I found it here, too spooje.
I don’t know about Congress, but Obama is clearly behind the curve here, not in front of it, echoing the outrage to avoid being considered out of touch. This stuff spread so quickly that I doubt it is planned. It’s been building for years, based on high CEO and Wall Street salaries and bonuses, and the perception that these people feel entitled.
Leveraged, and with no reserves. Gretchen Morgensen said yesterday on Fresh Air that the models they used could not handle the possibility of housing prices going down. :eek: But all people understand, and I can’t really blame them, is that the people who are taking lots of our money and are responsible for the meltdown in large part are getting rewarded for it.
Sure. But remember the first bailout happened over the weekend. There were a finite number of human beings involved, and they were trying to figure out some horrendously complicated stuff. I doubt if bonuses for the staff was even on the table, and if it got brought up I bet the universal response would be “stop bothering us about a trivial amount of money that has nothing to do with the health of the economy.”
Right, but the bottom people are getting a few thousand bucks. The top bonuses, of millions, are the problem. And you are correct about the contractual obligation - which predated the bailout and which the management might not have been able to break even during the bailout. It would be interesting to discover if the management of AIG knew of the precarious nature of the company when these contracts were made, and if the lack of a clause invalidating them if there was a loss was due to the deliberate ignoring of this eventuality. That might be fraud.
Sideline, perhaps hijack…
When did it happen? When did investment banking go from staid, boring and safe to an exciting, up to the minute go-go-go environment? Used to be, as I recall, that things like mortgages and such investments were totally boring: the profit was small but secure, its where you put your money if you didn’t have any to lose, if you wanted a modest but steady return over the thirty-forty years of your working life.
What the hell happened? When did these guys become bored with chartered accountancy and decide they wanted to be lion tamers? Because thats what happened, it looks like. The profits on dull, ordinary investments weren’t enough to support a whole bunch of guys in the manner to which they would like to be accustomed. Gotta take risks, you want the big bucks.
But at the same time, they wanted to appear as though they weren’t taking risks, all of this was based on that most sound and solid of investments: home mortgages.
Who are these people? Whatever happened to the staid and dull financial guys of yesteryear? And get off my lawn! Well, somebody’s lawn, maybe the bank’s, maybe 1/17th of it belongs to some guy in Saudi…
I doubt the company knew of their precarious position before things started to go tits up…AIG WAS one of the most stable and respected companies out there after all. I don’t think they realized how badly they had fucked up both by their use of leverage and by not understanding their investment risk (or that the other business units outside of insurance could bring the entire company to the brink) prior to the balloon going up. I seriously doubt they did and seriously doubt you could make a case of fraud stick.
I think this outrage has been carefully crafted and manipulated for years…and now it’s simply coming to a head. I’m not trying to spin CTs here, and I don’t think it’s some vast shadowy organization doing it…I think it’s being done pretty much independently and by a number of unrelated groups. But in essence I think Obama et al (and Congress) are simply playing on this already fertile ground, and for political reasons.
This isn’t to say that companies like AIG haven’t fucked up by the numbers, or that CEO’s are all goodness and light. But I note that not a lot of public anger has splashed on the government (Dem OR Repub) on this issue…and yet, they are at least as responsible as the folks at AIG for the creation of the environment that lead to the free fall.
Well…I think it had more to do with their failure to look closely at and gauge the risk of their investments in their non-Insurance based business units, and also to not be able to predict how the credit crunch would effect them…or how much effect their non-Insurance BU’s could bring the company to the brink. But in essence yeah…there were several key failures here by the folks in charge.
It IS a complex web though and while I sympathize with people just wanting to lash out at perceived injustice (or whatever folks are lashing out at here…The Rich™, or Fat Cat CEO’s™ or whatever), they are still lashing out due to ignorance and, frankly, because they have been told this is outrageous and they SHOULD be lashing out. JMHO, FWIW. YMMV and all that jazz.
Well…then it’s a bit late in the game at this point is all I’m saying. Of course, now that there is a public outcry, in good part because of how this story has been spun (as well as how the ground work has been laid for this for years), the government has to Do Something™!!! So…they are. Personally I see either them doing something cosmetic but publicly popular or them doing something major…which could have unintended (bad) consequences by forcing AIG to not honor their commitments…and to make future bailout companies wary of further manipulation in this backdoor sort of way (i.e. if the government wanted to attach strings they should have done it BEFORE they gave out the money…how do you trust someone trying this sort of after the fact backdoor manipulation?)
Look at Snowboarder Bo’s link…the government is trying to backdoor a change by using punishment taxes in order to manipulate the situation and AIG to do what seems to be publicly popular atm. I don’t know about you, but this doesn’t seem a very good or well thought out course to me at this point.
-XT
Jesus Marimba, XT, how the hell did they *not *know? Isn’t that why they were pulling down the big bucks, because they were experts? Because they went to business school, and had years of experience, and could be trusted? Wasn’t that the reason they were being paid?
I’ve been reading about this impending crisis for years, haven’t you? If a DFH without so much as an hour of business school can see this, what the hell is their excuse?
They knew, XT. And if they didn’t, they were committing fraud by pretending to be something they weren’t. They got up in the morning, shaved and showered, put on the their patriotic flag pin, and went to the office to throw their fellow Americans over a barrel and butt-fuck them half to death.
They knew.
I disagree…they really didn’t know. The reasons that they didn’t know are complex, but boiled down they simply had no idea of what their actual risk was…and, though I hate to use such a cliched response, they got greedy. But no…I don’t think they did know.
-XT
If they did know, they don’t deserve bonuses, and they don’t deserve our trust and faith.
If they didn’t know, then they definitely don’t deserve our trust and faith.
So we shouldn’t be angry at them for malfeasance. Is it okay if we’re angry at them for incompetence?
Don’t invest in AIG, or if you have change your investments away from them. We as a nation aren’t saving them for their sake, but for our own because we have decided it’s in our best interest. ‘Trust’ doesn’t really come into it. Unless we are prepared to take over the country and have the government run it however (and that doesn’t seem like an option at this time…nor I’m I sanguine about how well our servants of the people would be able to do any better, or even as good, fuckups that the AIG upper management turned out to be), it’s really not our choice how they run their company, bail out buckets or no bail out buckets.
The time to attach a bunch of strings to our handout has, IMHO, come and gone, and trying to do it after the fact would be a bad idea. Though I guess we are going to get to see how it all works out, since that seems precisely what we are bound and determined to do. Guess we’ll see.
-XT
Although this will prolly push xtisme over the edge, I agree with him to a point. With some clarifications, tho. (To be clear, I have no problem with passing a law specifically to get our money back from these greedy incompetent lying fucksticks. Just be careful how it’s worded, and mind the precedent we set, etc.)
In hindsight, what should have happened is the TARP funds should have been made available to companies that were failed, not to companies that were about to fail.
This would have allowed for an examination of documentation so that the TARP money could be used only for necessary business and obligations, and the feds could have written out things like exec bonuses, etc.
Unfortunately, the Chicken Littles prevailed with their “we need it now DO IT DO IT hurry don’t think GIVE US SOME MONEY OR WE ALL DIE” rhetoric. Fear is a great motivator, after all, especially when the result desired is of dubious quality.
The only good thing is that all of this just hastens the achievement of some of my own personal goals. I had thought it would take until the latter part of the century to see them, now I am cautiously revising that to sometime near the middle of the century.
You have some evidence of malfeasance on their part?? I mean, you can certainly be angry with them about whatever you like, but I know of no malfeasance…which is, IIRC, a criminal charge which, curiously, hasn’t been leveled at them afaik.
Well, as I said, you can get angry at them about whatever you like. I’M certainly angry at them over this (of course, this has a bit to do with the fact that I had money invested in AIG prior to it going tits up).
-XT
No, I don’t, which is why I said we shouldn’t be angry at them for it. But that doesn’t mean we’re “lashing out due to ignorance”.
Well now, that all depends on why ‘we’ ARE lashing out…and at what exactly. Doesn’t it?
-XT
The funny thing (funny as in it makes you want cry) is that AIG is supposed to be in INSURANCE.
Oh the irony, it stings!!
What’s really sad is…that insurance part of AIG is still sound. And had they run their other BU’s as they do their insurance BU then they wouldn’t have jumped off the cliff.
-XT
Don’t buy it, not for a second. The Credit Default Swaps were written with an assumption that AIG would retain it’s high credit rating, and therefore ability to borrow capital to cover obligations at a low price. If AIG was downgraded, these swaps, which had no posted capital reserves backing them, would have to get capital posted to secure them. They KNEW they didn’t have the capital to post. Most of the assets they wrote CDS against have NOT defaulted, but because they lost their AA(or AAA) rating, they’ve had to lock their money away as collateral in case the swaps they wrote go bad(as they did in the case of the swaps they wrote to secure Lehman Brother’s debt).
I don’t believe for a second that no one at the company ever raised a red flag saying “these products we’re selling are like adjustable rate mortgages, they’re great for us as long as the rate never goes up, but if it adjusts up, we’re fucked.” They knew, or should have know, just like those who bought property with ARMs knew, or should have known, that sometimes rates go up and you damn well better be able to cover it or know that you’re going to go down when you can’t.
Enjoy,
Steven
But they were! Those “credit default swaps”? They were insurance, they just didn’t call it “insurance”, because if you sell insurance, there are rules. Like about how you got to put aside money to cover. But those rules were tiresome and boring, they got in the way of creative financial instruments.
Now, to dumbasses like me and you, when you promise to cover someone’s losses if Something Goes Wrong, that’s insurance. But it isn’t! Its a “credit default swap”! And so the rules for insurance don’t apply.
Now, say I want to sell you a rattlesnake. You might not be inclined to buy a rattlesnake. But if I call it a “cuddly puppy”, well, that’s totally different! Sure, it still has scales, and fangs, and venom sacs, that sort of thing. And it won’t fetch a stick for shit, but…
(Upon preview: Steve said it better, but I had more fun…)
Yes, and you claimed to know why, and at whom.
And I think you’re wrong. This company has failed at its mission, and done so to a degree that has harmed the economy, damaged people’s lives, and required public support. And people within the company are being handsomely rewarded. To be angry at that does not mean that we are ignorant or being led.
Ah hindsight…it’s it always so clear, in’nit?
-XT
Well yeah…I think I have a bit clearer idea on what to lash out at and why. To be sure. The bonuses aren’t it.
Well, again, it depends on what you are angry at and why. So yeah…I’d say that ignorance and fear are predominantly the reasons I’ve seen, and I think that manipulation is exactly why. YMMV of course. As for me being wrong…well, it wouldn’t be the first time.
-XT