churchill

    by Dingodude on Mon Feb 23, 2009 at 02:03:02 PM PST

  •  Here's an idea NATIONALIZE AIG! (1+ / 0-)
    Recommended by:
    Go Kid Hugo
  •  We need to declare credit default swaps ILLEGAL (5+ / 0-)

    and VOID.

    •  exactly right -- not a minute longer. (1+ / 0-)
      Recommended by:
      JuliaAnn

      As far as I can tell, the wall street assholes are still trading this crap, and now they are betting on the collapse of sovereign debt.  Send these crooks back to sports betting, where they belong.

  •  Here's my policy on bailouts - if the CEO (4+ / 0-)

    eats his way through a bowl of live cockroaches to get to the money. It's his.

    Maybe there's a god above, but all I ever learned from love was how to shoot somebody who out-drew ya. -5.75, -5.03

    by Muskegon Critic on Mon Feb 23, 2009 at 02:04:22 PM PST

  •  IMHO (1+ / 0-)
    Recommended by:
    Go Kid Hugo

    this to "Big to Fail" crap was allowed to happen because the Pols of both parties figured it was a
    lot simpler to shake down bigger corps for funds
    then have to deal with the rabble.

    A pox on all the players.

  •  The Bitter Pill: the market is not going to come (6+ / 0-)

    back any time soon and the economy is not going to improve until we deal directly with cause of this mess: the toxic assets.

    We are wasting time with this market based solutions.  It is over for financial system of a few years ago.  It will be painful, very painful, but we have to start restructuring our financial system.

    RebelCapitalist - Financial Information for the Rest of Us.

    by dennisk on Mon Feb 23, 2009 at 02:06:22 PM PST

  •  ...why not close or nationalize (4+ / 0-)

    large corporations that cannot keep their business running and cannot follow the law? I know this is probably too simple a solution, but seriously, my bullshit tolerance has already peaked as far as economic policy is concerned.

    Ask not any question of the Eldar; for they will give you three answers, all of which are true, and all terrifying to know.

    by Shaviv on Mon Feb 23, 2009 at 02:06:48 PM PST

    •  AIG Is already 80% nationalized. (3+ / 0-)
      Recommended by:
      mijita, sabredance, Go Kid Hugo

      now it needs to be broken up, cleaned up and sold off.

      The Shape Of Things "Beware the terrible simplifiers" Jacob Burckhardt, Historian

      by notquitedelilah on Mon Feb 23, 2009 at 02:22:56 PM PST

      [ Parent ]

      •  Whatever happens now, we have to make sure that.. (1+ / 0-)
        Recommended by:
        sabredance

        it costs US LESS than just letting AIG fail would have cost us (if we had had sense enough to do that).
        I say obviously we can't let it fail because I don't want to see MY investment so far written off.
        I am absolutely confident that it lies within the power and purview of Congress to make SURE this investment pays off, and if we already control 80%, then we certainly DON'T NEED TO LISTEN to any of the current management's opinions to the contrary!
        WE have ownership authority to JUST FIRE their bloated lying butts!

        The road to hell has not YET been paved with Republicans, but it SHOULD be -- Corrected BumperSticker

        by ge0rge on Mon Feb 23, 2009 at 03:38:55 PM PST

        [ Parent ]

  •  They don't get to make that decision anymore... (0+ / 0-)

    Take over.

  •  At what point do the contracts not get paid .. (2+ / 0-)
    Recommended by:
    Disillusioned, Publius2008

    when their combined value is 10-20x the world gdp?

    Electronic media creates reality - Meatball Fulton
    The less you know, the more you believe - Bono

    by zeke7237 on Mon Feb 23, 2009 at 02:12:23 PM PST

  •  Dirty Deeds....got nachos and beer? (0+ / 0-)
  •  If the government is investing, maybe it should (3+ / 0-)
    Recommended by:
    sabredance, saildude, Go Kid Hugo

    invest in viable banks and other financial companies to provide them with more capital that they can lend out. It could then sell off the shares in a few years.

    The problem, I presume, is that the government has to cover the depositors and those that are living on insurance company-based annuities and have little or no other income.

    It is time to use the stress test before any money is dumped into black holes, money that is needed to cover at least in part depositors and those with nothing else.

    There must be some crime that these idiots can be charged with or some way that their assets can be siezed for the public treasury. They in effect robbed millions of people to play games they could not win. How is this different from lifting the money out of the till and heading to Vegas.  

    We have only just begun and none too soon.

    by global citizen on Mon Feb 23, 2009 at 02:23:06 PM PST

  •  Um. Mister AIG CEO.. (1+ / 0-)
    Recommended by:
    gjohnsit

    Just do it and stop your yammering. Do it in a Scarlet O'Hara dress if you like, next to a fainting couch. "Oh I do declare. Bankruptcy."

    *&%$-Off.

    Just can't seem to win - If I'm standing still, I'm loitering. If I'm walking; I'm a vagrant. I just want to be a vagabond, or a wandering minstrel.

    by SecondComing on Mon Feb 23, 2009 at 02:23:49 PM PST

  •  Pluto (0+ / 0-)

    I can't pronuce the new 2010 gulf currency, I think
    I will just call it the kablowee.

  •  Nationalize them, then offer health insurance (2+ / 0-)
    Recommended by:
    fumie, Go Kid Hugo

    I mean, we've got all the infrastructure there, right?  Make them into the next arm of the government.

    Would y'all just chill the hell out?

    by nightsweat on Mon Feb 23, 2009 at 02:26:20 PM PST

  •  Uh..did they ever also sell insurance? (3+ / 0-)
    Recommended by:
    gjohnsit, JuliaAnn, Go Kid Hugo

    For a fucking insurance company, they sure were in the middle of a lot of other stuff.  Good thing that Bush crackerjack SEC was on the case, keeping an eye on the fact that an insurance company was buying and selling massive amounts of credit default swaps with the money from insurance premiums.  What a cluster fuck - fire the entire management team and start over, this is a new government owned business. Here is the perfect example of the Bush era - no regulation, no enforcement, no conscience, no sense of right and wrong, fatcats living high on the hog on the backs of average people.

    •  Sad to say (1+ / 0-)
      Recommended by:
      askew

      did they ever also sell insurance?

      They sold a ton and subcontracted sales of even more.  Group pension schemes too.  That's really a problem.  The states and federal government are backing all those policies to the tune of at least $100K.

      the third eye does not weep. it knows. Political compass: -9.75 / -8.72

      by mijita on Mon Feb 23, 2009 at 02:50:32 PM PST

      [ Parent ]

      •  Uh-oh. I think you meant (1+ / 0-)
        Recommended by:
        mijita

        $100k per policy.

        Please tell me that:

        a) I am wrong in my per-policy-assumption.

        or

        b) AIG sold only 10,000 policies.

        Because if I am right, you just said the Fed & States are on the hook for billions of dollars if AIG goes under...

        •  It's (A) and yes, per policy. (0+ / 0-)

          (Not sure what the group plan situation would be.  But some states have a higher than 100K per policy backing)

          But legally there are supposed to be there are assets out there to back the insurance.  

          the third eye does not weep. it knows. Political compass: -9.75 / -8.72

          by mijita on Mon Feb 23, 2009 at 05:46:45 PM PST

          [ Parent ]

  •  The American people to AIG: (5+ / 0-)

    Go ahead and declare bankruptcy; why should you have it any better than a lot of us?

    "Truth never damages a cause that is just."~~~Mohandas K. Gandhi -9.38/-6.26

    by LynneK on Mon Feb 23, 2009 at 02:30:28 PM PST

  •  We thought Bernie Madoff was a crook? (6+ / 0-)

    it seems his pyramid scheme pales in comparison.

    Apologies to those who've lost their pensions through Madoff. Let's hope the balance of your money wasn't in an AIG investment portfolio.

    The future belongs to those who give the next generation reason for hope.
    Teilhard de Chardin

    by exmearden on Mon Feb 23, 2009 at 02:33:56 PM PST

    •  Right when Madoff hit the airwaves I almost (2+ / 0-)
      Recommended by:
      exmearden, VoteAqui

      spit out my coffee in laughter as they tried to paint him as some kind of 'aberration' - as if the whole Economy were somehow different.

      I read your and Pluto's stuff, ex, and am enthralled and shocked, but you're missing the point.

      It's all an artificial construct. It's not even a house of cards.

      It's just ideas and wishes, nothing more.

      The whole damn thing was a fairy tale.

      If we realize that and wake the fuck up, we can stop the nightmare.

      You guys keep talking about all of this money, $600T and shit - it's not real. Never was, never will be.

      The sooner we realize that, the better.

      Democracy - 1 person 1 vote. Free Markets - More dollars more power.

      by k9disc on Mon Feb 23, 2009 at 05:48:47 PM PST

      [ Parent ]

      •  I'm not missing the point at all, k9disc. (1+ / 0-)
        Recommended by:
        k9disc

        and I agree.

        I see an interesting panorama, don't you?

        Money has always been an artificial construct.

        The future belongs to those who give the next generation reason for hope.
        Teilhard de Chardin

        by exmearden on Mon Feb 23, 2009 at 06:26:47 PM PST

        [ Parent ]

        •  It's all a Ponzi scheme (2+ / 0-)
          Recommended by:
          k9disc, exmearden

          Least that's how it seems to me.  The only difference is that sometimes it's shepherded by a Grand Poobah.  Other times, it's just herd behavior.  Ever so slightly more "organic".  But essentially the same.

          "The river always wins" - Mark Twain

          by Land of Enchantment on Mon Feb 23, 2009 at 06:29:21 PM PST

          [ Parent ]

          •  What do you think of the phrase (2+ / 0-)
            Recommended by:
            JuliaAnn, Land of Enchantment

            Political Capitalism?

            Isn't that what we've got?

            It's so much more than a Ponzi scheme.

            We're not just losing money - we're losing our society.

            The economy is eating more than dollars and cents it's eating our people, our communities, our states, our country, it's eating our entire culture.

            The Economy has become our reason for being.

            We are here to service the Economy.

            Democracy - 1 person 1 vote. Free Markets - More dollars more power.

            by k9disc on Mon Feb 23, 2009 at 07:35:14 PM PST

            [ Parent ]

          •  Ponzi will be too kind when this is over. (1+ / 0-)
            Recommended by:
            Land of Enchantment

            Banks are supposed to take deposits (liabilities) and make sound loans (assets) to corporations and individuals.  These banks did some of that (bad mortgage loans), but then they sold credit default swaps and turned themselves into illegal insurance companies.  They never had the unleveraged capital needed to pay off these credit swaps once the defaults occurred.  Pretty horrible if you consider that the entire banking sector did this.

        •  Yes, yes! (1+ / 0-)
          Recommended by:
          exmearden

          but we've got to bring the 'reality based community' here.

          How can we do that?

          How do we trump the all powerful Wizard of Corporate Media?

          How do we convince people to open their eyes?

          Without seeing the panorama, how can they navigate?

          The circular logic of 'government is bad', blame government, less government will save us is gospel - hell it's gospel to 50% of this site, and they're the ones on our side.

          Without the panorama, we're going to walk straight into a minefield - fascism, fanatacism, war.

          I say your missing the point because you're stuck in the meta of the situation, or at least playing there. Playing on the meta ratifies the big lie for those who's eyes are not open.

          If I'm being hyperbolic, please give me something to come down.

          Democracy - 1 person 1 vote. Free Markets - More dollars more power.

          by k9disc on Mon Feb 23, 2009 at 07:29:44 PM PST

          [ Parent ]

          •  It's inverted totalitarianism (2+ / 0-)
            Recommended by:
            k9disc, exmearden

            according to Sheldon Wolin:
            http://www.amazon.com/...

          •  Playing on the meta (0+ / 0-)

            allows one to see the matrix of possibilities, both good and bad.

            You're not being overly hyperbolic.

            But what are you offering in its stead? I would venture that all of politics and policy is a house of cards, ideas and wishes. Any head of any government must and should completely understand that they have power only because of a perception from the madding crowds that they have power. It's a construct that is backfilled by the history of any given country.

            Same with the monetary system that now exists.  I suspect Pluto posits a return, in some sense, to a gold standard - or has suggested that some countries are moving that way. The reality is the world has grown too large for that.

            And gold itself is a thing of mercurial value - something we have placed value in because we can measure something else - a fiat of a different color in any given country - against that gold shiny stuff that we've decided to impart value to. How crazy is that?

            If we start using gold again (or any restricted nondigital, or nonpaper, commodity currency as our means of an exchange of value), we will embark on another limited resource spree, much like peak oil.

            Gold is just another commodity that can be controlled and valuated up or down, causing inflation and deflation.

            This is not a collapse. It's a dystrophy that is disintegrating towards a failure where uncertainty wraps around a vacuum.

            Our options seem to be we either call it all wrong from the beginning, or ask "where did it go wrong?"

            This is also meta. What do you think can be floated as the alternative?

            The future belongs to those who give the next generation reason for hope.
            Teilhard de Chardin

            by exmearden on Mon Feb 23, 2009 at 09:37:51 PM PST

            [ Parent ]

            •  Well, the meta is good when talked about in (0+ / 0-)

              this post, but poo-poohing those who say it's a bad thing to throw trillions at bankers because there's '$600T at stake' is the wrong kind of meta argument.

              It lends credence to the whole charade.

              People like you guys should be working to draw attention to the illusion and to help protect ourselves and our communities.

              Now I totally understand that that opens one up to ridicule on this site, but what else is new?

              The left (not saying your on the left) has been right about every god damned problem we've had in the last 30 years, and because people engage in that kind of meta argument, the left is still 'wrong' and we're left with Kristol and Friedman pontificating as if they've been right all along.

              We need to pop that bubble of illusion. It seems as if you guys have this very specific understanding that gets weaker as it spreads out to the general understanding, people like me have a strong general understanding that gets weaker as it gets to the specifics.

              But us, together, we could bring down the whole damn thing - pop that illusion.

              But the generalists and the specialists tend to get hung up on silly little meta things, and the entire picture never gets presented.

              We lack the holistic view that the Friedman's, the NYT and CNN can deliver - that continuity and absolute refusal to entertain the meta that does not fit their reality.

              Does that make sense?

              Democracy - 1 person 1 vote. Free Markets - More dollars more power.

              by k9disc on Mon Feb 23, 2009 at 11:59:54 PM PST

              [ Parent ]

  •  Nationalize them! (0+ / 0-)

    Make AIG the property of the U.S. Government, let them stay in business so customers and such don't get screwed.

    In the meantime, pick apart the carcass, throw out all the bad paper, all the worthless "assets" and all the bad debts, pick out what's left that's still good, put them under new management, and when the new AIG that was built Frankenstein-like out of the old AIG is solvent, sell it back into private hands.

    That's what we should be doing instead of giving them free TARP money - that's all money down the toilet.

    Waster of electrons, unlawful enemy combatant. http://meldroc.com/

    by meldroc on Mon Feb 23, 2009 at 02:34:19 PM PST

  •  Oops! Sorry AIG (7+ / 0-)

    Your first payment was late we are boosting your interest rate to 29.99%.

    Pay up deadbeat!

  •  Too many people want theft to succeed (3+ / 0-)
    Recommended by:
    JuliaAnn, fumie, Paul Goodman

    The problem is simple: connected people in investment banking and their politician friends created "opportunities" in the form of utterly worthless credit default swaps payable in the trillions. In order to "bailout" AIG, the US Govt, or indeed, all world governments would need to contribute to the system more than the planetary GDP.

    Or we could declare the fraud of 2000-2008 an actual fraud, hold some people really accountable (i.e. jail time), and declare that anyone who helped perpetrate the fraud gives back what they got, and gets not one cent more of compensation.

    The devil will be what to do with those innocent bystanders whose many got tied up in worthless asset-backed commercial paper, or similar dodges. They will have to settle for cents on the dollar, because the reality is that they may very well get nothing or a lot less if they don't settle.

    Nationalizing is the only way to take these kind of steps. But no one wants to admit the truth, because everyone's afraid of some consequence. Meanwhile, the paralysis we endure as a result of that fear dooms us to a far worse fate. It's like trying to decide whether to reverse course or gun the engine while sitting in the middle of the railway tracks. Fear of those two options is leaving us with option 3... do we really want that?

    Focus on what matters.

    by thingamabob on Mon Feb 23, 2009 at 02:36:29 PM PST

  •  I work in Life Insurance. (7+ / 0-)

    This will only mean that in the coming weeks I'm going to see application after application from clients looking to replace their coverage with a more financially sound insurer.

    If AIG goes under?  I'm not sure what that means, honestly.  They're supposed to have enough reserved to handle all reasonable claims.  The insureds' policies should be solid.  I don't know how that works if the company goes under completely.

    What we don't know keeps the contracts alive and movin. They don't gotta burn the books, they just remove em while arms warehouses fill as quick as the cells.

    by Black Leather Rain on Mon Feb 23, 2009 at 02:39:50 PM PST

  •  Congress and White House refuse (6+ / 0-)

    to deal with these Credit Default Swaps, which represent a true fiscal "black hole."  Today, there are reports of credit swappers betting on sovereign risk.  How long will DC politicians stand aside while these traders topple corporations and governments?

  •  Mother may I have another??!! (2+ / 0-)
    Recommended by:
    bink, Cassiodorus

    The truth is that 60 billion is a single line of coke for these crooked fuckers......They litterly have TRILLIONS of crap paper obligations owed to every major bank and institution in the world......

    People it's either AIG or OUR Country.....WHO DO YOU CHOOSE????

    FUCK THESE CROOKS!!!

  •  Then It's Time For Bankruptcy (0+ / 0-)

    If the company can't be made a "going concern" with the sizable bailout it just got, then it's dead meat.

    Let's let AIG go and move on!

  •  Seeds You maybe right about backstops, (0+ / 0-)

    but sooner or later you run out of fence and post.

  •  One thing I wish you had addressed... (1+ / 0-)
    Recommended by:
    joynow

    What happens if they go bankrupt? Right now that sounds like a pretty good option, but what do I know?

    •  Make them sell their homes and cars, hock (1+ / 0-)
      Recommended by:
      JuliaAnn

      their jewels, silver, crystal and art, sell their clothes in second hand shops, fire their help, put their kids in public schools, give up the call girls and cocaine, sell everything they hid in their kids names, their wives names and UBS. They can liquidate their wine collections and antiques. They can borrow on their trust funds, ask their parents for money and They can turn over that money to the taxpayer and we will see if we think they are worth the risk for more bail outs.

      15,000 CA diabetic school kids in danger due to recent court decision.Shame on the ANA,CNA,CSNO. Info http://tiny.cc/uVmZF

      by foggycity on Mon Feb 23, 2009 at 07:47:58 PM PST

      [ Parent ]

  •  Give me the first bail out back or (2+ / 0-)
    Recommended by:
    pollbuster, 3goldens

    I'll seize all your assets including all your buildings and property.

  •  America to AIG: Drop Dead. (4+ / 0-)

    If they go bankrupt, good riddance.

  •  Their threatening to go bankrupt? (2+ / 0-)
    Recommended by:
    k9disc, 3goldens

    That's just what I needed today--a good laugh.

    "We had a decisive win... and so I don't think there is any question we have a mandate to move the country in a new direction." Barack Obama

    by pollbuster on Mon Feb 23, 2009 at 03:29:33 PM PST

  •  Maybe they should also threaten (1+ / 0-)
    Recommended by:
    3goldens

    to not do what they usually do everyday--steal.

    "We had a decisive win... and so I don't think there is any question we have a mandate to move the country in a new direction." Barack Obama

    by pollbuster on Mon Feb 23, 2009 at 03:30:51 PM PST

  •  why keep pumping blood into a corpse??? (2+ / 0-)
    Recommended by:
    gjohnsit, 3goldens

    maybe best to just let these too big to fail - fail. either way, we the people is just one mass of hurt already.

    someone needs to press the 'reset' button - get the worst over with so we, as a nation, as a people, can actually start to recover.

  •  PERSEPCTIVE! (5+ / 0-)

    To put that in perspective, remember when Hillarycare was too expensive for America? It's cost was $110 Billion to insure all Americans. Now we've thrown $150 Billion at an insurance company, and that appears to be just the downpayment.

    Well, what would it cost to insure all Americans TODAY???

    The road to hell has not YET been paved with Republicans, but it SHOULD be -- Corrected BumperSticker

    by ge0rge on Mon Feb 23, 2009 at 03:37:01 PM PST

  •  On a very much related note (6+ / 0-)

    Yves Smith does the take-down at nakedcapitalism.com on the government's statement today pledging support to the banksters.

    All the more reason to be distrustful that either the good of the global economic system as a whole or American citizens in particular are on the front burner with regard to AIG.

    •  The money quote (1+ / 0-)
      Recommended by:
      JuliaAnn

      And there is no acknowledgment of what you intend to do about deficient private management, save throw more money at it, which does not sound reassuring.

    •  Thanks for the link to Yves Smith (2+ / 0-)
      Recommended by:
      notcaesar, Areopagitica

      I get e-mails from the U.S. Treasury and today received the one about the pledge of support to the banksters.  I felt like writing back and telling them to issue a warning before they just shoot these e-mails to unsuspecting citizens.  I almost had a stroke.  I'm speechless at the brazenness of that announcement from the Treasury, FDIC, OTS, etc.  Geithner needs to get his ass out in front of the cameras and explain himself.  And where is Bernanke?  He is suddenly invisible!

  •  Me, Too (3+ / 0-)

    Give me bailout or I'll have a bankruptcy.  Serious!

    You can call me "Lord Bink Forester de Rothschild."

    by bink on Mon Feb 23, 2009 at 03:51:22 PM PST

  •  Bankrupt Hank Greenburg and sons first (5+ / 0-)
    Recommended by:
    bink, gjohnsit, JuliaAnn, justmy2, 3goldens

    First, every penny of Hank Greenburg and his son's money must be extracted from them, including all that has been run through the Cayman Islands and other offshore hiding places and in all the spun off companies and retirement plans for himself and his family, then it should be run by some competent and honest folks for a few years.  Its assets can then be broken out and sold to private entities.

    Whether it is truly "nationalized" or just the majority of the voting stock taken over by a public supervised entity, whether the government or a new business entity, is not really as important as putting in honest and ethical management who will vacuum back all the money the Greenburg family took out over the years and the management they put in are also thrown out with all their stock and payments recovered.

    For those who don't know who Hank Greenburg and his sons are, do the google search and make room in your "Birds of a Feather" file next to Madoff and Stanford.

  •  Where's the fucking Party of No?!?!?! (3+ / 0-)

    Let's just sic the Rethugs on 'em...oh wait, they'll probably be FOR "stimulating" AIG.

  •  Let AIG fail. Goodbye, good riddance. (3+ / 0-)

    They are thieves anyway.

    Don't be so afraid of dying that you forget to live.

    by LionelEHutz on Mon Feb 23, 2009 at 04:09:39 PM PST

  •  Why isn't Santelli ranting on this one? n/t (1+ / 0-)
    Recommended by:
    3goldens
  •  If we OWN 80% of AIG, let's RUN AIG (0+ / 0-)

    Start by replacing the clearly incompetent Board of Directors and appointing some new executives.

    I think we don't technically own 80% yet though.  Don't we have to wipe out the common stockholders first?

    -5.63, -8.10. Learn about Duverger's Law.

    by neroden on Mon Feb 23, 2009 at 04:33:50 PM PST

  •  Crash and Burn: What more can you say! (0+ / 0-)

    Dow at 7,100...Citicorpse and Geithner's playing doctor: Please don't die on me, Citicorpse...Breathe, Breathe more taxpayers' money! Open checkbook, for real look: the "authorities" will do whatever it takes to keep the stinking, putrid bones of the great, free-market enterprise system from rotting, huh?
    Game over, Obama should wake up and start implementing that Change We Can Believe In before it comes in the form of tinkling sounds in tin cups on street corners!

  •  Love it. I watch my favorite football (soccer) (0+ / 0-)

    team Manchester United play and I chuckle to myself every time. I should be getting free tickets to the games! At least they're canceling their contract. We always joke the front of our jerseys should say IOU...

    "indifference is the one thing that makes the very angels weep."-Cornell West

    by misreal on Mon Feb 23, 2009 at 04:47:30 PM PST

  •  Cram Down AIG's CDS to 50 cents on the $$$ (2+ / 0-)
    Recommended by:
    JuliaAnn, theworksanddays

    The governemnt needs to ensure that AIG's core insurance businesses remain functioning.  These are used by many individual customers globally.  However, we do not have to pay off the CDS written by AIG at 100 cents on the dollar. Let the Financial Services Subsidiary go broke and pay off at some reduced percentage on the dollar. Do a CRAM DOWN like proposed on mortgages.

    Wall street trading desks are betting that they have the government as their counterparty not AIG.  They would realize an extraordinary profit if paid off with taxpayer dollars.  CRAM THEM DOWN to 50 cents on the dollar!!! or let them pay back the premiums they paid.

    It is not clear to me that this can be done without bankruptcy. Merrill and Countrywide hurt B of A because they did not go through bankruptcy and force debt holder to bear some of the burden. They were paid at 100 cents on the dollar, not the pennies they deserved. All the good financial services acquisitons were forced through bankruptcy before being purchased. The same should go for taxpayer purchases.

    AIG's core insurance businesses have value. If done without bankruptcy you are transferring taxpayer dollars to the profit accounts of CDS traders. Hire bankruptcy experts to find out what is best for the taxpayer not Wall Street!!!  

  •  For once these greedy Bast__ds (0+ / 0-)

    Just once, I'd like to hear these bankers, Mortgage Houses and Finance House who made and bought into these Securitized Mortgages and lets remember, 90% of Mortgages are good and paying off, it's the % of those that have lost their homes, due to losing their jobs and rest of the % is rapped up in making bad deals, unethically and immorally, some say, unholy as well, are the rest.

    Not one news report about a gun to the head of a Mortgage banker, or Underwriter to give a Mortgage, for a home worth $120,000, but sold and sign-off on a mortgage for $250,000, you tell me who sold who what and why?

    Look, just one board, just one CEO would, write down the debt they hold, lowering the interest rate on Credit Cards, Loans, cutting the principle, and lowering the payments and the problems solved, but no these... these... keep holding the bad debt and refuse to do anything, they sit there watching the Markets crater, each day and can solve this, we've given them Billions and they won't throw up a gut full of puke.

  •  I am kind of half buying what you're saying, (1+ / 0-)
    Recommended by:
    j1j2j3j4

    but I'm not completely convinced. If AIG owns 20% of the People's Insurance Company of China, wouldn't it just be cheaper and well perfectly doable for China to bail out that 20% instead of going through this whole convoluted process you have laid out? Or am I missing something?

  •  drag 'em out of their offices (4+ / 0-)

    shoot 'em in the head and stick their heads on pikes in the nearest public square.  Don't they cut the hands off thieves in some moslem countries?

    I run a homeless shelter and work w/people whose only income is 176$ a month in food stamps.  The "lucky" ones get 840-960/mo SSI/SSDI.  Not ONE of the fucks in charge of any bank or financial institution has been fired or let go.  They're getting fucking bonuses and, when push comes to shove, stealing money from the rest of us and because, ultimately, service for low income/extremely low income/no-income folks are going to get squeezed and cut, its' not to far of a leap to say some of our neediest people will die for those sons of bitches that fucked our economy.  

    Bernie Madoff wiped out 50 fucking BILLION dollars worth of money and is under 'house arrest' in his fucking apartment.  I've got guys here who've  spent three or more days in jail for possession of an unpacked bowl.

    I say fuck those punk ass Wall Street bitches.  Drag 'em into the street, shoot 'em down like rabid dogs and stick their heads on pikes.  Vlad the Impaler had the right idea for dealing with scum like these.

    •  Don't Their Windows Open Any Longer? (2+ / 0-)
      Recommended by:
      bnasley, Interceptor7

      Motherfuckers should jump.

    •  Can't you pair up lucky ones (1+ / 0-)
      Recommended by:
      bnasley

      so they can find an apartment together?

      •  very hard to do (0+ / 0-)

        especially w/SSDI recipients.  Alot of the SSDI recipients are on SSDI for mental health reasons and stability isn't one of their best attributes.  There's also the issue of them being able to save up the money for deposits and such, even w/a payee.  

        This is one of the frustrations that led me to my comment above.  We don't properly fund mental health in this country.  The problems of homelessness & panhandling have been around fohhhh-evah BUT in the '80's the federal government began to cut funding for state mental hospitals and institutions.  The states' political will to keeping funding for those places was also very much on the wane (EVERY major city was also drastically cutting funding for basic upkeep of infrastructure in those years).  By the late '80's & early '90's many institutions had entirely shut down or were operating at 10% capacity (or less) and, guess what, as a direct correlation, panhandling & homelessness went up.

        I pretty much screen out people w/severe MH problems from being allowed out to the shelter I run.  However, even amongst those I do allow out, there's a pretty decent percentage who wouldn't really be the best roommate in the world.  We really need to fund supervised living & half-way houses.  If you're really interested, San Francisco's Care-Not-Cash program, though controversial, I think did some good things.  

    •  I am in total agreement with you, bnasley (1+ / 0-)
      Recommended by:
      bnasley

      AbsolutelyfuckingA dead on.

      •  thanks, I'm so frustrated and angry... (2+ / 0-)
        Recommended by:
        JuliaAnn, Interceptor7

        I'm pretty much a non-violent person but...  Not one of the motherfuckers have been fired even though every talking head and elected official on TV says were in deep shit.  If that's the case, why do ALL the folks running the various financial entities still have fucking job.  Lemme tell ya', when I was a carpenter, if I'd crashed my boss's truck into his house, left all the power tools out in the rain and ran up his account at the local Home Despot on candy in the fucking checkout aisle HE WOULDA' FIRED MY ASS!!!!!!!!!!!!!!!!!!!!!!!!  I sure as hell wouldn't have gotten a christmas bonus and keys to his other truck.

        •  woo hoo for a fellow carpenter! (1+ / 0-)
          Recommended by:
          bnasley

          Amen brother. If I fuck up on the job, my ass is gone.
          Same for the fucks who did this, and while we're at it, let the investors take a fucking bath with them.
          They took the risk and invested in shit, they get shit.
          If the capitalists who did this want free markets, they can burn in their free markets.
          Whew! I need to vent too. This is really pissing me off.

          -7.88/-4.41 "The blood sucking aristocracy stood aghast; terror stricken, they thought the day of retribution had come." - John Ferral, union leader

          by Interceptor7 on Mon Feb 23, 2009 at 09:01:27 PM PST

          [ Parent ]

        •  God knows, I know (2+ / 0-)
          Recommended by:
          bnasley, Interceptor7

          I have paid all my life, obeyed all the rules.Have had 2 homes, 3 cars -- banks made all the money -- triple, quadruple the original loans. I paid off student loans, credit cards. I have never had food stamps or government assistance. Now I am unemployed, basically, and in hock to the utility companies (deregulated assholes burning coal and profiting hand over fist and also paying outrageous CEO salaries but no external costs for cooking our world), and while I can hardly make enough to deal with rent and phone charges and to feed my daughter, I am asked to bail out these motherfuckers. I have nothing.NOTHING. No retirement. No health care. NOTHING. I really 'don't know how our government expects a nation of sullen unemployed tomagically disappear corporate shenanigan debt.

          The rich always get bailed out,except when there's finally a revolution. That happens when people literally begin to starve.

          Hate to admit it, but my stomach is rumbling pretty loud.

          •  two years ago I made a bad career choice (1+ / 0-)
            Recommended by:
            JuliaAnn

            wound up running up 40K+ on the credit cards and realized in the process of becoming homeless I was just never going to pay the money back.  I don't have much respect for the way CC companies earn their money (didn't Europe have usury laws even in the dark ages?) but I knew what the deal was when I signed the agreement.  I've ALWAYS been scrupulously honest in my business dealings so my decision to say "fuck it" has nagged at my conscience somewhat for awhile.  Welllllll.....  FUCK THAT!!!!  As a US citizen, whatever my portion of the bailout was that I was expected to cough up, well, I got mine back.  No pangs of conscience anymore on my part.

  •  Strange. I used to work for AIG. (0+ / 0-)

    And their name is American International Group, not American Insurance Group.

    This is fishy... how can they NOT get the name right?

    •  AIG is the parent -- Greenberg was the boss (0+ / 0-)

      The American Insurance Group is the parent--see

      http://en.wikipedia.org/...

      There are many many many sub parts.

      Many of the sub parts are in fine shape and carefully monitored by those states that do, in fact, monitor insurers in their states.

      See the list in the wicki article

      and it is the Greenberg family, not Greenburg--I misspelled it in earlier post.

      •  No, I have to disagree (0+ / 0-)

        I worked in HR, so I know about all the groups.  They are all American International Group... then it's broken down... AIG Leveraged Finance; AIG Affordable Housing; AIG American General; AIG SunAmerica; AIG... etc.  Even internationally, it is all AIG (American International Group) with the sub-group name to follow.

        American International Group is the parent; there is no American Insurance Group that I know of.

      •  Here you go (0+ / 0-)

        http://www.aig.com/...

        No such thing as American International Group.  The only thing Google will show you if you search there is where the idiot press has screwed up.

  •  Wall Street is playing chicken with taxpayers (3+ / 0-)
    Recommended by:
    JuliaAnn, Jbeaudill, Knarfc

    The Wall Street media machine's main goal is to get taxpayer to pay off the bonds of failed banks at par (100 cents on the dollar). Rick Santelli and Larry Kudlow are all about free markets for their friends (not mainstreet)

    Nouriel Roubini and Meredith Whitney are right, there is another trillion or two of losses floating around the casino. Several of the big banks are bust - the Wall Street media machine is lobbying for their bondholder to get paid off at par. The shareholders are just about done. AIG included. Also, expect giant losses in pension funds to be reported after April.  

    The bondholders should not get off unscathed. An orderly and fast bankruptcy can be orchestrated through the FED or FDIC that CRAMS DOWN the debt of some of the bondholders to current market values. You can pay off senior bonds at 75 cents and junior bonds at 25 cents. Why should the taxpayer pay these people out at 100 cents on the dollar?  No way!!!  

    The government will run out of bail out money.  They should start to have some discipline now before it is too late.  Make sure your money market fund owns treasuries.

  •  Too big to fail = too big to succeed. (0+ / 0-)

    It works all over, every time.

  •  So We own Aig/Citi/BofA. (0+ / 0-)

    Lets start making booking for rooms in the Hamptons.
    And No I'm not kidding, throw the sum of a Bitches
    out. I want to have a room in Mr. ken Lewis part time home.

  •  Not gonna read all the comments, but (2+ / 0-)
    Recommended by:
    ohcanada, Jbeaudill

    how come U.S. taxpayers have to bear the burden?
    Is this not a GLOBAL problem?
    Why can't taxpayers in LOTS of countries pony up as well?
    Americans aren't the only ones who are insured by AIG.
    Hell, isn't AIG headquartered in Switzerland?
    Let's get some Europeans taxpayers to help.
    Some Asian taxpayers....some South Americans...some....

    You're wrong for thinking I'm wrong, so that makes you wrong twice.

    by ohmyheck on Mon Feb 23, 2009 at 05:28:10 PM PST

    •  American International Group (1+ / 0-)
      Recommended by:
      Interceptor7

       

      American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.

      Who is on the Board? Thats all you need to know.

      Think Tank. "A place where people are paid to think by the makers of tanks" Naomi Klein.

      by ohcanada on Mon Feb 23, 2009 at 07:19:52 PM PST

      [ Parent ]

  •  FUBAR...ALL OF IT FUBAR (4+ / 0-)
    Recommended by:
    mijita, Knarfc, Interceptor7, randomfacts

    There are no other words/thoughts to describe this colossal fucking unmitigated disaster

    F - ucked
    U - p
    B - eyond
    A - ll
    R - ecognition

    Trust only movement. Life happens at the level of events, not of words. Trust movement. Alfred Adler

    by Hamsun on Mon Feb 23, 2009 at 05:58:07 PM PST

    •  Pretty Amazing, Really (3+ / 0-)
      Recommended by:
      mijita, JuliaAnn, randomfacts

      When Clinton left office, all was well, relatively. Now, we know where we are at; fucked.

      I mean, to get THIS fucked you almost have to try to fuck everything up. Try really hard to not make any non-mistakes along the way.

      Incredible.

      •  Exactly (0+ / 0-)

        But you know, the problems with the American economy and American business is caused by over regulation.

        /snark

        the third eye does not weep. it knows. Political compass: -9.75 / -8.72

        by mijita on Mon Feb 23, 2009 at 08:00:20 PM PST

        [ Parent ]

      •  Sometimes what appears (0+ / 0-)

        to be design is only the logical conclusion to a series of choices, evolving and developing over time, with many many connections and overlappings.

        Which doesn't make it any less insane. It makes it almost more insane.

        Why are we bailing out a company that isn't worth it? Because 20% of China is insured by them. Why does that matter? Because China buys US debt. Why do have so much debt? Because we have to spend so much to bail out companies like AIG.

        "YOPP!" --Horton Hears a Who

        by Reepicheep on Mon Feb 23, 2009 at 09:22:57 PM PST

        [ Parent ]

      •  You're right that it looked good when Clinton (0+ / 0-)

        left but many of the changes, the deregulation started in Clinton era...credit default swaps really got going then too.
        If Clinton had remained president or Gore or Kerry had gotten in I assume they'd have made corrections as those policies started causing clear problems years ago (though I don't know how they weren't anticipated)

        But I agree that it looks like to get things THIS fucked you almost have to try to fuck everything up. They succeeded. They pushed the bad along and actively stopped people who tried to correct it, even stopped the states from protecting their people from predatory lenders, banned or over ruled any laws or court actions against federal banks doing it. See
        Predatory Lenders' Partner in Crime

        How the Bush Administration Stopped the States From Stepping In to Help Consumers
        By Eliot Spitzer
        Thursday, February 14, 2008;

        They were blocked way back in 2003...why would they want to enable predatory lending that way if they didn't want things to get worse and worse. (And since it was all 50 states fighting this why isn't it brought up more?)

  •  AIG and the China connection..... (0+ / 0-)

    Now this brings up all kinds of questions....

    AIG and China....Inquiring minds want to know

  •  What they are probaly not telling us: (2+ / 0-)
    Recommended by:
    JuliaAnn, Jbeaudill

    A great majority of AIG's losses are attributable to it having to cover, that means pay cash, on billions of dollars of "credit default swaps", a business that was and remains wholly UNregulated and limited to a few players.  

    Dreams have a way of betraying you when you use them to escape. Ask yourself why you dream what you dream.

    by brjzn on Mon Feb 23, 2009 at 06:16:49 PM PST

  •  moved to enforce a Freedom of Information Act (4+ / 0-)
    Recommended by:
    mijita, VoteAqui, Losty, HKPhooey

    By Anthony M. Freed

    Advocates of an open Government and transparent allocation of taxpayer funds celebrated the news late Friday afternoon (2-20-09) that the U.S. District court has moved to enforce a Freedom of Information Act (FOIA) request to release more details about exactly how TARP bailout funds have been and are being used.

    There's a long, long trail a-winding into the land of my dreams.

    by allenjo on Mon Feb 23, 2009 at 06:30:39 PM PST

  •  Who loses if AIG goes bankrupt? (2+ / 0-)
    Recommended by:
    Jbeaudill, Interceptor7

    Whoever they are I expect we'll be hearing from them quite vociferously this week.

  •  Nationalise it (1+ / 0-)
    Recommended by:
    Jbeaudill

    just as the British did to Northern Rock..it might not be worth much..but at this point..the company almost exists solely at the governments discretion anyway.

    Think Tank. "A place where people are paid to think by the makers of tanks" Naomi Klein.

    by ohcanada on Mon Feb 23, 2009 at 07:16:36 PM PST

  •  Jump You Fuckers (2+ / 0-)
    Recommended by:
    greenearth, Interceptor7

    What are you waiting for? JUMP !!!

  •  AIG too big to (1+ / 0-)
    Recommended by:
    Jbeaudill

    fail. Too big to feed. Too much to swallow.

    "Getting (re)elected is politicians' only true moral imperative."

    by zackamac on Mon Feb 23, 2009 at 07:19:50 PM PST

  •  The Pentagon is now officially more careful with (0+ / 0-)

    our money.(Not the Bush era Pentagon) AIG execs should be fired, our government can't do any worse than those boneheads. We no longer need to allow them to run the company. Threaten bankrupty all you want AIG. But my government can do as good or better a job as you can so we don't think you should be kept on if you get a single dime.

    15,000 CA diabetic school kids in danger due to recent court decision.Shame on the ANA,CNA,CSNO. Info http://tiny.cc/uVmZF

    by foggycity on Mon Feb 23, 2009 at 07:52:47 PM PST

  •  FBI ought to march AIG out onto Wall Street... (2+ / 0-)
    Recommended by:
    Jbeaudill, HKPhooey

    and Obama could declare an end to the insanity of naked credit default swaps and the predictable market-driven failure of derivatives, mortage-backed securities and other "instruments" (of economic torture).

    Hedge funds and sovereign funds around the world would scream bloody murder, the rich would be ruined, crying and committing suicide (but those are the breaks when you f**k up the world's economic system.)

    Just triple your SS detail and warn Bush & Cheney that they're next in line for rendition to The Hague if they open their f**king mouths.

    It will be called war on the rich by CIA's Mighty Wurlitzer, but Obama will win hearts and minds everywhere. Krugman will swoon! And in just six months, the 'credit crisis' will look like a bump in the road, and it will be ended. America will go back to work for a sustainable future. It may even mark the end of the oppressive rule of Bilderbergers.

    I would also urge Obama to tap Bush I's phones and do in  whoever, whatever and whenever anything looks threatening anywhere for the duration.

    American bankers will survive to resume a bygone era of due diligence. All may soon be well in the realm and abroad. This bullshit must end!

    "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." -Thomas Jefferson

    by ezdidit on Mon Feb 23, 2009 at 07:58:30 PM PST

  •  Our economic system is faltering (0+ / 0-)

    and should be scrapped. We currently have a system where goods are produced and services provided which provide relatively short term profit for companies and individuals while long term considerations are for the most part ignored. This leads to over use and wasteful use of natural resources and the pollution of our environment. We are stuck with a monetary exchange system which has developed and evolved over thousands of years and is no longer working for the common good. There is no need to be wedded to it. We know what people need to survive and be kept amused. We can forget about all the debt everyone owes everyone else. We can stand back from our situation and decide what we need to do to feed ourselves, to cloth ourselves and to explore and understand our world and our universe. We can live in the world in a way that makes room for those who will come after us. Forget the Free Market. Forget debt. It's time for the world to start over with a new economic system, one who's purpose is to benefit us all.

  •  AIG FOUNDED in China Geithner speaks Mandarin (1+ / 0-)
    Recommended by:
    joynow

    I wondered why Obama choose Geithner seeing as he is one of the "experts" that brought us this Economic Chaos.
    Now it is becoming clear.....
    CHINA Choose Geithner for Obama.....

    The selection of New York Federal Reserve Bank President Timothy Geithner as President-elect Barack Obama's Treasury Secretary-designate bodes well for U.S.-China relations because Geithner has lived in China, speaks Mandarin, and has had an "Asian focus" in his career, according to a senior financial services industry executive.

    Geithner "has thoughtful views and understands the connectivity of the two economies," said Rob Nichols, the chairman of the Engage China Coalition and president and COO of the Financial Services Forum."His experience in Asia and knowledge, especially of China, will serve him well at the [Treasury] Department."

    Obama's choice of Geithner also strengthens the argument for Treasury to retain leadership of any high-level bilateral dialogue the new administration holds with China, Nichols indicated.

    http://www.engagechina.com/...

    At the core of the human spirit there is a voice stronger than violence and fear - S. dianna ortiz

    by Rachel Griffiths on Mon Feb 23, 2009 at 09:32:57 PM PST

  •  China.. and AIG (0+ / 0-)

    Who knew..it adds a new dimension.

    From 2005.....

    HONG KONG: American International Group, the world's biggest insurer, is losing its edge in China. Thecompany, based in New York and founded in Shanghai in 1919, last quarter fell from the top spot among China's overseas life insurers for the first time since 1992.

    The slide comes amid a U.S. accounting inquiry that has caused AIG to lose 27 percent of its market value in two and a half months. The company's chairman and chief executive, Maurice Greenberg, 80, resigned in March.

    "They've lost their way a little in China," said Glenn Henricksen, who advises companies on risks in China as head of CIF Consultants in Hong Kong. "They have a reputation to repair, and it's going to take a few years."

    Competitors including the Italian company Assicurazioni Generali and Prudential PLC are gaining on AIG, which was the first overseas insurer allowed back into China after the revolution of 1949.

    World Trade Organization rules opening China's life-insurance market to more overseas companies favor those with local partners - something that AIG lacks.

    Think Tank. "A place where people are paid to think by the makers of tanks" Naomi Klein.

    by ohcanada on Tue Feb 24, 2009 at 10:43:18 AM PST

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