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Why did AIG Collapse?

Why did AIG Collapse?

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Originally posted by Sleepyguy
Didn't you say in one of these threads that you helped someone prepare their testimony for it?
let's not go there.

Just be sure to look at coverage of the hearing. I'm as anxious as you to see that pin put back in the grenade.

I'm beginning to get really concerned, to tell the truth.

I've resisted the urge to panic for a long time.

I wonder how much more bad news I can take before I begin really losing my grip.

I'm already more angry at myself than I can stand for sticking so long with investments my own judgment told me I should sell and take a loss. Angry because I've allowed myself to be talked out of it by folks who supposedly know better. Only in hindsight can I see what I should have done. And I still don't trust my own judgment to chart a course forward.

There are too many mines out there ready to explode and which we've not been told about.

One very key thing about this debt swap thing that we'll have to return to -- those who designed them, made them, sold them, lied to regulators and to all of us. They were required to disclose certain facts -- but these things are not regulated as are many other financial instruments. So they played fast and loose with the accounting rules and simply flat out lied, covered up, and set us all up in the biggest financial collapse in history.

Ask me again how I'm feeling.

kmax87
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Originally posted by Scriabin
Ask me again how I'm feeling.
A bit like Ken Lay _insert exponential multiplier_ as he fiddled while Enron sank?

kmax87
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And before I get chased away and get told off to find the spirituality forum

Let ye who has wisdom

Rev 18:1-20

1After this I saw another angel coming down from heaven. He had great authority, and the earth was illuminated by his splendor. 2With a mighty voice he shouted: "Fallen! Fallen is Babylon the Great! She has become a home for demons and a haunt for every evil[a] spirit, a haunt for every unclean and detestable bird. 3For all the nations have drunk the maddening wine of her adulteries. The kings of the earth committed adultery with her, and the merchants of the earth grew rich from her excessive luxuries." 4Then I heard another voice from heaven say: "Come out of her, my people, so that you will not share in her sins, so that you will not receive any of her plagues; 5for her sins are piled up to heaven, and God has remembered her crimes. 6Give back to her as she has given; pay her back double for what she has done. Mix her a double portion from her own cup. 7Give her as much torture and grief as the glory and luxury she gave herself. In her heart she boasts, 'I sit as queen; I am not a widow, and I will never mourn.' 8Therefore in one day her plagues will overtake her: death, mourning and famine. She will be consumed by fire, for mighty is the Lord God who judges her. 9"When the kings of the earth who committed adultery with her and shared her luxury see the smoke of her burning, they will weep and mourn over her. 10Terrified at her torment, they will stand far off and cry: " 'Woe! Woe, O great city, O Babylon, city of power! In one hour your doom has come!'
11"The merchants of the earth will weep and mourn over her because no one buys their cargoes any more— 12cargoes of gold, silver, precious stones and pearls; fine linen, purple, silk and scarlet cloth; every sort of citron wood, and articles of every kind made of ivory, costly wood, bronze, iron and marble; 13cargoes of cinnamon and spice, of incense, myrrh and frankincense, of wine and olive oil, of fine flour and wheat; cattle and sheep; horses and carriages; and bodies and souls of men. 14"They will say, 'The fruit you longed for is gone from you. All your riches and splendor have vanished, never to be recovered.' 15The merchants who sold these things and gained their wealth from her will stand far off, terrified at her torment. They will weep and mourn 16and cry out: " 'Woe! Woe, O great city, dressed in fine linen, purple and scarlet, and glittering with gold, precious stones and pearls! 17In one hour such great wealth has been brought to ruin!' "Every sea captain, and all who travel by ship, the sailors, and all who earn their living from the sea, will stand far off. 18When they see the smoke of her burning, they will exclaim, 'Was there ever a city like this great city?' 19They will throw dust on their heads, and with weeping and mourning cry out: " 'Woe! Woe, O great city, where all who had ships on the sea became rich through her wealth! In one hour she has been brought to ruin! 20Rejoice over her, O heaven! Rejoice, saints and apostles and prophets! God has judged her for the way she treated you.' "

u
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Originally posted by kmax87
And before I get chased away and get told off to find the spirituality forum

Let ye who has wisdom

Rev 18:1-20

1After this I saw another angel coming down from heaven. He had great authority, and the earth was illuminated by his splendor. 2With a mighty voice he shouted: "Fallen! Fallen is Babylon the Great! She has become a home for demons prophets! God has judged her for the way she treated you.' "
[/b]
Um, doesn't this just hammer the point home that humans have been making the same mistakes for centuries?

This isn't a prophecy, it's a re-cap.

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Originally posted by uzless
Um, doesn't this just hammer the point home that humans have been making the same mistakes for centuries?

This isn't a prophecy, it's a re-cap.
right on.

what goes around comes around and always has.

Where have all the flowers gone?

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Today's Washington Post had this editorial, which I think is a good summary:

AIG Agony
The never-ending rescue of an insurer that was too big to fail.

Tuesday, March 3, 2009; A12

THE COST to taxpayers of rescuing American International Group (AIG) keeps going up. In September, the insurance giant faced a sudden demand for collateral to back guarantees it had given on troubled mortgage-backed securities. Alarmed that AIG's liquidity crunch could turn into bankruptcy -- which could, in turn, lead to the meltdown of banks around the world -- the Federal Reserve supplied it an $85 billion line of credit. The terms were tough: a two-year deal at a stiff interest rate, in return for which the U.S. government got 79.9 percent of the company and installed new management. The idea was that AIG would sell its assets to repay the government, at which point Uncle Sam would cheerfully retreat from the insurance business.

It hasn't worked out that way. Instead, the global economy plunged more dramatically than anticipated. Though AIG's core insurance business is strong and might have attracted interest under more normal circumstances, the company has been unable to find buyers at prices sufficient to repay the government. Its losses have mounted, and, with them, the need for more government aid; the bailout rose to approximately $150 billion by the end of 2008. And yesterday, as AIG announced a $61.7 billion loss in the fourth quarter of 2008 -- the largest in U.S. corporate history -- the government gave it access to an additional $30 billion. The terms of the deal are the most generous yet and convert the U.S. government from a short-term creditor of AIG's into a longer-term equity investor. Over time, as economic conditions improve, AIG may finally be able to sell itself off and repay the taxpayers. We shall see.

There are some lessons here. The first, of course, is that AIG never should have been allowed to endanger the global economy in the first place. Appended to the firm's insurance business was an unregulated "financial practices" shop that exploited AIG's triple-A bond rating to sell derivative contracts supposedly protecting counterparties against remote economic meltdown scenarios. AIG set aside no reserves against these risks, so that, when they materialized, those who had bought the company's baloney suddenly found themselves at risk of failure. And AIG's customers included pension funds and big banks across the United States and Europe: The U.S. bailout of AIG is a bailout of the global financial system more generally. This is why U.S. officials believe that it's a necessary evil, even as the costs rise.

The second lesson relates to the plight of U.S. banks, at least one of which, Citigroup, resembles AIG in its global reach. No one should be under any illusions that the process of bailing out these institutions will be quick or straightforward. More likely, we're looking at years of government involvement. It has become distressingly easy to design scenarios under which it becomes necessary for the government to get more deeply into the ownership and control of banks than it already has -- up to and including nationalization. The hard part will be getting out again.

Sleepyguy
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Originally posted by Scriabin
I'm already more angry at myself than I can stand for sticking so long with investments my own judgment told me I should sell and take a loss. Angry because I've allowed myself to be talked out of it by folks who supposedly know better. Only in hindsight can I see what I should have done. And I still don't trust my own judgment to chart a course forward.
I feel your pain. My finger in the wind approach is to repeat the phrase "regression to the mean" while looking at a historical chart of the S&P 500. I draw a mental line and say, "not that far to go now, not that far to go." Of course the mean would not be the mean if it didn't occasionally get overshot, and let's not forget the Obama factor. I hope I have some change left in a dish somewhere that he doesn't know about.

w

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Originally posted by Scriabin
Today's Washington Post had this editorial, which I think is a good summary:

AIG Agony
The never-ending rescue of an insurer that was too big to fail.

Tuesday, March 3, 2009; A12

THE COST to taxpayers of rescuing American International Group (AIG) keeps going up. In September, the insurance giant faced a sudden demand for collateral to back guaran ...[text shortened]... as -- up to and including nationalization. The hard part will be getting out again.
Put simply corporations fail. It is simply a fact within the capitalistic system. It is a natural turn of events. However, when these corporations go belly up and are "too big to fail" watch out!! Perhaps corporations should not be allowed to become too big to fail or if they already are, perhaps they should be broken up?

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Originally posted by whodey
Put simply corporations fail. It is simply a fact within the capitalistic system. It is a natural turn of events. However, when these corporations go belly up and are "too big to fail" watch out!! Perhaps corporations should not be allowed to become too big to fail or if they already are, perhaps they should be broken up?
Fortunately, or not, folks who do not rely on simple-minded, top of the head, ignorant generalizations make laws and implement them. The devil is in the details - but some folks can't be bothered to even scratch the surface. AIG's failure cannot be put simply and make sense. Oversimplification is a form of logical fallacy.

In the case of AIG, it will be said this week that no one did or could have anticipated the sheer size of the demands for cash on AIG's finance entity, which provided insurance-like protection against declines in the values of underlying securities.

Those securities were bundles of toxic subprime mortgages, and no one saw back in 2005 that AIG insured too much of these bundles to satisfy the demands for cash to indemnify investors as the housing crisis began when the bubble burst.

It is NOT a simple matter at all. It insults our intelligence to weigh in with such an uneducated, worthless comment.

F

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Originally posted by Scriabin
Fortunately, or not, folks who do not rely on simple-minded, top of the head, ignorant generalizations make laws and implement them. [...] It is NOT a simple matter at all. It insults our intelligence to weigh in with such an uneducated, worthless comment.
The way you have disingenuously 'misinterpreted' whodey's comment here is yet another attempted insult to his and, seemingly, everyone else's intelligence. But then, that's just you - and the 'entertainment' you claim to provide, isn't it? Always gagging for the chance to be snide.

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Originally posted by FMF
The way you have disingenuously 'misinterpreted' whodey's comment here is yet another attempted insult to his and, seemingly, everyone else's intelligence. But then, that's just you - and the 'entertainment' you claim to provide, isn't it? Always gagging for the chance to be snide.
Given the subject, snarking seems the least one can do -- and perhaps the most one can do.

Misinterpreted? pray tell how. The information provided above that useless post showed the unprecedented and terrifying scale of the giant conglomerate AIG's impact on the world's economy. $1 trillion in total assets -- hundreds of billions in toxic guarantees and debt swap instruments for which it did not have the cash when it was called in. Operating in 130 countries -- tentacles into banks and insurance companies throughout the world. And you defend that post?

"companies fail" "sh-t happens." Gee, guess we should have thought of THAT, huh?

My, but you exude the smell of the green eyed monster in almost everything you say to me -- as you certainly do not engage on the issues. Talk about being disingenuous -- the prize for that is yours.

For example, you seem bent on some way to boost your own status within the "community" by constantly sniping at me personally, but not through substantively addressing the question at hand or refuting what I'm saying.

You even stoop to defend crap like that post just to try to get in a personal dig.

Something's overdone and gone rotten in Indonesia -- and it just might be you.

F

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Originally posted by Scriabin
Given the subject, snarking seems the least one can do -- and perhaps the most one can do.

Misinterpreted? pray tell how. My, but you exude the smell of the green eyed monster in almost everything you say to me -- as you certainly do not engage on the issues.
Then it would seem you didn't actually understand whodey's comment.

"Green eyed monster"? Not in the slightest. How revealling of you to say such an odd thing.

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Originally posted by FMF
Then it would seem you didn't actually understand whodey's comment.
yeah? explain it why don't you --

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Originally posted by kmax87
A bit like Ken Lay _insert exponential multiplier_ as he fiddled while Enron sank?
why make that comparison? I'm no fortunate son. I got no AIG stock. All I got is the loss of almost 20 years of work caused by monstrous corporate malfeasance.

This is the payoff for corporatism.

Makes one doubt that pluralism is really the way politics should be comprised. The invisible hand of politics was supposed to prevent this sort of thing. Yet here we are on the same track as from 1929 to 1932.

Ken Lay caused what Enron did -- I've had no part in causing this mess.

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Originally posted by Scriabin
My, but you exude the smell of the green eyed monster in almost everything you say to me -- as you certainly do not engage on the issues. Talk about being disingenuous -- the prize for that is yours. For example, you seem bent on some way to boost your own status within the "community" by constantly sniping at me personally, but not through substantively ad ...[text shortened]... personal dig.Something's overdone and gone rotten in Indonesia -- and it just might be you.
Why, more torrents of personal abuse. What a surprise.

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