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Fed to give AIG $85 billion loan and take 80% stake[Done Deal]
IHT ^ | 17 Sep 2008 | Michael J. De La Merced and Eric Dash Published:

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 ...


TOPICS: Business/Economy; Government
KEYWORDS: aig; economy; federalreserve; govwatch; housingbubble; loan; ronpaul
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To: CodeToad

Comparing avionics to financials isn’t really a sound comparison.

They were dealing in abstractions. Not sound business, but not illegal.


161 posted on 09/16/2008 7:36:48 PM PDT by durasell (!)
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To: ThePythonicCow

“It takes that paper across the street to the Federal Reserve, which buys them from the Treasury”

Except there is no real money exchanged. The Fed gets to GUESS how much the economy might have grown recently and create that money out of thin air. Then they get to further that fairytale and create many times that amount as “credit”, which the Fed sells to the markets, such as banks, which then loan that fictitious money to you as a mortgage or car loan.

ALL of the US Currency, the Federal Reserve Notes known as the dollar, are created out of thin air and are not based on anything except the Fed deciding what to create.

The Fed has to bail out these failing institutions as they are tied directly into them. This isn’t about the economy, this is about the Fed.


162 posted on 09/16/2008 7:36:56 PM PDT by CodeToad
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To: ThePythonicCow
It takes that paper across the street to the Federal Reserve, which buys them from the Treasury, in return for some new money.

The Fed does not buy securities from the Treasury.

163 posted on 09/16/2008 7:39:24 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: Freedom_Is_Not_Free
Why was AIG on the cusp of bankruptcy if the $85 billion was just given to dismantle the company.

Let me put it this way. Which course of action will yield a better return for you:


164 posted on 09/16/2008 7:40:09 PM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
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To: Tublecane
All of our economic woes stem from bad investment due to credit expansion. We need an economic contraction to sort things out.

While true, no one wants the contraction to happen on their watch because the public has been fed the belief that the business cycle can be conquered and that recessions are the work of malevolent politicians. So we keep kicking the can down the road.

165 posted on 09/16/2008 7:42:46 PM PDT by garbanzo (Government is not the solution to our problems. Government is the problem.)
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To: garbanzo

“the public has been fed the belief that the business cycle can be conquered”

How short are our memories? Don’t we remember what the government said last time every time some new bust looms? Where are the historians to tell us that there was no business cycle before we had a central bank?


166 posted on 09/16/2008 7:49:03 PM PDT by Tublecane
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To: Petronski
Why did she put a thousand dollar bill on the cover? When was the last time one of those was in circulation? Can't beat the graphic either.


167 posted on 09/16/2008 8:02:46 PM PDT by library user
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To: Petronski
Lets try this again. The Fed press release specifically states...

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due.

The press release goes on to say...

This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

This means, the $85 billion loan is to assist AIG in meeting its debt obligations as they come up and preventing their bankruptcy. Having prevented outright default by lending $85 Billion to cover their debts, AIG can sell assets in an orderly manner. To say I was wrong in my original statement is flat false.

168 posted on 09/16/2008 8:05:14 PM PDT by Freedom_Is_Not_Free
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To: Tublecane
We need an economic contraction to sort things out. So long as the fed keeps bailing people out, we are only prolonging the crisis.

Bump to that.

169 posted on 09/16/2008 8:06:34 PM PDT by calcowgirl ("Liberalism is just Communism sold by the drink." P. J. O'Rourke)
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To: Toddsterpatriot

“The Fed does not buy securities from the Treasury.”

This is something else I’ve never understood. I know that the Treasury prints the notes that the Fed ships out. I also know that the major assets of the Fed are its gold and its securities. I’ve never precisely understood from whom and with what the Fed buys the securities. It occurs to me that if the Fed owns Treasury securites, and I believe it does, it must have bought the securities from the Treasury.


170 posted on 09/16/2008 8:06:40 PM PDT by Tublecane
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To: Freedom_Is_Not_Free

You can cherry pick quotes to tell yourself whatever you want.

I am telling you what it will be.


171 posted on 09/16/2008 8:06:46 PM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
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To: BGHater

If you are, then you must have seen this:

“113 ETF’s were suspended in UK trading” was posted in the comments thread at the site. This is the only news report I found that talks about ETF’s and AIG but not about the suspension.
http://www.investegate.co.uk/invarticle.aspx?id=58393


172 posted on 09/16/2008 8:08:45 PM PDT by TruthConquers (Delendae sunt publici scholae)
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To: BGHater

If you are, then you must have seen this:

“113 ETF’s were suspended in UK trading” was posted in the comments thread at the site. This is the only news report I found that talks about ETF’s and AIG but not about the suspension.
http://www.investegate.co.uk/invarticle.aspx?id=58393


173 posted on 09/16/2008 8:08:53 PM PDT by TruthConquers (Delendae sunt publici scholae)
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To: TruthConquers

Opps.


174 posted on 09/16/2008 8:09:35 PM PDT by TruthConquers (Delendae sunt publici scholae)
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To: Freedom_Is_Not_Free
To say I was wrong in my original statement is flat false.

I wasn't aware I used that word.

175 posted on 09/16/2008 8:09:49 PM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
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To: Freedom_Is_Not_Free
The $85 billion goes right out the door to pay off the massive losses from MBS deriviatives. Wait until we hear they need another $85 billion and then another.

Uh, no. I will not wait.

Where is your evidence saying "the $85 billion goes right out the door..."?

That statement belies the basic facts of the deal.

176 posted on 09/16/2008 8:11:55 PM PDT by Petronski (Please pray for the success of McCain and Palin. Every day, whenever you pray.)
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To: Petronski

Glad to be of help - say “woof” to your poodle for me ;).


177 posted on 09/16/2008 8:12:32 PM PDT by ThePythonicCow (By their false faith in Man as God, the left would destroy us. They call this faith change.)
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To: Tublecane
This is something else I’ve never understood.

Another in a long list.

I know that the Treasury prints the notes that the Fed ships out.

The Bureau of Engraving prints notes. The Fed creates money without printing notes.

I’ve never precisely understood from whom and with what the Fed buys the securities.

The Fed buys Treasury Securities from Primary Dealers using newly created money.

It occurs to me that if the Fed owns Treasury securites, and I believe it does

You are correct.

it must have bought the securities from the Treasury.

Bzzzt, you are incorrect.

178 posted on 09/16/2008 8:13:43 PM PDT by Toddsterpatriot (Let me apologize to begin with, let me apologize for what I'm about to say....)
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To: TruthConquers

**113 ETF sercurities products suspended**

NOW, I found it: http://www.investegate.co.uk/invarticle.aspx?id=52375


179 posted on 09/16/2008 8:15:05 PM PDT by TruthConquers (Delendae sunt publici scholae)
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To: SteveAustin
See my related post, on this money market fund problem, at: Money market giant freezes redemptions.
180 posted on 09/16/2008 8:15:11 PM PDT by ThePythonicCow (By their false faith in Man as God, the left would destroy us. They call this faith change.)
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