Posted on 09/16/2008 4:49:39 PM PDT by BGHater
In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan.
The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.
Without the help, AIG was expected to be forced to file for bankruptcy protection.
The need for the loans became necessary after the major credit ratings agencies downgraded AIG late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.
Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and AIG's request for help from the Fed of just a few days ago was rebuffed.
(Excerpt) Read more at iht.com ...
I think the bank panic is going on very silently as people and companies who had more than $100,000 at one single bank have or will be moving around money so that they do not have more than $100,000 in any one bank (and thus preserving FDIC insurance)
The story tonight about the money market funds is a bigger one, since Joe Sixpack has always thought the money market fund at his broker was also 100% safe, even though it was never FDIC insured. This may counter-act bank runs because I think guys will pull their money market fund monies and move them to 100% FDIC insured bank accounts as long as they don’t put more than $100,000 in any one bank.
But remember that the money market assets have historically been used to get low cost money to top tier AAA type corporations. That will raise the cost of borrowing for those companies if the money market industry either contracts or is forced to really increase yields.
IMHO this money market story is the big story of the night that is getting lost in the AIG situation. It will make some people consider stuffing money and gold in the mattress.
“Okay, that’s it. You are no longer allowed to watch re-runs of the Waltons.”
Jokes are fun and all, but seriously, what do you think a depression is? I believe depressions are caused by credit expansion, which encourages bad investments. Bad investments must clear, easy credit must tighten, and people must save and invest in new capital for there to be a recovery. Depressions are recoveries.
Who’s the owner of the 80%?
What do you think about Social Security? What do you think the next depression will give us?
You’re talking about Joseph Schumpeter’s theory of “Creative Destruction.” He may have been right, but it’s nothing I care to experience.
Federal Reserve Notes
But with this deal, 80% of that value is now gone.
The Federal Reserve is a private banking cartel. They refuse to even publicly state who (which banks) owns them.
Schumpeter would tell his class at Harvard: My three goals in life are to be a great lover, a great horseman, and a great economist. I’ve accomplished two of them.”
“severe depressions make us peons harder to control”
This was the one part of your post with which I cannot agree. The depression brought about the single stupidest move by our government in the last century (aside from the creation of the Fed): taking us off the gold standard. The depression also led to the most precipitous growth of the federal government in the history of the United States. The depression only made it easier to control the peons.
Other than the Nikkei, the euphoria is fading on the Asian indexes, and Taiwan has given up 50%. The Nikkei is closed for lunch now.
This is called a depression, and I disagree.
You don't get it. It wouldn't with AIG, it would continue.
Pray it doesn't anyway.
Tomorrow is gonna be real interesting, especially in Asia ends up in the red.
“No. We, through our government, handed over to this private cartel the power to issue currency.
The Federal Reserve is a private banking cartel. They refuse to even publicly state who (which banks) owns them.”
Well, look at it this way, private warlords become public officials when they win civil wars. Once an entity has governmental power, whether it takes it by force or by consent, it is a part of the government. Just because we don’t vote for the chairman does not mean he’s a private businessman.
That is it? Just a flippant answer?
If I am spreading misinformation, which is not my intent, then please correct me so others won’t be mislead by my misinformation.
Please explain the purpose and need for the $85 billion loan, where the money is going to and how much money AIG lost on derivatives.
They thought AIG would only need to raise $40 Billion, then $70 Billion, now $85 Billion? So why did AIG need $85 Billion today or declare bankruptcy tomorrow?
The government doesn't borrow from the Fed.
The main purpose and use of the Federal Income Tax is to pay the interest on this debt.
LOL!
How much did the government collect in income taxes last year? How much did the Fed collect in interest last year?
We, America, owe our soul to the company store, this bank consortium.
That's funny! Hyperbole much?
The Treasury, by the 1913 law, can only make more money by borrowing it from the Federal Reserve.
The Treasury doesn't "make money". So what?
“We need an economic contraction.
This is called a depression, and I disagree.”
I’m confused. What do you disagree with, the word “depression”? Isn’t a depression two consecutive quarters with negative economic growth? What’s wrong with that? I’m not saying we need bank failures and 25% unemployment. I’d never advocate that.
Or maybe they aren't avoiding The Great Depression II, and it is just taking some pretty severe economic poison to bring the American economy to its knees a second time.
In that case, best stock up on ammo, whiskey and survival rations.
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