Let's be honest, most of us have only a vague notion of what the Federal Reserve actually does. When Alan Greenspan started doing mea culpa's on television, however, I got a stronger sensation that the Federal Reserve Chairman really is an important guy. Since then, I have greatly appreciated Ben Bernanke's stoic anti-charisma. I can't tell if what he's saying makes any sense, but he seems so calm and competent when he speaks that I feel like a real adult is on the case.
So I was a little taken aback today to watch him get testy with the Senate Budget Committee. He said, "AIG exploited a huge gap in the regulatory system; there was no oversight of the financial products division. This was a hedge fund basically that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses." He seemed almost emotional as he spoke. And then it occurred to me that he was trying to remind Congress that a lot of the fault for this could be placed squarely placed at their feet.
Democrats, you inherited a mess from the Republicans, but you also didn't do much between in the time that you regained control of the Senate and the financial crisis erupted. Then, you passed TARP with insufficient oversight criteria in cooperation with a lame-duck president. So please be aware that the "not my fault" card will only take you so far.
Republicans, you made a lot of this possible while you controlled both houses of Congress for over a decade. That "huge gap in the regulatory system" is one that you allowed to be made in the name of libertarianism and fiscal conservatism. Of course, your motives are somewhat suspect since you also okayed the largest deficit in US history (just prior to this current mess) and managed to roll back more civil liberties then the left-leaning boogey men of your own political rhetoric. So, Senator Jim Bunning don't act like the new sheriff in town: you've been in the Senate since 1998 and no doubt voted for much of the relaxed financial posture that helped make this fiasco possible.
Of course, Bernanke might also just be angry at an administration that would allow $30 billion of taxpayer money to be dispersed to unnamed "counter parties." This is simply wrong and an abuse of the public trust more fitting of the Bush administration than the Obama era. The other option, of course, is that there was simply no choice, because the economy is FUBAR. (For those of you who are not familiar with the term, I'll give you a hint. It's an acronym ending in "..."Up Beyond All Repair.)
Under any circumstance, let's all try to be a little nicer to Chairman Bernanke who appears to be we earnestly bent on trying to save all our butts, blue and red alike.
With regard to the CDS (credit default swaps) which are like an insurance policy against default, AIG sold lots of them. But something was really wrong. There was an impending risk factor. It was in the housing market! Should the housing market start to turn south, AIG didn't have the dough on hand to make good on its insurance policies, that is, on all the CDS it sold.
Federal Reserve Chair Ben Bernanke saw the problem and just how AIG gamed the system.
"AIG exploited a huge gap in the regulatory system.... This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets-- took huge losses. There was no regulatory oversight because there was a gap in the system."
Now the question is this, did AIG know the risk beforehand as well as its counterparties (i.e. those who bought the CDS) but went ahead anyway, knowing full well the government would bail out their greedy asses?
This brings up the issues of the moral hazard we are probably creating. Let's be honest, there has to be some brutal punishment involved (short of GITMO). AIG should be broken up -- and no bonuses.
JPMorgan invented the idea to get around the reserve requirement. Phil Grahm loved the idea.
These Swaps and short they insure are now 90% of the "stock" market value!
Why have they not been Banned?
http://www.huffingtonpost.com/users/profile/research?action=profile
When I watch Obama and Biden at work, admittedly from a distance, I'm observing that they continually lay whatever blame needs to be laid right back at the proper feet ... the Congress. Facilitate the discussions, resolve the log-jams that come up on the issues, sort-out and propose the priorities, and above all else, hold Congress' feet to the fire where it properly belongs.
What's got to come out of this is much more than "money." There has got to be financial regulation. A grand swindle has literally become the order of the day, literally treated as a legitimate thing, while the people of the United States founder in unemployment and usury ... as mere bargaining-chips in this game.
This is not an "economy." This is a GHOST of what the United States of America could be ... and, once was. So as for me, "this is not acceptable."
Class warfare is here and the sooner the middle and lower class realizes it the better!!!!!!!!
AIG: THE RISK IS SYSTEMATIC
TIME: DOOMSDAY MINUS 72 hours
TO: MEMBERS OF CONGRESS, BENJI BERNANKE, TIMMY GEITHNER
CC: Lloyd Blankfein, Goldman Sachs & Co.
AS YOU ARE AWARE THERE HAVE BEEN NUMEROUS PRESS REPORTS THAT A.I.G. (hereinafter branded the "Outfit") will be reporting a combined quarterly loss somewhere North of $60 Billion (yes SIXTY BILLION). This is a rough cut number. It could easily be higher should we decide it to be. In addition our current burn rate for legal expenses, public relations advisers, clandestine junkets and cash retention bonuses has been estimated to exceed $400,000 per second. We have a black hole that is getting bigger by the second. Moreover, our massive global financial services flea market has not delivered the proceeds we projected to you during the immediately preceding TARP crisis.
Rumors have been circulating that the Outfit has amassed enough weapons grade
credit default SWAP material to build a financial doomsday device. Make no mistake, these rumours are not unfounded. Our handler's led by Gabathon Kekst et al have been quietly disseminating this information on our behalf.
con't on WilliamBanzai7 Blog
AIG is continuing downward despite $100+ Billion Bailouts because of this Casino Scam!
Banks and Hedge Funds knew that "SURE FAIL" mortgages were being made to poor Americans because the Banks were doing it through their own companies!
So what does AIG do but provide CDSs to allow Casino Betting that the SURE FAIL loans/derivatives would FAIL. AIG Executives had to have lost their minds giving away Trillions to the Hedge Funds and Banksters!
The solution is to declare these Bets illegal due to insider information the Banks and Hedge Funds had, and make them NULL and VOID. It is the Taxpayer who is continuing to pay off these illegal bets to the corrupt Hedge Funds, Banks, and inside traders!
We are Bailing Out the Banks and AIG Management that RUINED their COMPANIES! WHY?
For example, AIG sells at $0.45 per share and taxpayers should own them!
We have given them close to $100 Billion in Bailouts and the Taxpayers should own the company!
_______________________________________________________________
Lets clear out the Bad Management and cancel the ILLEGAL BETS and use the Bailout Money to capitalize them instead of paying-off illegal Bets to crooked Bankers and Hedge Fund Managers. Then sell them back into the Market!
At the expense of the American taxpayers. Remember, he works for the banks.
In this country, there is this debt-money system.
It creates all the money as debt.
Repayable with interest.
Which is never created.
So it comes out of new debt-money.
Which is repayable with interest.
Which is never created.
As long as you keep MAKING new debt-money fast enough to make all those interest payments, hey, no problem.
But when the money needed to make those interest payments exceeds the ability to create new debt-money, well, then the entire debt-money system goes broke.
We cannot make our debt-service payments.
This is what is known as the insolvency of the debt-money system.
Plain and simple.
What we need is a new DEBT-FREE money system.
To replace the debt-money system of the private bankers.
Plain and simple.
We have no obligations to those banks beyond what we now contractually owe.
Bernanke wants us to sign on to some NEW way of getting taxpayer money to pay some of those debt-service payments for the banks.
It is unnecessary.
All those in favor, say Aye.
Opposed, No.
http://www.ricoexplainsitall.com/politcs-economy/2009/3/4/the-irrational-aig-bailout.html
Problem is, the default of AIG's credit default swaps would tank the bond market to an extent that would make Lehman Brothers look like Linens-N-Things.
Those bonds form the backbone of bank reserve capital and individual wealth management. A generation of graying baby boomers would never recover.
So we have a three options:
1) The insurance industry collapses.
2) The banking industry collapses.
3) The government bails out the bondholders and hopefully doesn't collapse itself.
We're going with option 3.
http://market-ticker.denninger.net/archives/847-Bernankes-Lies,-Part-4,232,123-AIG.html
I'm not in the let the historians work this all out camp: I'm in the let's save the patient (economy) first and then prosecute the attackers (whoever exactly they turn out to be). So please, send in the pros from Dover, or the clowns or anyone else that you think can make good things happen.
We know how to get ourselves out of this mess - we just need to spend a lot of money very well. If we can't grow our economy fast enough we're doomed. That seems to be lost on the Republicans, who think only they have the right to deficit spending.
By the way - it is FU--- beyond all recognition.
It you are going to use Marine Corps jargon, have the courtesy to look it up first.
I read the NYT article this morning and it seems that the Country Wide buyers are actually doing some good, while making a fortune off the misery that they helped cause. I'm not sure what to make of this. Retribution is always satisfying, but so is a functioning economy.
There's plenty enough crazy anger out there already and it's only going to get worse.
Keeping things on the level of rational discourse is not a bad thing right now.