Moon Kil Woong

More AIG Controversy: Maiden Lane III

This is crooked and we all want to know who really benefitted. That is who insured Goldman and others on their AIG contracts and got premium witout having to pay a cent. The fact no one will tell is telling itself. Full disclosure is what we all want.

Special Inspector: AIG Counterparty Volunteered to Take Haircut, Geithner Refused

The day Obama promoted Geithner was the day change went out the window. The status quo sure seems to fit Obama's tenure so far, save healthcare. First we get a Republican who socializes America. Now we get a Democrat who steals from the masses to give to the richest bankers around. No wonder the public is confused.

ING Shows How Bank Dismemberment Is Done

This is one good reason why Europe is recovering faster than the US for once. The US is quickly becoming the new model for an economy stymied by an over-reliance on government crutches.

Although some may say breaking ING up is bad for ING, it's most certainly good for the economy. Similarly Glass-Stegall is good for the US even though financial institutions loathe it.

David Einhorn: Break Up Too Big to Fail Institutions

I agree. However, the biggest too big to fail institution is the Federal Reserve and Geithner wants to have them manage too big to fail institutions and systemic risk. Noted that just a year ago everyone quickly identified Greenspan as the biggest root of the systemic risk we presently face.

Furthermore, the Treasury and Federal Reserve have made sure the too big to fail institution including the Federal Reserve got even bigger during this downturn. They not only control more deposits and have bigger balance sheets (the fed made theirs out of thin air) they also own more of America than ever before (that's why you own less). So how exactly can we trust them to manage to big to fail or systemic risk when they are the problem and they have such a terrible history making too big to fail institutions even bigger? Is this ironic, pitiful, corrupt, or all the above?

The first big bank to be broken up should be the Federal Reserve. US Treasury auctions should go up through a bidding process. It's not like the Federal Reserve does that great of jon holding Treasury auctions anyway since nowadays it has to buy a lot of them themselves. In any other auction this would be illegal bid rigging. But so would writing guarantees in the trillions of dollars when you don't have the capital to back them up like AIG did (Federal Reserve backstops). Or blowing up your balance sheet 40 to 1 without taking into account market values or setting aside any reserves for losses much like Bear Stearns (The Federal Reserve balance sheet). Or thwarting all audits like Bernie Madoff (The Federal Reserve). Or refusing to disclose your shareholder structure (the Federal Reserve).

Ok it's too easy to slam on the Federal Reserve. But really, the biggest cause of most of our woes stem from the Federal Reserve's blatant mismanagement of interest rates and money supply. They are too big to fail and are the biggest ststemic risk in the system bar none.

Bank of New York and Bank of America vs. AIG: No Winner in Sight

It seems obvious mortgage insurers were part and parcel of the securitization/derivat... fraud. Just because it makes them more bankrupt than they already are is not a good excuse for siding with them. Their financial houses should burn. Next time don't insure what you can't pay or don't even know what your insuring. As Homer Simpson puts it, "Doh." Yah they owe a lot of dough.

A Dow Double in 10 years? Easy

Much of the expectation in earnings growth is already valued into this market. If we get anemic earnings growth stocks will go down not up. The only major reason why I would agree with his premise is if he assumes that the dollar will depreciate 5-10% a year like it is this year, then the Dow only has to hold its own relative to the depreciation to double. With a lot of Dow firms deriving some component of their revenues from overseas that shouldn't be hard to accomplish.

With Bernake at the helm, persistent dollar depreciation is a very high probability.

What Did the Ratings Agencies Know About AIG?

Gatekeeper is a laughable status to call them. They more closely resemble a rubber stamp put on all securities issued. I think companies think of them as a tax. Perhaps we should build them a forbidden city and call them Mandarins. They have long divorced themselves from reality.

Itr didn't take a brain scientist to know AIG didn't have the assets to cover $3+ trillion in derivatives obligations. Nor does it take a mathemetician to figure out the reason banks don't disclose their current percentage of the $600 trillion derivatives market is because they can't cover the liability either. Rather they just keep rolling it over. The US only is worth $60 trillion. It would take a lot of hyperinflating too even cover 10% of the liability should ratings agencies declare the derviatives counter party risk to be moderately significant.

So far the market looks stable merely because no one is demanding anyone to come clean anymore. As far as I can tell nothing real has been fixed even though the ratings agencies are busy upgrading everything for renewed bond issuances. Buyer beware!

Securitizing Life Insurance: Big Return for Asian Insurers as U.S. Insurers Lose Out

Face the facts, there is no regulators. The derivatives mushroom clouds are still spawning their kin in the dark. When morning comes we will be in a post-apocolyptic world.

The Five Worst Bailouts

The government's premise that a bailout saved us from a depression and double didget unemployment is wearing thin. For one thing, we are liable to experience statistical double digit unemployment anyways despite government's fiddling with the numbers to keep it low (we are already well past it in the real world). Likewise a lingering recession is worse than a short collapse no matter how deep. What killed the economy and dragged the US down into depression was more a factor due to its lingering nature than anything else. The longer we drag this on the closer we get to a great depression (one lasting years not a year).

Government intervention is playing with fire. A much hotter fire than we started out with. Rick Newman is right that we would have saved ourselves a lot of pain if we just let the brokerages eat crow. For one thing the survivors would have a lot of banking carcass to feed on which is better than asking the taxpayers to bleed themselves for the sake of the banking sector. If it wasn't for deficit spending and it came out of taxes both the Republicans and Democrats would be out of office today.

Post Traumatic Crash Disorder?

The run up was not so much buying as no one seling since it rose on such low volume excluding HFT. The selling yesterday was more realistic in terms of real people selling. I am curious to see who will really be burned if the market tanks. Goldman better not be expecting any more government welfare.

Closing Update for Tuesday, September 1: Third Day of Pullback

Today we see resistance around 1,000 for the S&P. For technical guys they will tell you, "No duh!" Other than that, there is no technical information that the market has not really expected.

The only really noteworthy thing was seeing that at least I know we get volume on a swing downward sometimes. That's a relief, lol. For a second I thought we lived in a post Terminator equity world now and that all volume was computer generated.

AIG Overpriced? Perhaps Not as Much as Barron's Thinks

I have heard rumors that AIG is undercutting competitors on rates and is will be expanding in the US. This follows suit with other too big to fail failures like Freddie Mac and Fannie Mae that are gobbling up marketshare. Government supported private institutions have unfair business advantages and always end up killing competition and injecting government money and politics into everything they touch (if not with corruption on top of that).

Really, the belief that this is occuring is one good example of the unfairness of it all. Being so bad you can't go bankrupt is a great selling point when you sell insurance. If you buy from a legitimate insurer you must take into account counter party risk. With AIG, no problem. They can't go bankrupt. So no risk there...

What a mess we are making of our industries.

Where Are We in This Rally's Lifecycle?

Governmental direct action into the private sector just encourages inordinate risk taking and the perception that bad failed companies receiving baiout money can't go under. This is just creates the oppsite effect we want. It drives money into the worst companies and segments of our economy, gives even greater market share to too big to fail institutions, creates the perception that they can not loose and thus are safer than the safest best run businesses, and exposes the taxpayer and economy to even greater risk.

On a side note, did you just notice how GM after breaking the unions just shifted $293 billion bailout funds to invest in moving their truck manufacturing to China. How on God's green earth does the US taxpayer benefit from financing and aiding that happen? Is this actually helping the American economy?

If the US ends up a destitute 3rd world economy in the next 20 years people will point to our actions the last 2 years as the cause. They will, of course, have a very sound argument.

Stay Away from AIG - Barron's

Regardless of whether AIG is worth the current prices, it certainly fits with the trend for everyone to flock wherever the government is dumping money because 1) there is a perception the government will keep dumping money to them regardless of prudence 2) these companies get unfair market support in which to railroad competition with 3) there is a lot of free funny money shoshing about there somewhere.

It is a simple fact for all the talk about limiting too big to fail institutions, government has done nothing but let the too big to fail failures become even larger and a greater threat to the US' fundamental health and stability. I'd love to hear Geithner and Bernake explain why letting Freddie Mac and Fannie Mae get bigger when they ask for billions every quarter helps reduce systemic risk and fit with their promise to shrink them.

AIG Is Dead, Long Live AIG

Just like Fannie Mae eating the mortgage market AIG as a quasi public company that can't loose can now railroad marketshare out of other players. This type of abuse of government backing must stop if our economy ever hopes to get back its capitalistic bent.

As for selling off assets, sure a company is free to make gambles they can afford by not selling assets in the face of eroding asset prices. However, such gambles require the company to afford them, and not to put the taxpayers at risk. AIG fails on both points. I can not in any conscience condone their executives new business model. Once again, it allows bankrupt companies taake extrordinary risk with public funds. It is true things might end up better, but probably more so possible things get much worse. We don't let the government go bet on roulette, why should we allow the same thing to go on under our noses with AIG and Citibank?