wakeup call

Obama and the Bankers - An Imagined Conversation

-A year ago the administration calls in the heads of the top 11 banks
-The bankers are told they can't leave the room until they take Fed money
-the administrations limits salaries for top bankers
-the banks pay back the government loans they didn't want in the first place
-The administrations tries to force the banks to take direction from the administrations and threatens more control because they took federal money
-circular logic at its best

Obama and the Bankers - An Imagined Conversation

-A year ago the administration calls in the heads of the top 11 banks
-The bankers are told they can't leave the room until they take Fed money
-the administrations limits salaries for top bankers
-the banks pay back the government loans they didn't want in the first place
-The administrations tries to force the banks to take direction from the administrations and threatens more control because they took federal money
-circular logic at its best

Time to Read the Riot Act to AIG

There seems to be a deficient IQ at work here. First, Benmoche was asked to take the job. He laid out his conditions including his previously planned vacation, a reasonable compensation package and that if the goveernment was looking for a liquidator it wasn't him.

Under Liddy and Reynolds the forced fire sale liquidation was a disaster and would not lead to a government payback. The most compelling indication was the sale of Hartford Steam Boiler. Here was a very profilable investment that AIG acquired about 8 years ago for $1.2 billion, consistently made money and was fire-sold for $743 million. A similar push was in the works for ILFC.

The $180 billion life line was to bail out GS, not AIG. AIG was simply the conduit.

The Governmetn could have saved a tone of money by simply guaranteeing AIG counterparties as they did with Citi whihc would have minimized the liquidity crisis at AIG.

AIG is also a significant insurance capacity provider in the insurance markets. Losing that capacity would create problems.

Dialoguing with Greenberg may give Benmosche some of the insite that previous CEOs never bothered to get whihc made them ineffective. AIG's massive network has value, including the synergist value of the whole being greater then the some of its parts. It still has some of the best talent in the industry. As a company it also employes over 100,000 people who no one needs added to the ranks of the unemployed.

FASB Changes Perpetuate Fair Value Lying

Your generalization using the condo example is short sighted. The shifting sand issue should have been uncovered if proper due diligence was undertaken resulting in the deal never being done. This has nothing to do with mtm. Forcing companies with large, longterm hold portfolios to take paper losses due to mark to market accounting is dealing in the make believe. As an example if I make investments with a hold to maturity strategy and are forced to mtm quarterly the volitility reflected in my financial statements would have me go from red ink to black and back depending on general market conditions. Would I have earned or lost cash - absolutely not. Rather when I actually sell or redeem those investments then I would reflect a real gain or loss. Now tell me again why mtm is a good thing?

One Easy CDS Fix

While we are at it short selling should be eliminated. It creates a death spiral provided the short seller has sufficient resources to take a major short position. This at the very least is market manipulation. It was outlawed for a brief period last year for financial stocks. Once the successful test period ended it was not renewed. Taking out short selling and elimninating mark to market would go a long way towards fixing out busted economy and put some light at the end of the tunnel. Light at the end of the tunnel in my opinion is the only way to restore consumer optimism whihc will help prime the pump. The are two fixes that can be put in place with the stroke of a pen. Why is there no movement?

Exclusive: Big Banks' Recent Profitability Due to AIG Scam?

Eliminating mark to market accounting would have eliminated so much of the game playing and yet the government refuses to take this action. It would be a no cost fix for most likely $1.8 trillion of mark to market losses. There has been a great deal of talk about eliminating the practice but no action. Would be interesting to know why.

The Microwave Society's Answer to the Economy Is Half Baked

The problem with CDOs is not the underlying paper. The problem with CDOs is that the discount reflected a potential perception of possible market problems. If you look at the CDO valuations in relation to the actual portfolio performance you will see discounts that are no relection of actual performance. To remove this anomaly from the analysis take away mark to market accounting then deal with actual loans that do go bad. A bad loan is fixable since there is something tangible behind it. A CDO is a synthetic and difficult or impossible o fix.

Did Geithner Bail Out Goldman Sachs?

Interesting series of comments. Keep in mind that had AIG filed for bankruptcy immediately Goldman would have had to come up with $20 billion immediately. An AIG bailout gave Goldman the opportunity to (1) hedge its AIG exposure after the fact and (2) request to be treated as a commercial bank and have the request approved in a matter of hours. This last point would allow Goldman to dip into any bailout pool for commercial banks. By the nature of the bailout for AIG with respect to the government ownership the government had no concern about shareholder value. Its almost as if once Goldman was taken care of what happend to AIG became immaterial.