BREAKING NEWS: AIG will get a government bail-out....

#52
#52
BigPapaVol said:
This is a pretty gross exaggeration.

The enron situation was about the equity value of the company going to zero. Here you're implying that actual assets and liabilities of the company go to zero, which would not have been the case.
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If the assets backing the annuities had to be sold in a fire sale today, they would have received pennies on the dollar.

Fixed annuities are the only investment that a financial advisor can call guaranteed, and if those investments backing those fixed annuities had to be "marked to market" and sold, then there is a possibility that annuities could have been wiped out. There are backstops to prevent this, but there was a chance

As an AIG policyholder, should you stay or go? Experts say 'stay' - MarketWatch

Read the comments and you will see the fear of an AIG annuity holder
 
#54
#54
oklavol said:
Banks are guaranteed, investments aren't.

You want your money guaranteed you put it in a bank. You want a higher return then you invest, but you also accept the risk (or at least you use to).
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Not all banks are guaranteed. Most state banks aren't.
 
#57
#57
allvol123 said:
Do AIG employees get all government holidays off now?
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Bloomberg asks why...............

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#59
#59
BigPapaVol said:
you saying most state banks aren't FDIC insured?
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It's been 15 years since I was heavily involved with the banking industry. A little research shows (at least in Texas) that more state banks are getting a FDIC charter so I should have said that many state banks are not FDIC insured.

If you use a state chartered bank you need to check for a plaque in the lobby that states they are insured by the FDIC.
 
#60
#60
KentheOrange said:
It's been 15 years since I was heavily involved with the banking industry. A little research shows (at least in Texas) that more state banks are getting a FDIC charter so I should have said that many state banks are not FDIC insured.

If you use a state chartered bank you need to check for a plaque in the lobby that states they are insured by the FDIC.
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I don't think a financial inst. could raise deposits today without FDIC coverage.
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#63
#63
I need a little help with this AIG thing. It's my understanding that their biggest issue was credit default swaps they entered into. So they insured against mortgage defaults and as these mortgages defaulted they had to pay out billions in insurance. However, it's been noted in a few articles that outside of this, the rest of the AIG business could have been easily sold, spun out, or restructured as that business is strong. If this is the case, is the $85B going to cover these credit default swaps? Said another way, if most of the business outside of these swaps was valuable -- couldn't someone have picked it up easily without issue? If so, it appears to me they are bailing out these swaps -- which I have issue with. Like I said, the AIG thing is convoluted to me so I'm not entirely following it.
 
#64
#64
VolByBirth said:
I need a little help with this AIG thing. It's my understanding that their biggest issue was credit default swaps they entered into. So they insured against mortgage defaults and as these mortgages defaulted they had to pay out billions in insurance. However, it's been noted in a few articles that outside of this, the rest of the AIG business could have been easily sold, spun out, or restructured as that business is strong. If this is the case, is the $85B going to cover these credit default swaps? Said another way, if most of the business outside of these swaps was valuable -- couldn't someone have picked it up easily without issue? If so, it appears to me they are bailing out these swaps -- which I have issue with. Like I said, the AIG thing is convoluted to me so I'm not entirely following it.
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bingo. they essentially insured CDOs and tranches of CDOs in the mortgage world. Fed Driven writedowns of that collateral value has eaten the equity in all of the institutions involved. The capital required of them to continue business, so they essentially had to cease. The problem with chopping it up and selling for liquidity the good pieces is the fire sale mentality in the market and the depressed pricing.

Bottom line is that overvalued Real Estate murdered all of these guys and banks that are getting hammered.
Posted via VolNation Mobile
 
#65
#65
Yeah, but why not let individual investors jump in on the bailout. I mean if they are charging around 12% interest. Why can't the Government allow individuals to bail AIG out on their own accord. Hell, I would be happy to loan them all the money I have for that interest rate and have it backed by the US Government.

For those of us who lived well below our means, didn't buy a house we could not afford, drive cars that don't befit our job pay and saved our asses off are now going to get screwed so these idiots can all go live on their golden parachutes.
 
#66
#66
VolByBirth said:
I need a little help with this AIG thing. It's my understanding that their biggest issue was credit default swaps they entered into.
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The Economist is the best magazine I have read on economics and the world economy. It has an article on AIG:

As well as writing general-insurance policies all over the world, AIG plunged disastrously into the market for derivatives linked to housing and credit. Its exposure to the murky credit-default swaps market alone is a notional $441 billion, enormous by anyone’s standards. As the market value of these derivatives fell, the firm found itself strapped for capital, and was forced last weekend to approach the Fed, cap in hand. The central bank initially demurred, instead nudging JPMorgan Chase and Goldman Sachs to try to help AIG raise the money from private sources, such as other banks, private-equity firms and sovereign-wealth funds. Those efforts failed, however, and AIG’s predicament worsened on Monday when the big rating agencies downgraded its debt, forcing it to post more than $13 billion of extra collateral with trading partners. At that point officials performed a U-turn and began negotiating an emergency rescue.
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The rest of the article is here: AIG, an insurance giant, is bailed-out by America's government | A lifeline for AIG | The Economist

It raises an important question here:

The government has, at least, demanded a lot for stepping in. It will receive warrants entitling it to a 79.9% stake in AIG. The two-year loan, secured against AIG’s insurance businesses, carries an interest rate of LIBOR plus 850 basis points (hundredths of a percentage point). The government will install new management and will have veto power over all important decisions, including asset sales and payment of dividends.
AIG will raise money to repay the loan by selling assets. The expectation is that the group will be broken up and sold, bit by bit. This would mark an extraordinary end for a company that as recently as last year enjoyed a market capitalisation of more than $170 billion. The company insists that it is illiquid, not insolvent, but the size of the loan suggests that its problems go beyond a short-term cash crunch.
The question that hangs over the rescue—apart from whether taxpayers will get their money back—is whether the government can continue to deal with tottering financial companies in an ad hoc manner. Pressure is likely to grow for the creation of a more formal mechanism for handling the sick, akin to the Resolution Trust Corporation that took on bad assets from the savings and loan crisis of the 1980s. That, at least, would make the hospitalisation process more transparent. After the historic events of the past fortnight, who would bet that AIG will be the last lumbering giant to need resuscitation?
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#67
#67
BigPapaVol said:
I don't think a financial inst. could raise deposits today without FDIC coverage.
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You are probably correct. I spent a little time looking at state banks this morning and could not find a state chartered bank that is not a member of FDIC. I'm not sure why the shift has occurred but it certainly has. :whistling:
 
#68
#68
BigPapaVol said:
I don't think a financial inst. could raise deposits today without FDIC coverage.
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there are plenty of online banks and credit unions that are non fdic insured. i can't understand why anyone would put their money with these people. probably too stupid to know better i guess.
 
#69
#69
droski said:
there are plenty of online banks and credit unions that are non fdic insured. i can't understand why anyone would put their money with these people. probably too stupid to know better i guess.
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Not from you area or maybe even era but folks in East Tennessee got screwed by Southern Industrial Banking Corp (I believe I have the name right) - a banking institution that wasn't insured and went belly up. I would guess anyone that remembers the Butcher Brothers would be wary of uninsured deposits.
 
#70
#70
BigPapaVol said:
bingo. they essentially insured CDOs and tranches of CDOs in the mortgage world. Fed Driven writedowns of that collateral value has eaten the equity in all of the institutions involved. The capital required of them to continue business, so they essentially had to cease. The problem with chopping it up and selling for liquidity the good pieces is the fire sale mentality in the market and the depressed pricing.

Bottom line is that overvalued Real Estate murdered all of these guys and banks that are getting hammered.
Posted via VolNation Mobile
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oklavol said:
The Economist is the best magazine I have read on economics and the world economy. It has an article on AIG:



The rest of the article is here: AIG, an insurance giant, is bailed-out by America's government | A lifeline for AIG | The Economist

It raises an important question here:
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Thanks gentlemen.
 
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