10 Comments for this entry

1. freemonster says:

   March 7, 2009 at 6:16 AM

   No we won’t. Another fed disaster. Time for a change
2. John M. says:

   March 7, 2009 at 6:18 AM

   Igor is “weeping” as the WSJ reports 10s of billions of taxpayer’s (future) dollars heading to the usual suspects. It’s not obvious how they got the list, but I presume there’s a diffuse paper trail that signals where the bailout bucks are going when there’s enough of them.

   “Top U.S., European Banks Got $50 Billion in AIG Aid”, by Serena Ng and Carrick Mollenkamp, Wall Street Journal, March 7, 2009.
3. AZSALUKI says:

   March 7, 2009 at 8:48 AM

   here’s two links:

   http://www.pbs.org/nbr/site/onair/transcripts/interview-with-aig-ceo-edward-liddy-090302/

   http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=AIG&period=qtr

   the first is an interview with the CEO where he says it’s just going to their debt, which i’ll buy. my question would be how are they deciding who to pay back first? if they’re not bein straight, and they know they’ll eventually fall, there’s nothing to prevent them from preferentially paying back certain debt. the second link is their balance sheet (not in detail, and no supporting schedules). you can see that 65% of their total assets are “investment securities.” valued at over 600 billion on sep 30…..so what are they worth now? just glancing at the balance sheet, i don’t see how anything short of a half trillion will keep these guys afloat?
4. AZSALUKI says:

   March 7, 2009 at 8:53 AM

   http://www.cnbc.com/id/29565683

   here’s some of the “usual suspects.”
5. John M. says:

   March 7, 2009 at 9:14 AM

   AZSALUKI (#3) -

   I think this assertion about unintended consequences of BAPCPA might speak to the “who gets paid first” question:
   

   I’m sure the knowledgeable people already know this. But it turns out that one of the features of the 2005 Bankruptcy bill was to put derivative counter parties at the front of the line ahead of other creditors in bankruptcy proceedings. Actually, from what I can tell, they don’t just go to the head of the line. They got to skip the line entirely. As the Financial Times noted last fall, “the 2005 changes made clear that certain derivatives and financial transactions were exempt from provisions in the bankruptcy code that freeze a failed company’s assets until a court decides how to apportion them among creditors.” As the article notes, ironically, this provision which Wall Street pushed for and got to protect investment banks actually ended up hastening the collapse of Lehman and Bear Stearns last year.

   Here’s the Financial Times story the quote came from with further discussion at Naked Capitalism.
6. Hutch says:

   March 7, 2009 at 9:50 AM

   AIG = Stealth FDIC backstop for the credit default swap bubble, no limits, international coverage, and absolute confidentiality. What’s not to love?
7. AZSALUKI says:

   March 7, 2009 at 10:00 AM

   john,

   you’ll have to dumb it down for me. lol…does that mean that they can us the bailout dough to pay off all of their “buddies” during their collapse, and when they do finally fail, everyone else is left holdin the bag?
8. John M. says:

   March 7, 2009 at 10:19 AM

   az,

   I would dumb it down if I had the foggiest idea what was happening. On the other hand it’s possible that Hutch (#6) has the essence of the situation. I’ve read something like that as the motivation for saving them the first time.
9. Hutch says:

   March 9, 2009 at 1:59 PM

   I have this horrible suspicion that the vast majority of the bailout money has gone not towards retiring toxic assets but toward meeting the cash flow guaranteed by the credit swaps they issued on debt instruments. As long as those instruments are merely non performing and not in default or foreclosure they must provide the missing cash flow. Only after the foreclosure or other default process is complete can they settle and retire the issue. The longer non performing loans sit on balance books waiting for resolution the more money this monster will devour with no end in sight.
10. Hutch says:

    March 11, 2009 at 5:10 PM

    http://www.nytimes.com/2009/03/08/business/08gret.html

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