Ezliving_Jim

http://finance.yahoo.com/q?s=AIG

The market cap for AIG is less than $15B.

It's cheaper to just nationalize the company. We should just buy the **** thing. At least then the taxpayers would get the assets too.

unity

Hm, I thought you were against socialism? Change your mind?

__________________
OMG! I made a post! :)

Ezliving_Jim

So it better to pay much much more and just get illiquid liabilities? That doesn't sound like Capitalism.

Ezliving_Jim

How the Democrats Created the Financial Crisis

by Kevin Hassett

Sept. 22 (Bloomberg) -- The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn't. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street's efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn't make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Turning Point

Take away Fannie and Freddie, or regulate them more wisely, and it's hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

It is easy to identify the historical turning point that marked the beginning of the end.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Commission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.


That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''

Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.


Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

megatanman

If the government did that,not only would they own AIG,they would end up owning all of the defunct banks and encourage others who are teetering to do the same rather than restructure.

And your preaching of the Dems and stealth socialism.If this country was looking to restructure to eurosocialism,GWB just broke ground on it.

I think we can officially blame the Republicans on this one.Now instead of making sure its appropriated correctly,GWB is trying to rush this through.

You can blame the dems all you want,but if the reps would do things the right way,you would not have dems opposing anything.republicans always have some hidden agenda and the dems always sniff it out.

Ezliving_Jim

You are smoking...

You didn't read the previous story from Bloomberg.

I'm against the bailout as described in the media. It makes no sense to make the taxpayers eat $1T (T as in a fuchin' Trillion) in illiquid liabilities.

Country First!

Obama will say anything, do anything to win.

engfant

How was the economy up until GWB took office?

EZ making sense once again. DO you even live in this country? Central America isn't REALLY America you know.

engfant

AIG...then another bank....then another.

Your Republicans in office have RUINED any chance of recovery thanks to HEAVY DOSES of GREED which we ALL pointed out was going to happen MANY YEARS AGO and now it has.

There's no JUST BUY AIG cause it's not just AIG, it's THE ENTIRE US ECONOMY. Bailing out the US economy isn't worth a TRILLION DOLLARS but a tire fire in IRAQ is.

Again, where are you from again? Iraq? Cause you are VERY AGAINST the USA for some reason.

Ezliving_Jim

Barney Frank just said on TV that taxpayers will get shares of AIG as part of the deal. For at least $700B, taxpayers get a stock interest in the company and all their illiquid liabilities.

Fuch that. Take the whole **** company, stockholders get zippo, and sell it off in pieces.

megatanman

Thats the mentality that has bankrupted this country.

I am not for bailouts and government intervention,but a time has come to restructure this government and everything associated with it.

The U.S dollar must regain respect in the world economy.I really don't care how it gets done,as long as it gets done.

With the exception of some of the cheap ******** on this board,i think everyone is willing to pay a little more if the cash drawer is overflowing.Rather than pay much less and have an empty register.