Comments on Saving to Inve$t: Another Inevitable Government (AIG) Billion Dollar...

still, it's hard to object to the government's mas...

2008-09-19T18:31:00.000-04:00

still, it's hard to object to the government's mass bailouts as similar debt-producing methods were put into action to bring the U.S. out of the Depression... our economy has been supported and driven by debt ever since

I always wonder where the money actually comes fro...

2008-09-17T17:28:00.000-04:00

I always wonder where the money actually comes from to bail out companies.

Anyway the video was great, look for a mention at my blog on Sunday.

For a great Q&A on AIG, check out the WSJ blog, wh...

2008-09-17T10:10:00.000-04:00

For a great Q&A on AIG, check out the WSJ blog, which covers the followin questions:

Why is AIG in crisis?

1) CDS: Unlike most other insurance companies, AIG plunged into the market for credit default swaps, which are contracts that act like insurance by protecting investors against default in a range of assets, including subprime mortgages and corporate bonds. Swap buyers make regular payments to sellers like AIG, who in turn have to make payouts if a default or bankruptcy occurs. As the risk of default on the assets has increased, AIG has had to write-down the value of the protection it sold and post collateral to its counterparties.

2) MORTGAGES: AIG also has other businesses that are exposed to the troubled housing market, including a unit that makes mortgage loans to consumers and a unit that promises to make payouts to lenders if a borrower can’t pay the mortgage.

3) INVESTMENTS: Like any insurance company, AIG funnels premiums paid by policyholders into myriad investments aimed at generating profits to fund future claims. Amid the upheaval in the markets, some of those investments have fallen in value.

What are the Ripple Effects?

1) AIG’s individual insurance subsidiaries appear to have adequate financial reserves and should be able to pay claims from people and businesses who hold policies with it. Even if the company files for bankruptcy protection, it can operate there or the subsidiaries can get sold.

2) The impact on Wall Street could be significant, as many financial institutions in the U.S., Europe and Asia bought credit default swaps from AIG tied to corporate debt and mortgage securities. These firms are counting on AIG to compensate them if the underlying assets default or decline in value. If AIG itself defaults or has trouble meeting its obligations, those market players may have to take write-downs or losses.

See http://blogs.wsj.com/wallstreetcrisis/2008/09/16/questions-and-answers-on-aig/trackback/ for more on this.

Mr TML. Thanks, the government without proper regu...

2008-09-17T09:28:00.000-04:00

Mr TML. Thanks, the government without proper regulations and oversight partly got us into this mess. What really gets to me is that the Wall Street Fat Cats (heads and senior mangement of these failed companies) will probably walk way with decent money while the rest of their ex-employee's suffer. I would not be surprised if a lot of these failed CEO's go work for hedge funds and then in 2 years or so comeback as part of takeover teams to buy the pieces of the institutions that the government will sell.

Smarter Wallet - The govt/fed can just keep printing money. This causes inflation, lowers our dollar and reduces the real wealth of most Americans. Not that the current administration cares about that..

How many more bailouts can the government make? R...

2008-09-17T02:35:00.000-04:00

How many more bailouts can the government make? Running out of powder here, probably!

Andy: I agree with your analysis 100%. If the go...

2008-09-17T00:12:00.000-04:00

Andy: I agree with your analysis 100%. If the government would focus on consumers, including keeping energy prices and taxes down, and stop the deficit spending, we would pull out of this mess. Instead, we are aiding he Chinese government (with Fannie Mae and Freddie Mac bailout) and Wall Street fat cats with Bear Stearns and AIG.