Chancer

Wall Street Breakfast: Must-Know News

Old Trader:

I had the same "other shoes to follow" thought.


On Nov 27 11:38 AM Old Trader wrote:

> I can't help but wonder if Dubai is just the first shoe. This news
> has overshadowed Japan's Finance Minister thinking of asking for
> CB intervention on behalf of the yen, and the fact Vietnam has devalued
> the dong.

Thoughts on Executive Pay Restrictions

For me, it depends on the government's motivation for doing this.

If it was done to punish or for revenge, or for political reasons to make Obama look good, I am opposed. I have heard some knowledgeable pundits say this was for public relations.

If it was done to protect the financial health of the organization or taxpayer investment (loans), I would not be opposed. Banks do this all the time on business loans, especially for companies in "workout."

My personal opinion is that it was pure politics.

Geithner to Blame for Outrageous Goldman Bonuses

Inspector General's report also blamed Geitner for AIG bonuses. Geitner said he did not know, but his staff did.

The failures and incompetence of government officials, including Obama's best and brightest, demonstrate that greater bureaucratic regulation will not protect us from systemic failure and too big to fail.

Break 'em up, if too big to fail.

AIG Infographic: Where the Money Went

I happen to believe that credit default swaps should have been legally determined to be illegal insurance contracts outside of government insurance regulation.

A legal case against AIG on this basis could have stopped the payoff for worthless securities and saved the taxpayers a ton of money. U.S. taxpayers cannot bailout the entire world- even tho the world demands it.

It might have resulted in massive lawsuits against AIG, but there would be time for AIG to wind down their operations while court cases proceeded, and they eventually might have to go bankrupt.

The bailouts and stimulus are already up $10,000 for every American. Giving that $10,000 to all of us might have been a much better stimulus than saving failing companies who flushed the $ down the toilet.

AIG: If You Can't Beat 'Em, Tax 'Em

I am all in favor if we also tax away the net worth of Barney Frank and Chris Dodd, who are more repsonsible as individuals than anyone else for getting the nation into this housing mess.

The AIG Bailout: Why Was the Onus Placed on Taxpayers?

Micajah:

You get it.

The entire country has gone mad about the taxpayer bailout of AIG. Except that is all wrong. The AIG bailout came from the Federal Reserve from "funny" money that Bernanke/Federal Reserve creates (out of thin arir) by computer entry (as Bernanke said on "60 Minutes") in banks where Fed has accounts.

AIG bailout is not in the budget, deficit, nor a taxpayer debt. If AIG fails to pay back the Fed, it would seem that the money just goes up in smoke like a restriction of the money supply. Too bad they did not do all the bailouts with Fed funny money. That would be better for the taxpayers.

AIG Watch: The Taxpayer Is Being Fleeced Twice

Hey all. One very big difference about AIG. The money came from the Federal Reserve- not from Congress, not in the budget, not in the deficit, and in that sense, not form the taxpayer.

As Bernanke said on "60 Minutes" the Federal Reserve creates money by computer entry in the banks where it has accounts: a billion here, a billion there. Even if 100% of the Fed's AIG investment is loss, who bears the loss? The Fed. The funny money created by Fed goes up in smoke, but it seems like no more of a loss than when the Fed restricts the money supply.

This all makes one wonder why the taxpayers get stuck with the bill on TARP but not for AIG. The reality or fantasy is that the Bernanke and the Fed operate in their own little world. I don't even know if there is a method to remove the Fed chairman; possibly the other appointed Fed governors can.

Bernanke once suggested that he might buy TBills or invest in the stock market (to prop up) with this money that the Fed creates from nothing. It certainly would be a lot cheaper if the Treasury was financed by TBills sold to Fed rather than to China. China must be repaid. But the Fed could just write it off.

This is what you get when the US dollar is backed by nothing and an independent Fed can create money from nothing. The system works on confidance and fails on the lack of it.

The FAS 157 Accounting Standard and Marking to Market

I have a very simple recommendation to resolve a lot of this.

Whenever there is no independent standard (appraisal) to value these assets, you are required to write down 50% on the first pass. That gets the worst of the bad news out fast. Future write downs will not be worse news, because there is only 50% remaining to write down.

Assuming for example that assets are eventually determined to be worth 20% in the end: there would be a first write down of 50% in one reporting quarter and an additional write down of 30% in the quarters that follow.

Although this is a big fast hit for an individual company, the market regains confidence quickly, because the worst of the bad news is out quickly.

Such a requirement might also cause companies to improve their on risk assessments at the start.