AIG Bailout

[Hookemdown.]

Jim Cramer, CNBC?

Yes.

[Avalonjohn44]

Apparently he was 'pleading' for the nationalization of AIG, and the others, according to many articles.  I don't watch mad money, and don't have an opinion yet on cramer, but the little I've read in the last 10 minutes doesn't make him look like a rabid capitalist, but more of a socialist, so of course he'd like the government stepping in... On one hand I hate that the gov't keeps bailing these industries out.  We have gov't propped up airlines, trains, banks, insurance, etc... Enough is enough.  What's next, record companies or oil companies when lithium ion cars get really good?  I'm sick of the government being so obesely powerful.

[Hookemdown.]

Apparently he was 'pleading' for the nationalization of AIG, and the others, according to many articles. I don't watch mad money, and don't have an opinion yet on cramer, but the little I've read in the last 10 minutes doesn't make him look like a rabid capitalist, but more of a socialist, so of course he'd like the government stepping in... On one hand I hate that the gov't keeps bailing these industries out. We have gov't propped up airlines, trains, banks, insurance, etc... Enough is enough. What's next, record companies or oil companies when lithium ion cars get really good? I'm sick of the government being so obesely powerful.

I agree 100% with you about the whole socialization of everything.  I think we've established that captialism > socialism.  

About Cramer... He has received some skepticism for having some socialistic opinions, such as in the "mortgage crisis" last year.

I think that AIG was too important to fail, and that the government was the only thing that could bail it out.

That being said,  I don't know that much about the financial sector to have a solid opinion about anything. ;D

[CRFisher]

On the bailout, Govt gets 11% interest on it's loan and 80% of the company.  They should be able to keep it afloat and make a pretty sizeable gain on this.  

On the blame game, a lot of the blame lies in the small time mortgage originators and house appraisers who were making a pretty penny on commissions fudging this crap and overvaluing the property then selling them off to the bigger companies as viable mortgages.  They go in, inflate the numbers, get the person qualified, then sell it off to WAMU, Countrywide or Wells Fargo and pocket an easy couple of grand.  No skin of their back if the mortgage goes belly up.

Sure the larger companies had to know, but the large corps were the same people who were villified for years as racists for not giving mortgages into poor communities, so they would've been painted as horrible people if they tried to put the brakes on.  The system was broken, however, since people were takign cash out and spending, keeping the economy afloat, no one really cared even though it's been going on for over a decade.  Eventually the bubble burst and the large companies were left holding the bag.  

[done]

On the blame game, a lot of the blame lies in the small time mortgage originators and house appraisers who were making a pretty penny on commissions fudging this crap and overvaluing the property then selling them off to the bigger companies as viable mortgages. They go in, inflate the numbers, get the person qualified, then sell it off to WAMU, Countrywide or Wells Fargo and pocket an easy couple of grand. No skin of their back if the mortgage goes belly up.

Sure the larger companies had to know, but the large corps were the same people who were villified for years as racists for not giving mortgages into poor communities, so they would've been painted as horrible people if they tried to put the brakes on. The system was broken, however, since people were takign cash out and spending, keeping the economy afloat, no one really cared even though it's been going on for over a decade. Eventually the bubble burst and the large companies were left holding the bag.

See I am less forgiving of the individuals with these mortgages than you are. When I got my first real job about 10 yrs ago, me and my wife had a combines income near 60k. We got pre-approved for a mortgage of 300k. If we had not done our homework and forced ourselves (and our prodes) to accept that as way out of our range, we would have been hosed.

That being said, I never saw the logic in any credit company giving high risk credit. The mortgage companies did it. The credit card companies do it. The payday loan companies do it. It makes no sense to me. What made it particularly worse for mortgage companies (IMO) was they gave high risk loans as ridiculously low interest rates. On top of that they offer these variable rate and interest only loans that seem designed to eventually lead the mortgagees to bankruptcy. i mean they go up when times get tough. Which is exactly when the owners cannot afford to pay more. It seems like an almost retarded business model.

I personally, think it was the failures of the banks as well as the total lack of personal responsibility by the masses that helped cause this crisis. That being said, please do not get the impression that I think everyone who has lost their homes in this crisis is some lunatic out there maxing out their credit. There are also plenty of folks who had their mortgages set up right and affordable and just got hit by some pretty unfortunate circumstances.

[FishingBuds]

its not over untill the fat lady sings :-X

[burleytog]

Congress Tries To Fix What It Broke

By INVESTOR'S BUSINESS DAILY

Regulation: As the financial crisis spreads, denials on Capitol Hill

grow more shrill. Blame an aloof President Bush, greedy Wall Street,

risky capitalism, anybody but those in Congress who wrote the banking

rules.

Such denials won't hold against the angry facts banging on their

doors. The only question is whether the guilty party can keep up the

barricade until Election Day.

A visibly annoyed House Speaker Nancy Pelosi rejected suggestions that

Democrats share blame for the meltdown. "No," she snapped at reporters

who dared ask.

Stick to our narrative, she scolded: The bursting of the housing

bubble was another story of market failure and deregulation.

"The American people are not protected from the risk-taking and the

greed of these financial institutions," she said, while calling for

investigations of the industry.

Only, the risk-taking was her idea and the idea of all the other

Democrats, along with a handful of Republicans, who over the past 30

years have demonized lenders as racist and passed regulation after

regulation pressuring them to make more loans to unqualified borrowers

in the name of diversity.

They were the ones who screamed "REDLINING!" and sent banks

scurrying for cover in low-income neighborhoods, where they have been

forced to lower long-held industry standards for judging

creditworthiness to make the subprime loans.

If they don't comply, they are threatened with stiff penalties under

the Community Reinvestment Act, or CRA, a law that forces banks to

make home loans to people with poor credit risks.

No fewer than four federal banking regulatory agencies are responsible

for enforcing the law. They subject lenders to racial litmus tests and

issue regular report cards, the industry's dreaded "CRA rating."

The more branches that lenders put in poor neighborhoods, and the more

loans they make there, the better their rating. Those lenders with low

ratings can not only be fined, but also blocked from mergers and other

business transactions needed to expand.

The regulation grew to monstrous proportions during the Clinton

administration, obsessed as it was with multiculturalism. Amendments

to the CRA in the mid-1990s dramatically raised the amount of home

loans to otherwise unqualified low-income borrowers.

The revisions also allowed for the first time the securitization of

CRA-regulated loans containing subprime mortgages. The changes came as

radical "housing rights" groups led by ACORN lobbied for such

loans. ACORN at the time was represented by a young public-interest

lawyer in Chicago by the name of Barack Obama.

HUD, in turn, pressured Fannie Mae and Freddie Mac to purchase more

subprime mortgages, and Fannie and Freddie, in turn, donated to the

campaigns of leading Democrats like Barney Frank and Pelosi who

throttled investigations into fraud at the agencies.

Soon, investment banks such as Bear Stearns were aggressively hawking

the securities as "guaranteed." Wall Street's pitch was that MBSs were

as safe as Treasuries, but with a higher yield.

But they weren't safe. Everyone in the subprime business from

brokers to lenders to banks to investment houses absolved themselves

of responsibility for ensuring the high-risk loans were good.

The mortgage lenders didn't care, because they were going to sell the

loans to other banks. The banks didn't care, because they were going

to repackage the loans as MBSs. The investors and traders didn't care,

because the MBSs were backed by Fannie and Freddie and their implicit

government guarantees.

In other words, nobody up and down the line from the branch office

on main street to the high-rise on Wall Street analyzed the risk of

such ill-advised loans. But why should they Everybody was just doing

what the regulators in Washington wanted them to do.

So everybody won until everybody lost, including the minorities the

government originally mandated the banks to serve.

The original culprits in all this were the social engineers who

compelled banks to make the bad loans. The private sector has no

business conducting social experiments on behalf of government. Its

business is making profit. Period. So it did what it naturally does

and turned the subprime social mandate into a lucrative industry.

Of course, it was a Ponzi scheme, because they weren't allowed to play

by their rules. The government changed the rules for risk.

In order to put low-income minorities into home loans, they were

ordered to suspend lending standards that had served the banking

industry well for centuries. No one wants to talk about it, so they

just scapegoat Wall Street. Even John McCain has joined the Democrat

chorus on this.

The FBI is now investigating 24 large mortgage lenders for alleged

abuses. But who will investigate the pols and the lobbyists and the

community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?

[jax]

Wow. That article put some of these I was juggling with into place. Thanks for finding that.

[moby bass]

The article posted by Burley is exactly right.  The trouble hasn't been deregulation but OVERREGULATION.

[avid]

I find myself agreeing with the spirit of Burley's post and the supportive comment that followed.  When you have multiple, overlapping agencies doing essentially the same thing, it's too easy to assume that "the other guy" is taking care of business.  We don't need more regulation and the swollen bureaucracies it creates.  We need a clear regulatory mission designed to prevent the abuse and manipulations that undermine the markets, carried out by skilled auditors with real enforcement power and a high level of accountability for their actions.

[Avalonjohn44]

I find myself agreeing with the spirit of Burley's post and the supportive comment that followed.  When you have multiple, overlapping agencies doing essentially the same thing, it's too easy to assume that "the other guy" is taking care of business.  We don't need more regulation and the swollen bureaucracies it creates.  We need a clear regulatory mission designed to prevent the abuse and manipulations that undermine the markets, carried out by skilled auditors with real enforcement power and a high level of accountability for their actions.

That makes far too much sense for it to work in our government.

[FishingBuds]

This was e-mailed to me ;D

I'd vote for it.

No, Good Deed, Goes Unpunished

Hi Everyone,

I'm against the $85,000,000,000 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in

a ''We Deserve It Dividend''.

To make the math simple, let's assume there are 200,000,000

bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman

and child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals $425,000.

My plan is to give $425,000 to every person 18+ as a

'We Deserve It Dividend'.

Of course, it would NOT be tax free.

So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.

That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500 in their pocket.

A husband and wife has $595,000.

What would you do with $297,500 to $595,000 in your family?

Pay off your mortgage - housing crisis solved.

Repay college loans - what a great boost to new grads

Put away money for college - it'll be there

Save in a bank - create money to loan to entrepreneurs.

Buy a new car - create jobs

Invest in the market - capital drives growth

Pay for your parent's medical insurance - health care improves

Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks

who lost their jobs at Lehman Brothers and every other company

that is cutting back. And of course, for those serving in our Armed

Forces.

If we're going to re-distribute wealth let's really do it...instead of

trickling out a puny $1000.00 ('vote buy') economic incentive that is

being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult

U S Citizen 18+!

As for AIG - liquidate it.

Sell off its parts.

Let American General go back to being American General.

Sell off the real estate.

Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can 'never work.'

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion

'We Deserve It Dividend' more than I do the geniuses at AIG or in

Washington DC.

And remember, The Family plan only really costs $59.5 Billion because

$25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh...I feel so much better getting that off my chest.

Kindest personal regards,

A Creative Guy & Citizen of the Republic.

[fishinfiend]

I think the person that sent you that email needs to rework their math.

The "We deserve it dividend" would come out to $425 or $297.50 after taxes.  I would go get a Loomis and order a few trick sticks.

[FishingBuds]

I think the person that sent you that email needs to rework their math.

The "We deserve it dividend" would come out to $425 or $297.50 after taxes. I would go get a Loomis and order a few trick sticks.

I missed that one,  but I'd move on with your line of thinking, But just a few of them ;D

[Glenn]

There's a number of political undertones in this thread.  I expect that everyone will adhere to the "no politics" rule going forward.

Fair warning.

[tyrius.]

As for AIG - liquidate it.

Sell off its parts.

That's pretty much exactly what is happening already.  AIG as it was no longer exists.  The shareholders of AIG lost 80% of the company when the gov't took over because the gov't took an 80% equity stake in the company.

Sure it's a crazy idea that can 'never work.'

It's actually much worse than crazy.    If the country printed that much money the dollar would essentially become worth significantly less in the world market.  All commodities would skyrocket, import costs would skyrocket, etc, etc.  Creating more money on that kind of a scale is economic suicide.  Many countries have tried it, they all have failed miserably.  .

[cart7t]

Congress Tries To Fix What It Broke

By INVESTOR'S BUSINESS DAILY

Regulation: As the financial crisis spreads, denials on Capitol Hill

grow more shrill. Blame an aloof President Bush, greedy Wall Street,

risky capitalism, anybody but those in Congress who wrote the banking

rules.

Such denials won't hold against the angry facts banging on their

doors. The only question is whether the guilty party can keep up the

barricade until Election Day.

A visibly annoyed House Speaker Nancy Pelosi rejected suggestions that

Democrats share blame for the meltdown. "No," she snapped at reporters

who dared ask.

Stick to our narrative, she scolded: The bursting of the housing

bubble was another story of market failure and deregulation.

"The American people are not protected from the risk-taking and the

greed of these financial institutions," she said, while calling for

investigations of the industry.

Only, the risk-taking was her idea and the idea of all the other

Democrats, along with a handful of Republicans, who over the past 30

years have demonized lenders as racist and passed regulation after

regulation pressuring them to make more loans to unqualified borrowers

in the name of diversity.

They were the ones who screamed "REDLINING!" and sent banks

scurrying for cover in low-income neighborhoods, where they have been

forced to lower long-held industry standards for judging

creditworthiness to make the subprime loans.

If they don't comply, they are threatened with stiff penalties under

the Community Reinvestment Act, or CRA, a law that forces banks to

make home loans to people with poor credit risks.

No fewer than four federal banking regulatory agencies are responsible

for enforcing the law. They subject lenders to racial litmus tests and

issue regular report cards, the industry's dreaded "CRA rating."

The more branches that lenders put in poor neighborhoods, and the more

loans they make there, the better their rating. Those lenders with low

ratings can not only be fined, but also blocked from mergers and other

business transactions needed to expand.

The regulation grew to monstrous proportions during the Clinton

administration, obsessed as it was with multiculturalism. Amendments

to the CRA in the mid-1990s dramatically raised the amount of home

loans to otherwise unqualified low-income borrowers.

The revisions also allowed for the first time the securitization of

CRA-regulated loans containing subprime mortgages. The changes came as

radical "housing rights" groups led by ACORN lobbied for such

loans. ACORN at the time was represented by a young public-interest

lawyer in Chicago by the name of Barack Obama.

HUD, in turn, pressured Fannie Mae and Freddie Mac to purchase more

subprime mortgages, and Fannie and Freddie, in turn, donated to the

campaigns of leading Democrats like Barney Frank and Pelosi who

throttled investigations into fraud at the agencies.

Soon, investment banks such as Bear Stearns were aggressively hawking

the securities as "guaranteed." Wall Street's pitch was that MBSs were

as safe as Treasuries, but with a higher yield.

But they weren't safe. Everyone in the subprime business from

brokers to lenders to banks to investment houses absolved themselves

of responsibility for ensuring the high-risk loans were good.

The mortgage lenders didn't care, because they were going to sell the

loans to other banks. The banks didn't care, because they were going

to repackage the loans as MBSs. The investors and traders didn't care,

because the MBSs were backed by Fannie and Freddie and their implicit

government guarantees.

In other words, nobody up and down the line from the branch office

on main street to the high-rise on Wall Street analyzed the risk of

such ill-advised loans. But why should they Everybody was just doing

what the regulators in Washington wanted them to do.

So everybody won until everybody lost, including the minorities the

government originally mandated the banks to serve.

The original culprits in all this were the social engineers who

compelled banks to make the bad loans. The private sector has no

business conducting social experiments on behalf of government. Its

business is making profit. Period. So it did what it naturally does

and turned the subprime social mandate into a lucrative industry.

Of course, it was a Ponzi scheme, because they weren't allowed to play

by their rules. The government changed the rules for risk.

In order to put low-income minorities into home loans, they were

ordered to suspend lending standards that had served the banking

industry well for centuries. No one wants to talk about it, so they

just scapegoat Wall Street. Even John McCain has joined the Democrat

chorus on this.

The FBI is now investigating 24 large mortgage lenders for alleged

abuses. But who will investigate the pols and the lobbyists and the

community agitators who made the bad decisions that ultimately forced businesses to make their bad decisions?

I'm still waiting for hard data that indicates that it was loans made under this plan that took the whole system down.

Of the foreclosures I'm aware of plus many more folks that got into sub-prime ARMS that re-adjusted themselves into a rate that put the pinch on the borrower, none of them would've qualified for any of these programs.