InnocentsAbroad

AIG Dumps Two Toxic Assets on the Fed

Sounds like the Fed is becoming the de facto U.S. national hedge fund.

Void Payout to Non-Debt Holders of CDSs

Nice article and comment stream.

I'd just like to advocate for a little different approach -- that derivative transactions be clearly identified as leveraged contracts, and then regulated the way that margin purchases of stock are, with a minimum downpayment.

I'm kind of thinking that they should be treated as traded securities, like other derivatives (futures contracts, options, etc).

This would stabilize markets and also provide some protection for companies and municipalities engaging in the derivative markets with a limited awareness of the hazards (the naive investor).

The AIG Counterparty Argument: Nothing to Gain, A Lot to Lose

Yep. For most people, theft is illegal. For GS and Barclay's it is considered not only legal but (according to The Fed and Treasury) needed and necessary.

AIG, Systemic Risk and Greenberg's Inner Circle

This is just plain silly. AIG didn't do anything that the regulators, the Congress, and both parties weren't fully aware. of.

Boston Fed Head: Ditch the Bad Assets So Banks Can Focus on Future Prospects

The sad fact is that neither the American public nor the Congress understand how the Fed works.

The American public is kind of like the dope at the shell game. He cannot win because he refuses to walk away.

Take the Fed, turn it upside down, shake out the roaches, hose it off, and put it out in the sun to dry.

JPMorgan Chase: Poisoned by Bear's 5,000 Counterparties

Wow. Very interesting observation on a member of the general public's experience with JPM as a service provider.

My general take (and I greatly appreciate Mr. Saxena's nice article), is that the problem is not only one of disclosure, but also one of the moral capacity to carry out fiduciary duty -- whether at the Fed, the Treasury, the FDIC, or the SEC.

Suspect when all is said and done we are looking at more of a systemic moral failure, rather than just a cyclical political economy problem.

On top of that, malfeasance, either in government or in the government sponsored private banks, seems to not only be endemic, but also as a general rule unpunished.

My continued reading of the core problem facing the economy today makes the US economy not dissimilar to that of the Russian Republic, or of communist China. The cycles of behavior of the wealthy and powerful appear to be more that of a corrupt plutocracy, rather than that of a republic.

What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup

Pls correct to: The US government may absorb its debts, but that only protects its creditors who made a bad bet in the first place.

What Obama Needs to Know about Tim Geithner, the AIG Fiasco and Citigroup

Actually, a nice dialogue here, getting to the critical issue, which is US net indebtedness. It is US industrial weakness we are looking at. Thus the puzzle of the flight to US financial markets as savior, and yet the source of the crisis. In the long run, however, good credits will get financing, and bad credits will not. AIG is a bad credit. The US government may absorb its debts, but that only protects its debtors who made a bad bet in the first place. The US taxpayer is bailing out speculators. There is no way around that. Rich speculators are being paid off to go speculate another day. Which they will.


On Nov 26 10:04 AM Steve Pluvia wrote:

> You, lost me early in this overly-long soap-box stint.
>
> Are you *seriously* suggesting the U.S. let AIG blow-up?
>
> So let me see if I get your point...
>
> Let AIG fail; All foreign held debt insured by AIG blows up...
>
> -- US treasury and corporate debt immediately has zero credibility;
>
> -- US corporations and have zero borrowing power for short term trade
> and expansion.
> -- Trade grinds to a halt as foreign partners no longer honor purchase
> orders from US corporations.
> -- Run on all banks;
> -- The dollar gets crushed; and,
> -- The US have very little ability to jump start the US economy with
> spending
>
> Oy freakin vey. Your idea is ridiculous. Clearly you don't understand
> the implications of what you propose.
>

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

Incredible. According to Paulson and Bernanke, they don't want just the desperate to come to the auction. Am I missing something here ? Washington is crawling with lobbyists being paid $300 an hour to get a piece of the pie for their clients. Everyone wants in. The banks, the hedge funds, the Europeans. I'd be surprised if the Russians don't want in.

AIG Bailout: Over to Congress

Say, for the sake of argument, that AIG is a potential going concern. Then, we can make the reasonable argument that if the US government is the recsuer, then the US gvt gets the assets; ie all the equity in the tail, and all the equity in the good assets, and with the capital put in being allocated to the senior debt in the broken up pieces, plus nominal cash price warrants. Now, is that what happened ? No. The good assets are going to be sold at firesale prices. The US government isn't going to buy those. What about the US government provided debt ? Is it the most senior ? In other words, no, this is not a deal to save AIG / and its businesses as a going concern. It is a deal to save AIG's business partners from losing their shirts on bad business transactions. Companies that improperly hedge their derivative contracts are not the America people's foster children. End of story.

Crunching Numbers: Why I'd Buy AIG

Puzzled as to how one can quantify a company's worth if you don't quantify the value (or present value, and leverage) of their off balance sheet items. That would, for AIG, include the as present non-pubic derivative contracts that they have entered into. It is the value, risk, and leverage of those derivative contracts that, (at least it seems tome, ) are being priced into the share price.

AIG: The Mark-to-Lehman Market

Suprised there isn't an ETF that is composed of CDOs. Perhaps American investors are so imitative that the CDOs are considered to be worth nothing at any price. An ETF for the CDOs would provide a vehicle for potential purchasers, and a potential source of liquidities for holders.

A fairly simple proxy would be an ETF composed of the senior debt of ML, Lehman, Goldman, AIG, etc. Or, potentially, a closed end bond fund with that specialty.