Government to offer conservatorship to AIG

NEW YORK (Reuters) - U.S. stock index futures fell after the market closed on Tuesday on a Bloomberg report that the United States was considering conservatorship as an option for troubled insurer American International Group.

First Fannie / Freddie and now this... I really hope this does not happen - I don't even know how it can even be considered legal. We taxpayers cannot afford this! Can you imagine what that would add to our debt?

The Financial implications of something like this are simply unprecedented. I for one, am terrified.

Sorry, here is the link for the article.

www.reuters.com...

That sounds very much like what Steve Forbes mentioned last night in an interview.

Here is the post I added in another thread.

www.abovetopsecret.com...

www.reuters.com...

Here is an update to the news story....

AIG insures more than one-third of the Forbes 400 richest Americans, according to its annual report. Its aircraft leasing unit boasts a fleet of 900 jets. It ranks as the world's seventh-largest asset manager. It is even the main sponsor of British soccer club Manchester United.

It goes on to say that a loan could put AIG back on it's feet so I just can't see why the Government is considering a complete conservatorship. How can we add the debt we are talking here?

The price tag to steady AIG would likely run into the tens of billions, perhaps as much as $100 billion.

This is just insanity!

Yes, you are correct; this is a travesty of justice. The government should not be in the business of bailing out companies who make bad investments.

But in this case, I am not going to protest too hard. Why? Because although I have lived in a rag-tag trailer for many years while trying to work and afford a nice home, those who simply ran out and borrowed more than they could afford , thereby living in comfort while I struggled, are now being let off the hook by the same government. That isn't exactly fair either.

So if this protects the check I just last week sent off to AIG for 6 months of (government-mandated) auto insurance, good. I am assuming that if AIG were to go under, that would mean I would have to buy insurance through someone else (again, due to a governmental mandate). So while I may not get the same amount of break as someone who bought a home they obviously could not afford to pay for, at least I get something out of it.

Yeah, I'm cynical about this. But if the country is going down anyway, I might as well get my share of the corpse.

TheRedneck

A federal government source told Reuters no federal agency has legal authority to put AIG into a conservatorship.


www.reuters.com...

Dear Redneck, where I can certainly understand where you are coming from... doesn't it feel worse to know that you paid the insurance but if the government owns it your taxpayer money is going to be paying it forever.

Hi, I'm based in the UK, and some of our practises were questionable, I can go on about data (at a place I worked) not having any part of it, human behaviour in a recession... quite important. But this wasn't regulated in my country to the best of my knowledge. How much regulation and, crucially, checking authenticity of figures do you have in your country. I saw a Republican saying there may be too much regulation, but do you feel that this situation has arisen from a corruption. Enron, what regulation did that lead to? Or is it not really that relevant?

[edit on 16-9-2008 by redled]

Trust me on this one, if the fed doesn't intervene, we could be heading into some VERY hard times. These are one of the time you hope the government does involve itself. Having the worlds largest insurer bottom out, during the same week that Lehman Brothers bankrupted (the largest bankruptcy in history), is something that simply cannot be allowed to happen.

This is what it comes down to, are you willing to let your principles destroy this country's economy, and possibly the world's economy. I have adopted the idea that different situations require different principles. You cannot approach every situation as a libertarian, or every situation as a democrat. You must assess the situation, and act accordingly. In this instance, it is in the country's best interest that we bail out AIG. If we don't, we might as well throw our economy in the trash bin, because that is where it would be headed.

Principles based on generalizations and blanket rules on issues WILL destroy this country if we allow it to.

(Reuters) - The Federal Reserve is negotiating a $85-90 billion secured bridge loan for American International Group Inc., according to a report on CNBC.

Shareholders would be severely diluted by the bailout that involves the bridge loan. The government would receive AIG warrants for most of its equity in the bailout being negotiated. CNBC said the deal would give AIG incentive to sell its assets quickly to help pay off the bridge loan.

Federal Reserve Chairman Ben Bernanke, U.S. Treasury Secretary Henry Paulson and others are involved in the talks, CNBC said, adding that the bailout plan being negotiated "isn't a conservatorship".


It's going to be a sad day when the taxpayers, their children, and the grandchildren have to pay the piper.

reply to post by angelonmyshoulder


And it would be a much sadder day tomorrow if the Fed fails to act and no loan is made. The largest insurer would tank and monday's drop would look like a small trailer of things to come. I am very glad that the Fed changed their mind. Without them, action would not be taken quickly enough, AIG would file for bankruptcy, in the same week Lehman Brothers declared. That would be devastating to our economy, as well as the world's.

reply to post by grimreaper797


Respectfully Grim...

When is enough...enough??? We bailed out Freddie/fannie now AIG - Leehman filed and it looks like Washington Mutual is next. But who's after that? What if there is another major company which could throw the markets in turmoil do we step in and bail them out too.

I don't want the market to tank anymore than the next guy. Our 401K's and retirements are in horrible shape after this very slow and painful market meltdown and they say it will take another year before we can see improvement however, with that being said....

look what happened when Greenspan tried to bail out the dot.com crash by bringing up housing sector...Now we have the housing bubble/crash - so we survive this crash by bailing out all these huge companies. Sooner or later someone has to pay to get the economics back on track and I just don't want it to be the little guy, because that's about 98% of America.

Do I have a better idea for what could have been done....No but I know that doing the same thing over and over again and expecting a different result is not going to happen.

reply to post by angelonmyshoulder


Who do you think is going to pay for this, if the market bottoms out? Does the collapse of the dollar mean that global investors starve? No, it means we starve. When I say good thing the Fed is stepping in, its only because if they don't we (the middle class and lower) will lose just about everything if the market collapses.

I would rather the government prolong the collapse and just MAYBE think of a way to get this mess sorted out, than to let my principles of "free market" say "let it collapse" and watch millions of people suffer immensely.

I'm pretty libertarian, so I am not happy that the government has to get involved, but make no mistake, they do have to get involved. It is in our countries best interest they get involved. If our countries economic survival depends on them bailing out AIG, then so be it. I would rather bite the bullet and have them bail out AIG than have them not and watch this country collapse around itself.

[edit on 16-9-2008 by grimreaper797]

reply to post by grimreaper797


Respectfully Grim,

I do understand what you are saying, as there are not a lot of options on the table right now but... the choices we make today we are going to pay for tomorrow. The sooner this market crashes, the sooner we can start to recover. If we keep going the way we are now we simply won't be able to recover period.

reply to post by angelonmyshoulder


I agree with yo let the greedy bastards that had made a mess of our economy crash we like generations before us the regular Joe will survive.

Perhaps the greedy fat rats will finally get a taste of what it mean to live like us.

Let the bastards crash!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

reply to post by marg6043


Oh thank god...I was beginning to feel like I was the only one who thought this was absolute insanity.

It's like Robin Hood stealing from the poor to help the rich. (that would almost make me laugh it it wasn't so true)

www.reuters.com...

reply to post by angelonmyshoulder

Dear Redneck, where I can certainly understand where you are coming from... doesn't it feel worse to know that you paid the insurance but if the government owns it your taxpayer money is going to be paying it forever.

Angel, I know exactly what you mean. I have been saying the same thing for quite a while now. But from what I am seeing now, it appears to me that we have just went into freefall. In other words, the crash is upon us, and while we may be able to slow our descent a bit, I see no humanly possible way to stop it. Props can only hold so much force before they completely fail.

I am truly saddened to have to say the above, but in light of it... yeah, I'm giving in and looking out for number one. Apparently if I don't, no one else will. Maybe it's because I was financially forced to quit a dream job today, but the cynicism is overpowering me.

I agree with you, really I do. Just not tonight, not right now. Let the wall collapse so we can start building it back. Hopefully minus the idiocy we have seen this round.

TheRedneck

Originally posted by angelonmyshoulder

It's like Robin Hood stealing from the poor to help the rich. (that would almost make me laugh it it wasn't so true)

Moar like the FED helping the rich to steal from the poor.... in the long run.

Just sayin'....

These government bailouts are ridiculous! The banks made loans to people who shouldn't have qualified in the first place and now they should pay for the bad investments they made. I have not bought a house, I knew it was too expensive for me. Fannie and Freddie were created to keep housing affordable, but now their role is the exact opposite. If they were allowed to fail housing prices would have dropped and the market would have stabilized. People like me would actually be able to buy an affordable home with a loan I could actually repay. Instead the plan is to keep the prices inflated which will require the same shady lending practices that got them into this mess. I say we should let them all go under, the homeowners who knew they could not afford it(sorry to those of you reading this), the banks, the insurance companies and the foreign investors (whom I am sure these bailouts are aimed at saving, not you and I). Does anyone else think it's a little scary the the government now basically owns our country's mortgage market and the world's largest insurer?

Seriously WTF is going on with these nutjobs mortgaging our future.

I thought this is why we have antitrust laws to prevent companies from becoming to big that their demise could collapse the system. Instead The Fed is allowing these companies to just get bigger.

What we need to do:
-Every company that has assets exceeding $350 Billion in assets should submit plans to their shareholders to divest 40% of their assets over 10 years.
-Lenders that originate the loans must hold onto it for a year and half. After that time period you can sell, but have to insure the borrower.
-You can not buy commodity futures unless you show you have the ability to take delivery.

This is a start.

Originally posted by Anonymous ATS
Instead the plan is to keep the prices inflated which will require the same shady lending practices that got them into this mess. I say we should let them all go under, the homeowners who knew they could not afford it(sorry to those of you reading this), the banks, the insurance companies and the foreign investors (whom I am sure these bailouts are aimed at saving, not you and I).

Sure would seem so... No?

Does anyone else think it's a little scary the the government now basically owns our country's mortgage market and the world's largest insurer?

Scary? No... A nightmare would seem moar akin, relevant, and properly descriptive.

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