AIG Bailout Has Saved America

#27
#27
RockyTopVol said:
If not for Paulson, unemployment would have been at 25% or worse. Thank you Paulson.

Paulson: 25% unemployment rate without AIG bailout - MarketWatch
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droski said:
ummm aig was bailed out under bush and yes it would have been a huge disaster because of the counterparty risk on their derivative trades. a lot more banks woudl have gone under if aig hadn't been saved.
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The link between AIG, Goldman Sachs, and Geither is eye-opening: RealClearMarkets - Goldman Sachs-AIG: It's Likely Worse Than You Think

The Goldman Sachs-AIG scandal may be worse than we think. Former New York Fed President and current Treasury Secretary Timothy Geithner is being castigated for paying off AIG's counterparties - Goldman foremost among them - 100 cents on the dollar and then keeping these payments secret. But it seems likely that Goldman actually got much more than 100%. What is worse, Goldman may have received this windfall by trading on information that was deliberately withheld from the public.

A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG. Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.

The result of all this hedging was that a crisis at AIG would become a crisis at whatever banks Goldman had used to hedge its AIG exposure. Through its purchase of protection on toxic assets from AIG, and subsequent purchase of protection on AIG, Goldman created a situation whereby its risk to AIG became systemic risk.
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#30
#30
VolInMn said:
Because I'm sure that's what people were thinking.

"Hey, we can't afford this house but let's buy it anyway because by the time we default there will be a system in place that we can use to screw the American taxpayer! To hell with our credit rating, who needs it!"

Lenders are greedy. People who knowingly took on more than they could handle are dumb.

Dumb ≠ Greedy
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before you sign the documents you see the mortgage payment. they should know how much money they are making. it's really not that complicated.
 
#36
#36
Sure...Why would a libertarian not be concerned about moral hazard?

The government coercively takes my money and gives it to a person who lost all their money by being an idiot.

If people (including corporate persons) failed when they did idiotic things, they may not behave quite as idiotically on the front end.

Goldman Sachs, AIG and on and on behaved as they did because they knew that in the end they would not be holding the bag, Uncle Sam would.

That is something that incenses libertarians. Let all of the bastards who sold idiots houses they could not afford sell their Jaguars and mansions or go bankrupt. Maybe next time they will follow realistic lending standards.
 
#37
#37
they behaved that way because they thought they'd make money. i doubt aig employees are all that happy their deferred comp is worth $0.
 
#38
#38
They were greedy and they took risks that they would not have taken if the risk was properly allocated.

They had all of the reward and none of the risk. That is morally wrong, and it is one of the primary reasons it got so bad.

If I lend you money and I make the interest off it, I should be the one who is screwed if you do not pay me back. If someone else is stupid enough to buy the loan from me, and the person does not pay them back, they should be the one who is screwed.

The entire debt market was crap because people were taking profits knowing that no matter what they could not lose.

Bush was wrong (about this as well as many other things) and Obama was even more wrong.
 
#39
#39
Dig deep and consider the alternative -- if they do go under. Think hard and really think it through. And no, anything like 'they go under and the rest of us move on' is both idiotic and not an acceptable answer.

And you do know who was calling the shots when the crisis first broke, right?
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#40
#40
rjd970 said:
Capitalism at its best.
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LOL@U. In a "free market" economy, no company could get too big to fail. AIG got to where it was because gov't is TOO involved as a player. If trust and monopoly laws were being enforced... it would not have been a problem.

Once again we see the folly of gov't being a player and taking sides... deciding who wins and loses... arbitrating what is "fair" and unfair. Once again we see the command economy ideals failing... not capitalism and certainly not free markets.
 
#41
#41
MikeHamiltonFan said:
They were greedy and they took risks that they would not have taken if the risk was properly allocated.

They had all of the reward and none of the risk. That is morally wrong, and it is one of the primary reasons it got so bad.

If I lend you money and I make the interest off it, I should be the one who is screwed if you do not pay me back. If someone else is stupid enough to buy the loan from me, and the person does not pay them back, they should be the one who is screwed.

The entire debt market was crap because people were taking profits knowing that no matter what they could not lose.

Bush was wrong (about this as well as many other things) and Obama was even more wrong.
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How do you suggest properly allocating the risk?

They had the risk of losing their retirement. i know i lost 90% of my deferred comp.

ok did aig not get screwed? what do you suggest? public beatings? fire the other 99.9% of workers that had nothing to do with CDS?

still not understandin the "could not lose argument." how exactly is not bailing them out punishment? how does this hurt them in any material way?
 
#42
#42
MikeHamiltonFan said:
They were greedy and they took risks that they would not have taken if the risk was properly allocated.

They had all of the reward and none of the risk. That is morally wrong, and it is one of the primary reasons it got so bad.

If I lend you money and I make the interest off it, I should be the one who is screwed if you do not pay me back. If someone else is stupid enough to buy the loan from me, and the person does not pay them back, they should be the one who is screwed.

The entire debt market was crap because people were taking profits knowing that no matter what they could not lose.

Bush was wrong (about this as well as many other things) and Obama was even more wrong.
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This is a very good and insightful post.

This is why neither party can be trusted with power. The only answer is to dispense with the idea of "good gov't", have gov't turn into the objective referee again, and reduce the size and scope of gov't.
 
#43
#43
droski said:
How do you suggest properly allocating the risk?
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By not insuring them at tax payer expense. By enforcing trust and monopoly laws. By breaking the incestuous relationship between gov't power brokers and big business/finance power brokers.
 
#44
#44
sjt18 said:
By not insuring them at tax payer expense. By enforcing trust and monopoly laws. By breaking the incestuous relationship between gov't power brokers and big business/finance power brokers.
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i never understood this logic. why is insuring them at the taxpayer expense make it mroe likely they will do risky things? the idiots like aig, citi, etc lost the majority of the stock value. so how is losing that last 10% going to encourage people to not do it again?
 
#46
#46
VolInMn said:
Because I'm sure that's what people were thinking.

"Hey, we can't afford this house but let's buy it anyway because by the time we default there will be a system in place that we can use to screw the American taxpayer! To hell with our credit rating, who needs it!"

Lenders are greedy. People who knowingly took on more than they could handle are dumb.

Dumb ≠ Greedy
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Greed is good (in a free society). Dumb isn't.

YouTube - ‪Greed With John Stossel part 1 of 6‬‏
 
#47
#47
sjt18 said:
LOL@U. In a "free market" economy, no company could get too big to fail. AIG got to where it was because gov't is TOO involved as a player. If trust and monopoly laws were being enforced... it would not have been a problem.

Once again we see the folly of gov't being a player and taking sides... deciding who wins and loses... arbitrating what is "fair" and unfair. Once again we see the command economy ideals failing... not capitalism and certainly not free markets.
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In a "free market" economy trust and monopoly laws would not exist.

sjt, it seems all your posts are so loaded down with rhetoric I can't tell what you are trying to say. Feel free to mold that rhetoric into a cohesive point about a specific topic at any time.
 
#48
#48
Milo, greetings to the Peoples Republic of Oregon.

I believe you should be able to be socialist pot smokers! You just should have to do it at a state level, not a federal one.

I said Bush was in charge when it went down, but you have to go back much further to find the root of the problem.

And droski, I am sincere when I say that I see many of the things you have written and believe you are extremely intelligent. Why are you asking what the difference is between being bailed out and not? Do you not understand the cascading impact of allowing the invisible hand to pimp smack all of the idiots?

Banks would not lend so that a guy making 60k could get a 400k house in California.
 
#49
#49
MikeHamiltonFan said:
And droski, I am sincere when I say that I see many of the things you have written and believe you are extremely intelligent. Why are you asking what the difference is between being bailed out and not? Do you not understand the cascading impact of allowing the invisible hand to pimp smack all of the idiots?
.
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i guess i'm failing to see how letting the company go bankrupt hurts the individuals who did this any more than they already got hurt?
 
#50
#50
milohimself said:
In a "free market" economy trust and monopoly laws would not exist.

sjt, it seems all your posts are so loaded down with rhetoric I can't tell what you are trying to say. Feel free to mold that rhetoric into a cohesive point about a specific topic at any time.
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Also monopolies wouldn't exist. There has never been a monopoly that's been able to sustain itself over time without government regulation and protection.
 
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