“’This is the end of an era. We can’t reinflate the bubble.

5 posts / 0 new
Last post
investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
“’This is the end of an era. We can’t reinflate the bubble.

 “All the original money that paid for all this
toxic waste didn’t evaporate, it ended up in illuminist bank accts. 
Billions.  Thus there will never be an accounting of TARP or the rest.
…AIG will need 500B.  …Credit is not capital Mr. Ben; capital comes from savings not loans.” (emphasis added)

Bob Chapman
International Forecaster

--------------------------------------------------------

 “Remember
that the reason for shoring up AIG was its credit default swaps
portfolio, in which it had written lots of unhedged guarantees on the
cheery assumption that there was tantamount to no risk... 

…Uncle
Sam has no regulatory responsibility for AIG, but was hit up
nevertheless as the most logical deep pocket that could prevent a
financial train wreck.

Gretchen
Morgenson reported in September that Goldman was the only financial
firm that had a seat at the table during the AIG rescue talks.  We
noted at that time:

This is special
dealing, pure and simple.  Even if AIG needed to be salvaged (there was
considerable agreement on this point), having Goldman deeply involved
in the process is cronyism…

…Another
reason for the bailout was that AIG’s guarantees allowed European banks
to circumvent minimum capital requirements, which means the AIG salvage
operation was a backstop to European financial firms.

The
Wall Street Journal story, ‘Top U.S., European Banks Got $50 Billion in
AIG Aid’ peels back another layer in this sorry affair:

The
beneficiaries of the government’s bailout of American International
Group Inc. include at least two dozen U.S. and foreign financial
institutions that have been paid roughly $50 billion since the Federal
Reserve first extended aid to the insurance giant.

Among
those institutions are Goldman Sachs Group Inc. and Germany’s Deutsche
Bank AG, each of which received roughly $6 billion in payments between
mid-September and December 2008…

The
names of all of AIG’s derivative counterparties and the money they have
received from taxpayers still isn’t known, but The Wall Street Journal
has identified some of them and is publishing others here for the first
time….

…Some banks that were paid by AIG after it was bailed out by the government

Goldman Sachs
Deutsche Bank
Merrill Lynch
Societe Generale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group
Source:  WSJ research

…Wake
up and smell the coffee.  The public purse is being looted and we the
great unwashed are being fed pablum.  Just because the perps work for
the once esteemed institutions and are typically treated with deference
does not change the nature of the undertaking.

From Buiter:

The
reports on the evidence given by the Vice Chairman of the Federal
Reserve Board, Don Kohn, to the Senate Banking Committee about the
Fed’s role in the government’s rescue of AIG, have left me speechless
and weak with rage.   AIG wrote CDS, that is, it sold credit default
swaps that provided the buyer of the CDS (including some of the world’s
largest banks) with insurance against default on bonds and other credit
instruments they held.  Of course the insurance was only as good as the
creditworthiness of the party writing the CDS.  When it was uncovered
during the late summer of 2008, that AIG had nurtured a little rogue,
unregulated investment banking unit in its bosom, and that the level of
the credit risk it had insured was well beyond it’s mean, the AIG
counterparties, that it, the
buyers of the CDS, were caught with their pants down.

Instead
of saying, ‘how sad, too bad’ to these counterparties, the Fed decided
(in the words of the Wall Street Journal), to unwind ‘…some AIG
contracts that were weighing down the insurance giant by paying off the
trading partners at the full value they expected to realize in the long
term, even though short-term values had tumbled’…

…I
am deeply worried that other people may, as a result of this, be
willing to do business with other U.S. Financial institutions on the
same ludicrous terms that brought us the current crisis…

Unless
the counterparties pay the full price for their hubris and
recklessness, they will be back for more.  It is therefore tragic that
central banks and governments everywhere are going out of their way to
protect and shelter the unsecured creditors of the banks (holders of
junior and senior debt among them), by raiding the taxpayer or the
credit and reputation of the central bank.  Significant mandatory
debt-to-equity conversions and large write-downs of (haircuts on) the
claims of other unsecured creditors should be an integral part of any
financial assistance package.

http://www.financialsense.com/fsu/editorials/deepcaster/2009/0313.html 

r101958's picture
r101958
Status: Martenson Brigade Member (Offline)
Joined: Aug 24 2008
Posts: 257
Re: “’This is the end of an era. We can’t reinflate ...

Speaking of not being able to reinflate the bubble.......Anybody heard anything about a big corporate failure to be announced next week?

http://www.housepricecrash.co.uk/forum/index.php?showtopic=107965

SkylightMT's picture
SkylightMT
Status: Silver Member (Offline)
Joined: Sep 30 2008
Posts: 125
Re: “’This is the end of an era. We can’t reinflate ...
investorzzo wrote:

Unless the counterparties pay the full price for their hubris and recklessness, they will be back for more. 

Distraction. Misplaced effort. Unless we rethink and rewrite our economic system, there'll be no place to come back for more.

First, fix the system and prevent further suffering. Nothing else should be a priority. Forget about moral hazard... that's already been violated so many times its a worthless concept at this moment in time.

investorzzo's picture
investorzzo
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
Re: “’This is the end of an era. We can’t reinflate ...
SkylightMT wrote:
investorzzo wrote:

Unless the counterparties pay the full price for their hubris and recklessness, they will be back for more.

Distraction. Misplaced effort. Unless we rethink and rewrite our economic system, there'll be no place to come back for more.

First, fix the system and prevent further suffering. Nothing else should be a priority. Forget about moral hazard... that's already been violated so many times its a worthless concept at this moment in time.

 

 I think if were going to philosiphize, we need to find a way to change our selfs.  I once read the life of a man who was destined to be the next Messiah. Only he found the clothes didn't fit and wanted  to walk in his own path. His name was "Krishnamurti"

 He had no followers and no expensive car or clothes. Just a man who would sit and discuss the topics of the day.  When will man be ruled by something other than Wealth or Power? You need to change the Paradigm of thinking first.

http://en.wikipedia.org/wiki/Jiddu_Krishnamurti 

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: “’This is the end of an era. We can’t reinflate ...

Thanks for the great post investorzzo

That list of payouts should horrify any US tax payer.  They are stealing out in the open - arrogantly assuming that they can't be stopped.  It is amazing that they seem to be getting away with it - they must think that even if the people start figuring it out; they can't do anything about it anyways.

They are over-playing their hand, and that will be their downfall.

Larry 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments