Thread: Fed in AIG rescue - $85B loan

looks like AIG, FannieMac, FreddieMac, and BearStern get the FED bailout.

The FED will now own a stake in these select institutions

I feel so stupid that I dont understand this shit. Let me declare my ignorance as follows:

1. I define "economy" as a state of mind, rather than actually being something.

2. I dont know how AIG or Meryl Linch effects me if they go under.

Originally Posted by AKIRA

I dont know how AIG or Meryl Linch effects me if they go under.

It may or may not affect you, as an individual. It depends

Why should I care about problems at AIG if I'm not a customer?

AIG is by far the world's largest insurer and its stock is found in many mutual funds, including any S&P 500 index fund. It is also a component of the Dow Jones industrial average. All by itself, it's been responsible for dragging the Dow down more than 400 points so far this year.

AIG is also active in the business of credit default swaps, complicated financial instruments used by investors to protect themselves from bond defaults. Lehman Brothers (LEH, Fortune 500) was another major player in that field. If both go away, it would create a tighter credit market for consumers and businesses trying to get loans.

For this reason, there is a debate about whether the Federal Reserve will agree to lend the company the tens of billions of dollars it needs to cover its short-term funding needs or if the Fed will try and get private firms to assist AIG instead.

Link & Entire: Five common AIG questions answered - Sep. 16, 2008

Originally Posted by AKIRA

I feel so stupid that I dont understand this shit. Let me declare my ignorance as follows:

1. I define "economy" as a state of mind, rather than actually being something.

2. I dont know how AIG or Meryl Linch effects me if they go under.

If AIG goes under...it would be disastrous. They are the largest insurers in the world (which is ironic that they did not plan for the "rainy day"). They insure many large multinational corps which are customers of medium and small sized businesses. The ripple effect is real in this case and they needed to be bailed out with our tax dollars...but it still irks me a little

the bailout is stated at 85 Billion I believe. <<sigh>> boy am I glad that I didn't shoot for a job in the finance sector.

When is this going to stop?? You make bad decisions and don't plan for a rainy day, you pay the consequences. Don't use taxpayer money.

Originally Posted by dg806

When is this going to stop?? You make bad decisions and don't plan for a rainy day, you pay the consequences. Don't use taxpayer money.

It is about damage control. AIG filing for chapter 11 could devastate the global economy.

Originally Posted by dg806

When is this going to stop??

once we get a new president and administration.

Originally Posted by Prince

once we get a new president and administration.

I doubt it.

You are looking at atleast a generation to repair this damage.

Originally Posted by IainDaniel

I doubt it.

You are looking at atleast a generation to repair this damage.

oh, no doubt, Bush has put us in one deep hole!

Originally Posted by Prince

once we get a new president and administration.

sh*t in one hand and pray with the other

Originally Posted by IainDaniel

It is about damage control. AIG filing for chapter 11 could devastate the global economy.

I understand the DC, but why do you think they made the bad decisions? They knew the government would bail them out. No consequences for their actions.

Originally Posted by dg806

I understand the DC, but why do you think they made the bad decisions? They knew the government would bail them out. No consequences for their actions.

Bankruptcy is nothing more than a tool. If I, as an individual file bankruptcy, I pay serious consequences. In the corporate world...not so much.

You don't have a 1 trillion dollars in assets Your bankruptcy claim wouldn't cause global market chaos.

Are you sure?

Originally Posted by Prince

oh, no doubt, Bush has put us in one deep hole!

Do you think it was George Bush that was encouraging banks to hand out easy money mortgages in the name of "affordable housing?"

Get real.

It's just easier to blame Bush, especially for the uneducated!

Originally Posted by Prince

once we get a new president and administration.

doubtful...besides the banking deregulation was ratified by Clinton. Its not just president Bush that allowed this to go one...all the politicians did.

Originally Posted by IainDaniel

You don't have a 1 trillion dollars in assets

Originally Posted by DaMayor

Are you sure?

I have this sick relative that needs money........

Originally Posted by lnvanry

doubtful...besides the banking deregulation was ratified by Clinton. Its not just president Bush that allowed this to go one...all the politicians did.

Clinton, Republicans agree to deregulation of US financial systemAn agreement between the Clinton administration and congressional Republicans, reached during all-night negotiations which concluded in the early hours of October 22, sets the stage for passage of the most sweeping banking deregulation bill in American history, lifting virtually all restraints on the operation of the giant monopolies which dominate the financial system.

The proposed Financial Services Modernization Act of 1999 would do away with restrictions on the integration of banking, insurance and stock trading imposed by the Glass-Steagall Act of 1933, one of the central pillars of Roosevelt's New Deal. Under the old law, banks, brokerages and insurance companies were effectively barred from entering each others' industries, and investment banking and commercial banking were separated.

The certain result of repeal of Glass-Steagall will be a wave of mergers surpassing even the colossal combinations of the past several years. The Wall Street Journal wrote, "With the stroke of the president's pen, investment firms like Merrill Lynch & Co. and banks like Bank of America Corp., are expected to be on the prowl for acquisitions." The financial press predicted that the most likely mergers would come from big banks acquiring insurance companies, with John Hancock, Prudential and The Hartford all expected to be targeted.

Kenneth Guenther, executive vice president of Independent Community Bankers of America, an association of small rural banks which opposed the bill, warned, "This is going to begin a wave of major mergers and acquisitions in the financial-services industry. We're moving to an oligopolistic situation."

One such merger was already carried out well before the passage of the legislation, the $72 billion deal which brought together Citibank, the biggest New York bank, and Travelers Group Inc., the huge insurance and financial services conglomerate, which owns Salomon Smith Barney, a major brokerage. That merger was negotiated despite the fact that the merged company, Citigroup, was in violation of the Glass-Steagall Act, because billionaire Travelers boss Sanford Weill and Citibank CEO John Reed were confident of bipartisan support for repeal of the 60-year-old law.

It all started in 1995 with the CRA....the community reinvestment act. It forced the banks to open loans up to non-conventional models. And it originated from.......JIMMY CARTER.
Without the CRA and all the hundreds of different loans that they could squeeze you into one that you could not afford, none of this would have happened. When Democrats gained control of the house in 06, all of them were in bed with Fannie and Freddie and are still there.
Hank Paulson wanted funding for these bailouts. Mr. Bush did not give it to him. It was the Democrat led Congress.

Originally Posted by lnvanry

doubtful...besides the banking deregulation was ratified by Clinton. Its not just president Bush that allowed this to go one...all the politicians did.

Originally Posted by dg806

It all started in 1995 with the CRA....the community reinvestment act. It forced the banks to open loans up to non-conventional models. And it originated from.......JIMMY CARTER.
Without the CRA and all the hundreds of different loans that they could squeeze you into one that you could not afford, none of this would have happened. When Democrats gained control of the house in 06, all of them were in bed with Fannie and Freddie and are still there.
Hank Paulson wanted funding for these bailouts. Mr. Bush did not give it to him. It was the Democrat led Congress.

Damn you and your logic!
It's gotta be Bush's fault!
Everything wrong in this world is the fault of G.W.B.!
didn't you get the memo?

so the Bush administration who has been running the country for the past 8 years does not have responsibility for our current economy?

ummm, okay.

not at all, he has some responsibility... but you can't hang the whole thing on him....

It's George Washington's fault.

Bill Clinton's Role In The Mortgage Crisis

by Ralph Brauer | 11/27/2007 10:15:00 AM


FDR Signs the Glass-Steagall Act (Carter Glass on Left)
Many Democrats wish Bill Clinton still occupied the White House. However, before you put him in Mt. Rushmore, you might want to investigate his role in the mortgage foreclosure crisis.

The chief aim of what I have termed the Republican Counterrevolution has always been to roll back the New Deal. Anti-gov'ment rhetoric hides this as surely as states' rights hid racist segregation. Of all the New Deal legislation the GOP has sought to overturn, one that has always been at or near the top of the list is the Glass-Steagall Act. Ironically, a Democratic president repealed this for them.

Glass-Steagall

An unreconstructed Southerner from Virginia, Carter Glass shepherded the creation of the Federal Reserve System through Congress, which has caused some to call him the "founding father of the Federal Reserve System." Later Glass would serve as Wilson's Treasury Secretary, recommending aid to Europe after World War I. Just before leaving Treasury to become senator, Glass warned about banks getting involved in stocks.

In his economic history of the Great Depression, John Kenneth Galbraith pointed out one of the causes was:

The large-scale corporate thimblerigging that was going on. This took a variety of forms, of which by far the most common was the organization of corporations to hold stock in yet other corporations, which in turn held stock in yet other corporations.

Galbraith would note:

During 1929 one investment house, Goldman, Sachs & Company, organized and sold nearly a billion dollars’ worth of securities in three interconnected investment trusts—Goldman Sachs Trading Corporation; Shenandoah Corporation; and Blue Ridge Corporation. All eventually depreciated virtually to nothing.

It is hard to imagine today what it felt like to walk through the door of a bank in those days and learn that the dollars you had earned had vanished. Every day spent working and saving had been for nothing. A great many farmers, brick layers, carpenters, factory workers believed the bankers had stolen their lives.

When Franklin Roosevelt took office, both the President and Congress knew the banking crisis demanded immediate action. The result was one of the crown jewels of the New Deal: the Glass-Steagall Act, officially known as the Banking Act of 1933. Glass made sure the bill forbid banks from getting into the investment business. In addition, the bill established the Federal Deposit Insurance Company, which protects our bank deposits.

In 1971, in Investment Company Institute v. Camp, no less than the United States Supreme Court would write what stands as the most cogent summary of the reasons for Glass-Steagall:

Congress was concerned that commercial banks in general and member banks of the Federal Reserve System in particular had both aggravated and been damaged by stock market decline partly because of their direct and indirect involvement in the trading and ownership of speculative securities.

The legislative history of the Glass-Steagall Act shows that Congress also had in mind and repeatedly focused on the more subtle hazards that arise when a commercial bank goes beyond the business of acting as fiduciary or managing agent and enters the investment banking business either directly or by establishing an affiliate to hold and sell particular investments.

Many arguments the Supreme Court advanced in support of Glass-Steagall, would prove prophetic three decades later.

Bill Clinton and the Wall of Me

Billionaire Sanford I. Weill, who according to Louis Uchitelle made "Citigroup into the most powerful financial institution since the House of Morgan a century ago," has what I call the Wall of Me leading to his office, which he has decorated with tributes to him, including a dozen framed magazine covers. A major trophy is the pen Bill Clinton used to sign the repeal of the Glass-Steagall Act, a move which allowed Weill to create Citigroup. Fittingly, Citigroup is a major contributor to guess which current Democratic Presidential candidate?

A Frontline report on the repeal of Glass-Steagall shows how those with money end up with pens from the President of the United States on their walls.

Sandy Weill calls President Clinton in the evening to try to break the deadlock after Senator Phil Gramm, chairman of the Banking Committee, warned Citigroup lobbyist Roger Levy that Weill has to get White House moving on the bill or he would shut down the House-Senate conference. Serious negotiations resume, and a deal is announced at 2:45 a.m. on Oct. 22. Whether Weill made any difference in precipitating a deal is unclear.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"

When Bill Clinton gave that pen to Sanford Weill, it symbolized the ending of the twentieth century Democratic Party that had created the New Deal. Although the 1999 law did not repeal all of the banking Act of 1933, retaining the FDIC, it did once again allow banks to enter the securities business, becoming what some term "whole banks."

The repeal of one of the most important pieces of legislation in this nation's history came about as a result of another Clinton "triangulation," the wobbling attempt to find the middle of the road that has somehow managed to pass for a philosophy with many Democrats for over two decades. As former Clinton former campaign Richard Morris once described it, you move a little to the left, a little to the right. I'd love to hear Clinton give that explanation to a foreclosed home owner today.

With the stroke of a pen, Bill Clinton ended an era that stretched back to William Jennings Bryan and Woodrow Wilson and reached fruition with FDR and Harry Truman. As he signed his name, in the whorls and dots of his pen strokes William Jefferson Clinton was also symbolically signing the death warrant of Liberal America and its core belief in the level playing field that had guided the Democratic Party. But it was the gift of the pen to Sanford Weill and its assuming an honored place on the Wall of Me that rubbed salt in the wound.
In his famous First Inaugural Roosevelt asserted:

Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

Clinton not only repealed the act Roosevelt had put in place to curb those practices, but presented one of the pens used to sign it to one of those "money changers."

What Hath Clinton Wrought?

What can be said in Clinton's favor is that in 1999 few people anticipated the out-of-control growth of the hedge fund industry and the subprime mortgage market. The New York Times described the new financial world created by the repeal of Glass-Steagall in a June 2007 profile of Goldman Sachs:

While Wall Street still mints money advising companies on mergers and taking them public, real money — staggering money — is made trading and investing capital through a global array of mind-bending products and strategies unimaginable a decade ago.

Curiously, Goldman Sachs head Lloyd Blankfein paints the perfect big picture of what has happened:

We’ve come full circle, because this is exactly what the Rothschilds or J. P. Morgan, the banker were doing in their heyday. What caused an aberration was the Glass Steagall Act.

Blankfein's analysis testifies to the full impact of Bill Clinton's actions, for like many members of the Counterrevolution he sees the New Deal as an aberration and longs for a return to the days J. P. Morgan and other tycoons gave the Gilded Age its nickname. His "aberration" was eliminated not because of the actions of some radical Republican, but because of Bill Clinton. No wonder Goldman Sachs is also a prime contributor to you-know-who.

As is often the case, the story of the repeal of Glass-Steagall and the growth of the subprime mortgage market that is now crumbling around us like a financial house of cards can be best be told by a graph:



If you think of this graph as the level playing field, notice how flat it was before Bill Clinton repealed Glass-Steagall, then notice how steep it has become. Those subprime loans amount to nothing more than an organized ripoff of millions of innocent Americans, with the steepness of the graph illustrating the how far the playing field has tilted.

The result is that all of a sudden people are thinking Glass-Steagall wasn't such a bad idea after all. Robert Kuttner testified before Barney Frank's Committee on Banking and Financial Services in October, evoking the dreaded specter of the Great Depression:

Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s – lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And, much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s. Much of it isn’t paper at all, and the whole process is supercharged by computers and automated formulas.

Then there is Dow Jones MarketWatch's Kostigen:

I'm not saying that Glass-Steagall would have made a difference to the evolution of the collateralized debt obligations. But it might have helped identify and isolated the damage.

As Congress continues to investigate the mortgage crisis, more people are wondering whether the repeal of Glass-Steagall was a mistake.

The Future of Your Mortgage

In testimony before Congress on November 8, Federal Reserve Chair Ben Bernanke painted a grim picture of the current crisis and even grimmer picture of the future:

On average from now until the end of next year, nearly 450,000 subprime mortgages per quarter are scheduled to undergo their first interest rate reset. [My emphasis]

According to a December 2006 study by the Center for Responsible Lending, a nonpartisan research and policy organization:

More than 2 million people with subprime loans are facing foreclosure this year and nearly 20 percent of subprime mortgages issued between 2005 and 2006 are projected to fail.

But numbers and testimony and even history mean little to those who suddenly find themselves up against the wall. In every city and town across this country "For Sale" signs are popping up on lawns. Behind each of those signs lies a personal story, a family tragedy, which like the tragedies of the Great Depression, tells of innocent Americans felled by an affliction they never saw coming. Walk any street in this country today--even in affluent neighborhoods--and each time you see one of those signs the hairs on the back of your own neck stand up, because those signs instill the same fear people felt when they walked into a bank in 1932 and found their money gone.

Two million people have found themselves one step away from figuratively being tossed out onto the street, the way millions were in the 1930s. Meanwhile, there are young people starting new lives for whom home ownership is rapidly receding, middle-aged people who finally had scraped together enough for a down payment only to find they can't get a mortgage and older people for whom their home was their retirement and now find its value dropping like George Bush's poll numbers. Finally there are even millions more for whom the collateral damage from the crises promises to cast its shadow over their American Dream.

The International Monetary Fund recently drew the following lessons from various financial crisis:

It is difficult to tell at the time whether a financial crisis will have broader economic consequences

Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

Both have characterized what happened after the repeal of Glass-Steagall. It is too bad Bill Clinton did not have their wisdom when he made his decision, but then when you make decisions by triangulating, how much weight do you give such studies?

And the current crop of politicians? Look closely at their donor lists, which I detailed in the series "Follow the Money." Then wonder why no moderator or other candidate has asked Hillary Clinton if she supports her husband's repeal of Glass-Steagall? Ask the other candidates if they support Bill Clinton's move.

Meanwhile the signs keep sprouting and the playing field keeps tilting and soon the snow will start to fall, drifting against the signs. How many more people will have lost their homes when the snow melts?

First NAFTA and now this.......can't anybody do the job right.

President Clinton Signing NAFTA

THE WHITE HOUSE


Office of the Press Secretary
__________________________________________________ ____________
For Immediate Release September 14, 1993




REMARKS BY PRESIDENT CLINTON,
PRESIDENT BUSH, PRESIDENT CARTER, PRESIDENT FORD,
AND VICE PRESIDENT GORE
IN SIGNING OF NAFTA SIDE AGREEMENTS


The East Room



10:39 A.M. EDT



VICE PRESIDENT GORE: Ladies and gentlemen, please be
seated. We'd like to welcome all of you. President and Mrs. Ford,
President and Mrs. Carter, President Bush, Mr. President, to the First
Lady, to the Ambassador of Mexico, Mr. Montano, Ambassador Keegan of
Canada, Ambassador Kantor. To the distinguished leaders of Congress
here -- the Speaker of the House Tom Foley -- I got you all a little
out of order, I apologize -- and to the Majority Leader, Senator
Mitchell; to the Republican Leader, Senator Dole; the Minority Leader
of the House Bob Michel; to all of the distinguished members of the
House and Senate who are here. To the other members of our Cabinet --
of President Clinton's Cabinet who are here --Secretary Christopher,
Secretary Bentsen, Secretary Espy, Secretary Reich, Secretary Riley,
Secretary Browner, Secretary Babbitt, Attorney General Reno, OMB
Director Panetta. And to all of the distinguished guests who are
present. We deeply appreciate the demonstration of support for a
treaty of such importance to the United States of America.


If you're anything like me and my family, you're still
kind of rubbing your eyes a little bit after yesterday's event, where
the Prime Minister of Israel and the Chairman of the PLO were on the
White House lawn. But that event has something in common with the
event here this morning; something that was thought to be impossible,
but good for our country and good for the world was made possible by a
long series of commitments by presidents in both parties.


There are some issues that transcend ideology. That is,
the view is so uniform that it unites people in both parties. This
means our country can pursue a bipartisan policy with continuity over
the decades. That's how we won the Cold War. That's how we have
promoted peace and reconciliation in the Middle East. And that's how
the United States of America has promoted freer trade and bigger
markets for our products and those of other nations throughout the
world. NAFTA is such an issue.


The presence of three former presidents, two Republicans
and one Democrat, to join President Clinton here today on this stage,
is evidence of our country's ability to support what is in our
nation's best interest over the long term without respect to
partisanship.


Arthur Vandenberg, the Senator most identified with
bipartisanship during and after World War II once wrote:
"Bipartisanship does not involve the remotest surrender of free debate
in determining our position. On the contrary, frank cooperation and
free debate are indispensable to ultimate unity."


We will, indeed, have much room for free debate during
this controversy. That it is in our nation's best interest to ratify
and pass this treaty cannot be left to doubt. The person who is
leading the fight and who has marshaled support in both parties is the
person it is my pleasure to introduce now. The President of the
United States, Bill Clinton. (Applause.)


THE PRESIDENT: Thank you very much. Mr. Vice President,
President Bush, President Carter, President Ford, ladies and
gentlemen. I would like to acknowledge just a couple of other people
who are in the audience because I think they deserve to be seen by
America since you'll be seeing a lot more of them: my good friend,
Bill Daley, from Chicago; and former Congressman Bill Frenzel from
Minnesota, who have agreed to lead this fight for our administration
on a bipartisan basis. Would you please stand and be recognized.
(Applause.)


It's an honor for me today to be joined by my
predecessor, President Bush, who took the major steps in negotiating
this North American Free Trade Agreement; President Jimmy Carter,
whose vision of hemispherical development gives great energy to our
efforts and has been a consistent theme of his for many, many years
now; and President Ford who has argued as fiercely for expanded trade
and for this agreement as any American citizen and whose counsel I
continue to value.


These men, differing in party and outlook, join us today
because we all recognize the important stakes for our nation in this
issue. Yesterday we saw the sight of an old world dying, a new one
being born in hope and a spirit of peace. Peoples who for a decade
were caught in the cycle of war and frustration chose hope over fear
and took a great risk to make the future better.


Today we turn to face the challenge of our own
hemisphere, our own country, our own economic fortunes. In a few
moments, I will sign three agreements that will complete our
negotiations with Mexico and Canada to create a North American Free
Trade Agreement. In the coming months I will submit this pack to
Congress for approval. It will be a hard fight, and I expect to be
there with all of you every step of the way. (Applause.)


We will make our case as hard and as well as we can.
And, though the fight will be difficult, I deeply believe we will win.
And I'd like to tell you why. First of all, because NAFTA means jobs.
American jobs, and good-paying American jobs. If I didn't believe
that, I wouldn't support this agreement.


As President, it is my duty to speak frankly to the
American people about the world in which we now live. Fifty years at
the end of World War II, an unchallenged America was protected by the
oceans and by our technological superiority; and, very frankly, by the
economic devastation of the people who could otherwise have been our
competitors. We chose, then, to try to help rebuild our former
enemies and to create a world of free trade supported by institutions
which would facilitate it.


More.....a lot more..

Originally Posted by brogers

Do you think it was George Bush that was encouraging banks to hand out easy money mortgages in the name of "affordable housing?"

Well, I believe there is some truth to this. The federal reserve / Alan Greenspan dropped and kept interest rates low after 9/11 due to fear that terrorism would hurt our economy. The supply of credit soared and borrowing increased drastically.