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In other words..."The Donald" wouldn't...
Trump: 'AIG has politicians right where they want them'
(CNN) -- Donald Trump, chairman and president of The Trump Organization and the executive producer of NBC's "Celebrity Apprentice," spoke with Larry King on Tuesday about the public's furor with AIG, the Bernie Madoff saga and the nation's economic woes.
The following is an edited version of the interview.
Larry King: We have public anger over the AIG bonuses. Is it justified?
Donald Trump: Well, it's unbelievable anger. I heard people saying things that you wouldn't even believe -- a very major senator saying that the people that did this should commit suicide. That's a pretty strong statement, I would say.
It is very bad politics in terms of what AIG did. They took $165 billion in money from the government and now they're going around giving out bonuses and giving people bonuses that really, in many cases, did not do a very good job and, in many cases, took the bonus and left right after the bonus. The bonuses were supposed to hold these people together and hold them into the company.
I think it's a very, very foolish thing that they did, and certainly should have used a different name if they had to do something.
King: We -- the collective we -- we the people, own 80 percent of AIG. Should we allow it to fail?
Trump: Well, Larry, now that you're in for $160 billion, it's a lot harder to walk away. I think AIG has the politicians right where they want them. Frankly, I think letting Lehman fail was far worse than letting AIG fail.
Think of this, Larry. The car companies want $35 billion. These people got $165 billion already and they're going to get a lot more. I don't know. It sounds, to me, just absolutely insane.
King: Can we get the bonuses back?
Trump: Well, it's pretty tough because supposedly they have iron-clad contracts and some of the people got their bonuses and already left. They took millions of dollars. The following day, they left. The reason for the bonus was to keep them in the company, supposedly. So they took the bonus and they left. I don't think those people are going to be giving the bonuses back, Larry.
Crisis having "major" impact on central bank reserve management
LONDON (Reuters) - Global financial turmoil has had a "major" impact on the reserve management policies of two thirds of central banks and almost all are rethinking diversification tactics, a survey showed on Wednesday.
The survey of 39 central banks who control reserve assets worth $3.2 trillion, just under 42 percent of the world's total, showed reserve managers were much more conservative and cautious last year than a year earlier.
Reserve managers expressed "great concern" about credit and liquidity risks, with over two thirds of respondents saying they experienced bouts of illiquidity in even the major bond markets.
Over 90 percent of respondents to the survey conducted by Central Banking Publications said they have been forced to reassess counterparty risk and most said the hunt for diversity and yield in recent years has been severely curtailed.
The majority of respondents in the survey, carried out late last year, also said they expect reserves to fall as the crisis unfolds before recovering to only "marginally" above current levels over the next four years.
"The unprecedented changes to the financial landscape witnessed over the last (few) months have dramatically altered previous paradigms and beliefs," said a respondent from a central bank in the Americas.
"These events have increased risk aversion and central banks have not been an exception."
Hedge Funds Can’t Save Themselves With Lower Fees: Matthew Lynn
March 18 (Bloomberg) -- It works for street traders. It can work for airlines, retailers and carmakers. But hedge funds?
As the financial community staggers from disaster to disaster, some alternative-investment managers have decided that slashing their fees is the only way to salvage their business.
Firms such as Centaurus Capital Ltd. and Harbinger Capital Partners are cutting the charges they levy on investors. As sales fall and redemptions increase, don’t be surprised if many others do the same thing.
It won’t work. The hedge-fund industry was never about price and never will be. These money managers are now showing that their ability to manipulate figures on a screen doesn’t necessarily translate into knowledge about how business works.
Throughout its explosive growth, the hedge-fund industry has been dominated by two simple numbers: 2 and 20. Typically, the funds charged 2 percent of assets under management and collected 20 percent of any gain made. Some of the biggest fortunes of recent times have been built on those two figures.
Now, with returns plummeting and investors heading for the exit, hedge funds are searching for a new strategy.
This week, London-based Centaurus Capital said it was starting a new fund that would charge a more modest 1.5 percent plus 15 percent of profits. Earlier this month, Harbinger Capital Partners, run by Philip Falcone, proposed lower management and incentive fees if investors agreed to have their money tied up for two years rather than one. New York-based Prentice Capital Management LP is offering similar incentives for tie-up periods.
...And the carnage continues...
Owners skulking away from "underwater" U.S. homes
LOS ANGELES (Reuters) - Ron Barnard is throwing in the towel. Like a growing number of the 8.3 million American homeowners who owe more on mortgages than their homes are worth, he's ready to just walk away.
Barnard and others like him are starting to worry market experts and economists, who fret that the growing trend may deal a blow to an economy on its knees while swelling an already ample pool of bad loans.
While others persist in draining savings and running up credit card debt in a last-ditch bid to save their homes, a growing number see no point in making boom-level mortgage payments in a bust market -- with no bottom in sight.
"People are hurting," said Barnard, who includes himself in that group. "They're scared or they're angry,"
In California's Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.
Those bank-owned homes moved at fire-sale prices that decimated the value of neighboring homes -- many of which are owned by people who have limited "skin in the game" because they put little or no money down at purchase.
Deflating home prices thus threaten to accelerate a negative feedback loop that has sent prices lower, said economist Ed Leamer, director of the UCLA Anderson Forecast.
"Should the downward spiral in home prices, neighborhood condition and equity deterioration continue, more and more mainstream borrowers are likely to walk away from their homes," Credit Suisse said in a December report.
Barnard, who already has stopped making payments on five investment properties purchased in 2005, is on the verge of giving up on his own home that is now worth roughly half its $800,000 purchase price.
Others weigh the predictable and relatively short-term foreclosure-related hit to their credit ratings against the diminishing likelihood of breaking even on their investments or even making monthly payments on such severely "underwater" homes.
This REALLY NEEDS TO STOP...like yesterday!!!
Freddie Mac: The Government's Next Black Hole?
AIG is to date the most expensive corporate bailout in American history, requiring $180 billion of government funds. But it may soon have competition. Last week, mortgage giant Freddie Mac said that it had lost $50 billion in 2008 alone. A look at the company's books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could even be larger.
"Freddie's portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analysts at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more.
Citigroup and other banks have also lost money, and will need more capital to survive. But in those cases it's not clear who will take the hit - shareholders, bondholders or the government. In the case of AIG, Freddie Mac and Fannie Mae, however, there is no question where the money will come from. Freddie and Fannie were taken over by the government and put into conservatorship last fall. AIG is now 80% owned by the government. The losses at those companies are now taxpayer losses.
And like AIG, Freddie has had to come back to the government a number of times with cup in hand. The mortgage giant has already received $14 billion in government aid. After the fourth quarter loss of $24 billion, the company said it needs an additional $31 billion from the government to keep the lights on.
Freddie's business, which in part comes from a government mandate, is insuring mortgages. So when borrowers lose their jobs, as many now are, Freddie is going to lose money. But only a quarter of Freddie's red ink, or about $13 billion, comes from mortgage insurance woes. The firm took a larger hit from its investment in mortgage-backed securities tied to subprime, adjustable-rate or jumbo mortgages. By law, Freddie isn't allowed to insure against losses on those types of mortgages, in part because they are riskier. But it bought securities tied to those home loans anyway - which it is allowed to do - in order to capture the higher rates of return that those mortgage bonds offered. Unfortunately, the bets didn't pay off. Freddie lost $16 billion on those investments.
Another bet that didn't pay off for Freddie was on interest rates. The firm's managers bought derivatives that would pay out if interest rates rose. Instead, a global financial meltdown has caused interest rates to plummet. That resulted is a $15 billion loss for Freddie from its hedges.
Freddie lost another $1 billion on bonds tied to short-term loans made to Lehman Brothers. Like Lehman, that investment went belly up. Then there are all the houses it now has to repossess as people stop paying their mortgages. The company now owns about 30,000 homes. Maintaining these houses cost about $3,300 a month each, and that comes on top of the loan loss, which is typically about one-third of the size of the mortgage. Wave goodbye to another billion.
The Real AIG Scandal
It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
By Eliot Spitzer
Posted Tuesday, March 17, 2009 - 11:01am
Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?
For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.
It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.
But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
So here are several questions that should be answered, in public, under oath, to clear the air:
What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?
Was it already known who the counterparties were and what the exposure was for each of the counterparties?
What did Goldman, and all the other counterparties, know about AIG's financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn't they bear a percentage of the risk of failure of their own counterparty?
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.
Originally posted by DangerDeath
reply to post by redhatty
Curiously, Reinhardt believes that exposing the bastards is the same as destroying them. Well, I don't think so.
They own the handcuffs.
In the middle of this outrage, they are pushing pedal to the metal. Things accelerate. This is going to be such a crash, such a stranding!
Literally, ashes will fall from the sky.
Even the meteorologists will drown