Tornado Alley (PROG)

[fuagf]

GEO, did anyone else think it was funny? LOLOL, 'weeird' sense of humor.

Sox's,
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Quote: With the big banks that's impossible because of all the other businesses they are in
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reminded me of an article, which mentioned the fact that the "too big to fail" construct doesn't apply to the one firm
itself, but to the global, (lol, there's that word again) connections the firm has. Can't find the article, but this one deals
with it again, as Sox, just did to you. Am posting in toto p.1 of 3, because there are a couple of things mentioned
which we should not forget. Bill Saporito, also repeats some things, Sox, has just mentioned to you and to others.

How AIG Became Too Big to Fail
By Bill Saporito Thursday, Mar. 19, 2009

Treasury Secretary Tim Geithner had every reason to think he had seen all of AIG's dirty laundry. The government owned 80% of the company, and Geithner had just orchestrated AIG's most recent handout — its fourth, if you are keeping score, for $30 billion on March 2 — to prevent the teetering insurance giant from going over the cliff and taking the rest of the global financial system with it. AIG had already cost the taxpayers some $170 billion, mostly to repair the damage done by one of its units, AIG Financial Products (AIG FP), which last year alone piled up $40 billion in losses related to its dealings in complex mortgage bond derivatives.

Then Geithner's staff made the discovery that would infuriate nearly everyone in Washington. On March 10, the Secretary learned, 10 days after his staff first got wind of it, that AIG had paid out $165 million in retention bonuses to executives at the unit that compelled the U.S. to bail out the company in the first place. It took Geithner until 7:40 the next night to place what must have been a tense phone call to AIG's newish CEO, Ed Liddy. The bonuses were not tenable; they had to be canceled, he demanded. Liddy, a dollar-a-year man

INSERT: Liddy is doing his bit, as are a few other rich are. A new group who lately
offered something in regard to the Bush tax cuts, i think. Sorry, forget the details.

who took over the company after the bonuses had been promised, replied that AIG's lawyers had decided that the contracts could not be broken without even bigger costs to taxpayers. Geithner sent Treasury's lawyers searching for a way out, but they couldn't find one. (See 25 people to blame for the financial crisis.) .. http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350,00.html

On the balance sheet of debacles caused by this economic crisis — the $700 billion Troubled Asset Relief Program (TARP), the stock-market swoon, the credit crunch and the ongoing global recession — $165 million is small change. But the revelations of the AIG bonuses, like nothing else, seemed to finally tip the mounting public furor over corporate malpractice into a full-scale rebellion. Yet Geithner, embarrassed for discovering the bonuses so late, plans to dock AIG that much out of the next $30 billion in bailout funding when it is delivered — which amounts to a mere 0.1% of the total AIG has received. Assorted Senators, from New York Democrat Chuck Schumer to Montana Democrat Max Baucus and Iowa Republican Chuck Grassley, have proposed a number of tax and legal schemes to snatch back the bonus bucks from AIG FP executives — 73 of whom got payouts of $1 million or more, according to New York State attorney general Andrew Cuomo. (Read "Treasury Learned of AIG Bonuses Earlier Than Claimed.") .. http://www.time.com/time/business/article/0,8599,1886138,00.html

With all the political theater and populist grandstanding, though, the bigger issue has been obscured. And that is, Just what is AIG doing with the $170 billion? Does the company's strategy, which is to wind down its exposure to toxic assets and sell some of its profitable insurance divisions to help pay off the government debt, stand a good chance of succeeding? And if it does, will the world avert financial Armageddon?

Those questions have taken on greater urgency, since it turns out that AIG has become the banking industry's ATM, essentially passing along $52 billion of TARP money to an array of U.S. and foreign financial institutions — from Goldman Sachs to Switzerland's UBS. Those firms were counterparties to the credit-default swaps (CDSs) that AIG FP sold at least through 2005, and the companies were collecting on the insurance-like derivatives. AIG paid out an additional $43.7 billion to many of the same banks, which were also customers of the securities-lending operation run out of AIG's insurance division. In this case, AIG managed to take a business specifically designed to be low risk, low return and amp it into another dicey venture — with taxpayers on the hook.

The outrage will pass, and when it does, we're going to have to focus on whether keeping AIG afloat is preventing a sharp recession from becoming a prolonged one. The reason AIG has cost taxpayers $170 billion — and the reason the Obama Administration seemed willing, at least at first, to hold its nose and accede to bonuses for the company's managers — is that it's too big to fail. It's an often heard phrase, but what does it really mean? (See the top 10 financial collapses of 2008.) .. http://www.time.com/time/specials/2008/top10/article/0,30583,1855948_1864602,00.html

The idea is that in a global economy so tightly linked that problems in the U.S. real estate market can help bring down Icelandic banks and Asian manufacturers, AIG sits at some of the critical switch points. Its failure, so the fear goes, would set off chains of others, rattling around the globe in short order. Although some critics say the fear is overblown and the world economy could absorb the blow, no one seems particularly keen on testing that approach.

How We Got Here

AIG seems an unlikely candidate for the company that could bankrupt the planet. Founded 90 years ago in Shanghai, AIG moved its headquarters to New York City as the world headed toward war in 1939. After Maurice R. (Hank) Greenberg took over in 1967, AIG consolidated its global empire. By the time Greenberg was forced out in an accounting scandal 38 years later, AIG had become one of the world's biggest public companies, with sales of $113 billion in 2006 and 116,000 employees in 130 countries, from France to China.

AIG says it has written more than 81 million life-insurance policies, with a face value of $1.9 trillion. It covers roughly 180,000 small businesses and other corporate entities, which employ approximately 106 million people. That makes AIG America's largest life and health insurer; second largest in property and casualty. Through its aircraft-leasing subsidiary, AIG owns more than 950 airline jets. Just for good measure, AIG is a huge provider of insurance to U.S. municipalities, pension funds and other public and private bodies through guaranteed investment contracts and other products that protect participants in 401(k) plans. "We have no choice but to stabilize [it] or else risk enormous impact, not just in the financial system but on the whole U.S. economy," said Fed Chairman Ben Bernanke.

The risk is not in any one business but in the connections among them and in the industries in which they compete. As AIG has pointed out in its own analysis, "The extent and interconnectedness of AIG's business is far-reaching and encompasses customers across the globe ranging from governmental agencies, corporations and consumers to counterparties. A failure of AIG could create a chain reaction of enormous proportion." Among other effects, it could lead to mass redemptions of insurance policies, which would theoretically destabilize the industry; the withdrawal of $12 billion to $15 billion in U.S. consumer lending in a credit-short universe; and even damage airframe maker Boeing and jet-engine maker GE, since AIG's aircraft-leasing unit buys more jets than anyone else.

While AIG's holdings are diverse, nearly all its losses centered on AIG FP, which until March 2008 was led by its high-rolling president, Joseph Cassano,
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[INSERT]: see also .. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=45317971&txt2find=joseph|cassano .. and, clip ..

February 23, 2010 "Bloomberg" -- When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.

Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.

A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.

These were the deals that pushed the insurer to the brink of insolvency -- and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.

That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.”
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=47070905&txt2find=joseph|cassano
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a tough-talking Brooklyn, N.Y., native who in the past eight years banked $280 million in cash compensation, or exactly $115 million more than the bonuses at the center of the current controversy. Cassano, who helped found the AIG FP unit in 1987, built his money machine not on anything fraudulent but on what's been described as regulatory arbitrage. As Bernanke explained recently, "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."

See the worst business deals of 2008. .. http://www.time.com/time/specials/2008/top10/article/0,30583,1855948_1864555,00.html

See pictures of the recession of 1958. .. http://www.time.com/time/photogallery/0,29307,1850639,00.html

P.2 .. http://www.time.com/time/business/article/0,8599,1886275-2,00.html

http://www.time.com/time/business/article/0,8599,1886275,00.html

Sox, asked you, "So do you agree that letting the big banks fail at this time would have been the absolutely wrong thing to do at that time?" .. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=48808929&txt2find=agree

Do you agree that letting AIG fail then or now would have been the absolutely
wrong thing to do? Would you have been happy to test it? Clop, from above ..

"Although some critics say the fear is overblown and the world economy could
absorb the blow, no one seems particularly keen on testing that approach."

Seriously, my laugh with your post did not arise from any good sense of humor. ROTFLMAO. Chuckle. Clip, clop.