05 Mar 09
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Originally posted by uzlessIt simple would not happen as the fabric of the finanacial systems would cause a global meltdown
I still haven't seen anyone show they know what would happen if AIG collapses.
money would become meaningless, nothing....
Mass demo's and civil unrest would follow, society would breckdown and law / order would be hard to implement
Thus, the goverment would be unwilling for this to even happen, hence the US taxpayers funding AIG
05 Mar 09
Originally posted by uzlessAIG will have to seriously devalue its stock, then a healthy capital flush company will by them out and control their assests, which are considerable. Inevetably its the course that must happen. If America is truly capitalist then we will let these companies fail.
Who here knows and can provide a good answer?
05 Mar 09
1 edit
Originally posted by duecerWhat company will take them over? Keeping in mind the purchasing company would be responsible to pay off the debts, name us a company that has that kind of cash.
AIG will have to seriously devalue its stock, then a healthy capital flush company will by them out and control their assests, which are considerable. Inevetably its the course that must happen. If America is truly capitalist then we will let these companies fail.
06 Mar 09
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Originally posted by uzlessOnce the company files chapter 11, the debt gets restructured, it also will significantly devalue the company making it affordable for investors. Its likely that a company will only buy enough shares to control the company. Or perhaps they might break the company into seperate divisions. Some of those would actually be profitable. The unprofitable would be a tax write off.
What company will take them over? Keeping in mind the purchasing company would be responsible to pay off the debts, name us a company that has that kind of cash.
Its what happens in a free market. It is essential to keep sacred the risk/reward factor, or companies have no inscentive to be profitable
06 Mar 09
Originally posted by duecerRestructure the debts the firm has to the Fed?
Once the company files chapter 11, the debt gets restructured, it also will significantly devalue the company making it affordable for investors. Its likely that a company will only buy enough shares to control the company. Or perhaps they might break the company into seperate divisions. Some of those would actually be profitable. The unprofitable would be a ...[text shortened]... ssential to keep sacred the risk/reward factor, or companies have no inscentive to be profitable
With things as they are who has the finances to take on AIGs liabilities?
Those liabilities have been reduced by the fall in asset prices, granted, but they are still astronomical and I'd guess completely out of the reach of any firm at the moment.
AIG can't fail, I agree with your capitalist sentiments to an extent but AIG falls into that same bracket as all these other financial institutions holding their hand out at the moment, it's simply Too Big To Fail.
06 Mar 09
Originally posted by RoostyWhat does that mean? Why is AIG too big to fail?
...AIG can't fail, I agree with your capitalist sentiments to an extent but AIG falls into that same bracket as all these other financial institutions holding their hand out at the moment, it's simply Too Big To Fail.
06 Mar 09
Originally posted by leisurelyslothIt's too big to fail because it is so intertwined with American and global finance. These markets are obviously fragile at the moment and AIG is heavily involved in insuring some of these financial instruments.
What does that mean? Why is AIG too big to fail?
You aren't just letting AIG fail, you're hoping, hoping, that it doesn't take the banks with it.
If you're asking specifically why an insurance company can be too big to fail I'd say that it increases certainty and confidence (although I agree that's slightly laughable at the minute) . So many decisions may have been made based on, or including the fact that AIG had underwritten some aspect or other of it.
06 Mar 09
Originally posted by leisurelyslothRoosty has the general idea. Scrabin has the best explanation.
What does that mean? Why is AIG too big to fail?
You have to understand first of all what CDO's and CDS's are and then understand who bought them.
Then, when you understand that were AIG to fail and these financial instruments NOT paid to the holders, you must understand that is those holders of these instruments that suffer because they are not being paid.
What do we mean by suffer? WIPED OUT. As in out of buisness.
Have you ever lined up dominoes side by side? What happens when you knock the first one over?
Now, imagine you place dominoes in a tight circle and then place more dominoes around the outside in increasing larger circles. Now, knock over the inner cirlce of dominoes and watch what happens to the rest of them.
It spreads like a wildfire.
AIG is massive. It deals with virtually every major industry. It goes down, THEY ALL GO DOWN.
It's the end of our financial system as we know it if AIG fails. And that's why the US has no choice but to keep shoving cash into this thing to pay off the money it owes to the CDO's and CDS clients.
About 500 Billion dollars by my last count.
06 Mar 09
Originally posted by uzlessAIG is a multinational corporation and I would think that these CDO's and CDS's are not just propping up US corporations but multinational corporations. Why does the US have to go it alone in propping up the world economy, if that's what is going on here?
...AIG is massive. It deals with virtually every major industry. It goes down, THEY ALL GO DOWN.
It's the end of our financial system as we know it if AIG fails. And that's why the US has no choice but to keep shoving cash into this thing to pay off the money it owes to the CDO's and CDS clients.
About 500 Billion dollars by my last count.
Beyond that it certainly seems as though it's the end of our financial system as we know it either way (and good riddance). Reading about what's been going on lately (correct me if I'm wrong) but it appears that our financial system has lately been largely based on making ill considered loans, aggregating them into an ill considered pool of loans, and treating that ill considered pool of loans as if it weren't a horribly risky mess. This has been driving the housing bubble...and AIG is at the heart of this mess, pretending as though they could insure the junk bonds that were generated by selling off the bad loans, and through this "insurance" somehow spin that straw into gold. Currently the government is acting to prop up AIG and prop up the housing bubble, rather than correcting the underlying problems. It seems smarter to allow AIG to go the way of the dodo and admit that that was a failed idea and get banks back into the business of making well thought out loans.