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Financial Crisis

cacruden said:
AIG is not back for another bailout so to speak - they are already nationalized (80% owned by the feds).
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True, but they want more capital. They lost 60 billion in the last Q, which is ridiculous. They need to go bankrupt.
 
Roy G Biv said:
Nationalize, and sell off what you can, or else the US will become 90's Japan.
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I'm afraid that's too late. The US will be lucky to be like 90s Japan.

Roy G Biv said:
True, but they want more capital. They lost 60 billion in the last Q, which is ridiculous. They need to go bankrupt.
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The trouble is that AIG is so tangled in messed up derivatives that you'd need financial wizards (like an alumni from my school who helped cause the current mess http://en.wikipedia.org/wiki/David_X._Li) to untangle them, or else an AIG bankruptcy will make September 15, 2008 seem like an average bad day.
 
Roy G Biv said:
True, but they want more capital. They lost 60 billion in the last Q, which is ridiculous. They need to go bankrupt.
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They are bankrupt, that is why the feds are in control. There is a BIG problem with allowing AIG to actually implode though. In Canada we have most of our securitized mortgage insured through CMHC, which is actually a crown corporation that I think the US should emulate, a mortgage version of FDIC. If you think the financial crisis is bad now, it would be dwarfed by an AIG implosion, since AIG was the financial insurer. Think of everything that any financial institution manufactured in a similar manner - imploding all at once. You would bring down every single financial institution in the United States -- all at once.

When companies moved stuff off of book, they packaged the security side of the equation (in one case Mortgages), they then bought insurance (aka CMHC) - in case of default (to cover losses), then sold it as fixed income that was 100% secured with an interest rate and income stream. Now of AIG folds, all the insurance is null, and all of those instruments have to be unwound and put back on the companies books. This will in turn require a massive increase in capital for all the financial institutions, which is required to continue operating. Think of the great depression 10 fold. The problem with financial institutions insuring financial institutions is that they have to take in money and invest it in a pool, which is used to cover losses if needed. Of course, when it is needed most, investments are depressed or illiquid - boom. On top of it, these instruments were sold, repackaged, sold etc. Which means you really cannot figure out what would happen - just it would be the worst of all worlds.
 
cacruden said:
They are bankrupt, that is why the feds are in control. There is a BIG problem with allowing AIG to actually implode though. In Canada we have most of our securitized mortgage insured through CMHC, which is actually a crown corporation that I think the US should emulate, a mortgage version of FDIC. If you think the financial crisis is bad now, it would be dwarfed by an AIG implosion, since AIG was the financial insurer. Think of everything that any financial institution manufactured in a similar manner - imploding all at once. You would bring down every single financial institution in the United States -- all at once.

When companies moved stuff off of book, they packaged the security side of the equation (in one case Mortgages), they then bought insurance (aka CMHC) - in case of default (to cover losses), then sold it as fixed income that was 100% secured with an interest rate and income stream. Now of AIG folds, all the insurance is null, and all of those instruments have to be unwound and put back on the companies books. This will in turn require a massive increase in capital for all the financial institutions, which is required to continue operating. Think of the great depression 10 fold. The problem with financial institutions insuring financial institutions is that they have to take in money and invest it in a pool, which is used to cover losses if needed. Of course, when it is needed most, investments are depressed or illiquid - boom. On top of it, these instruments were sold, repackaged, sold etc. Which means you really cannot figure out what would happen - just it would be the worst of all worlds.
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There have been some that think the securitizations could be leveraged 300:1
 
cacruden said:
They are bankrupt, that is why the feds are in control. There is a BIG problem with allowing AIG to actually implode though. In Canada we have most of our securitized mortgage insured through CMHC, which is actually a crown corporation that I think the US should emulate, a mortgage version of FDIC.
Click to expand...

In the US it was Fannie Mae and Freddy Mac which guaranteed most of the mortgaged backed securities. The trouble came when their implicit backing by Uncle Sam made them reckless, eventually requiring them to be seized.

AIG was hit by the massive CDS payouts which started to unravel them once the Lehman dominoes started falling.
 
Honestly the easiest way out of this mess is basically converting to a socialist regime in which the top 1% no longer hold 90% of the worlds money. "Off with their heads" I say!

But yeah, major power and wealth redistribution needs to happen, more or less another revolution at some point down the road. How it will happen is anybodys guess.
 
rpgr said:
Honestly the easiest way out of this mess is basically converting to a socialist regime in which the top 1% no longer hold 90% of the worlds money. "Off with their heads" I say!

But yeah, major power and wealth redistribution needs to happen, more or less another revolution at some point down the road. How it will happen is anybodys guess.
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I think that it might take a jubilee*. In a modern sense allow all governments to increase the money supply by 100%. Sort of like a two for one stock split, with the government taking possession of the newly created money.

*
 
urbanfan89 said:
CDS payouts which started to unravel them once the Lehman dominoes started falling.
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Yeah, it's the CDS' killing everybody. AIG's insurance business is still profitable, and it looks like Buffet is going to make a play (via B-H).
 
Damn....wish I had bought TD stock. Glad to hear all of our banks are at or above earnings targets. Perhaps Toronto will get back the reputation of 'New York run by the Swiss' for an entirely different reason.
 
AIG was lobbying the Harper Government Hard! I think we are on the hook for a deal that was made, anyone know about this?
 
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