Posted tagged ‘AIG’

Profit From TARP? Not So Much

September 7, 2009

Reporter Matt Taibbi sees through the smoke and mirrors surrounding the supposed “profit” taxpayers have made from the Treasury’s TARP program.

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It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.

This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

…it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era

Read the rest…

Obama’s AIG Outrage

March 17, 2009

Yesterday’s news of AIG executives receiving $165 million in bonus payments was indeed enraging. Even more troubling was the news that AIG paid out over $100 billion to Goldman Sachs – a private business with deep ties to the US Treasury.

Today, Barack Obama expressed “outrage” over the executives bonuses, urging Goldman Sachs insider and current Treasury Secretary Tim Geithner to use “all legal means to stop AIG bonuses“, going so far as threatening to withhold further TARP infusions.

I have only one thing to say to this. Mr. President, your “outrage” today is much too little coming much too late. If you actually had any kind of moral opposition to wasting taxpayers money like this, you would have voted against the original Bailout Bill back in October. But you didn’t. You came in from the campaign trail to vote FOR this morally reprehensible legislation along with your opponent, John McCain.

If you actually thought there might be a moral hazard to giving away billions of dollars from our children’s future you would have joined the vast majority of American citizens who called, faxed, emailed and rallied against the Bailout Bill before it was made law. But you did not.

Your words today are hollow and insulting to all of us who said in September that nothing good would come of the Bailout. It is too late now, Mr. Obama, to play at righteous indignation over something you helped create.

Also jumping on the outrage bandwagon are Ben Bernanke (who asked for and wrote the Bailout), Tim Geithner (who oversaw distribution of the Bailout), Larry Summers, NY Fed President (and ex-Goldman economist) William Dudley, Rep. Barney Frank, Sen. Bob Corker and others (who voted for the bailout).

Americans, if you are indeed outraged by what is being done with your money it is time you learn who your true friends are. The Campaign for Liberty, Lew Rockwell and the Mises Institute are among those who spoke out and coordinated efforts against the Bailout. In fact, these are the people who knew the housing bubble would pop, knew it would effect the whole economy and know that the actions being taken now to “rescue” the economy will only make matters worse. Isn’t it time you got to know your real friends?

More Fuel for the Fire – AIG

March 3, 2009

us-economy-771581What do you do with the company that posts biggest quarterly loss in U.S. corporate history – a $61.7 billion loss?

If you’re the US Government, you hand that company – AIG – another $30 billion, and send the stock market into freefall.

With investors uncertain about what will happen next, we can be certain that AIG will be back at the trough before long.

In fact, AIG’s CEO, Edward Liddy, said today that he wouldn’t rule out needing another bailout.

Why? Why does the government keep handing our money to AIG – now more than $150 billion?

Banks all around the world never fully-accounted for the losses they would have to take if their loans stopped paying off at expected rates because they had bought insurance against these losses from AIG. If the banks had to account for those likely losses, they would have to start socking money away.  This is what regulators are trying to prevent by bailing out AIG.

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And that, friends, is the danger of fractional reserve banking.

Apparently, AIG sits at the base of this house of cards, insuring the loans banks made with money that didn’t actually exist.  If AIG falls, many banks will fall along with it. Lately, I’m thinking that wouldn’t necessarily be such a bad thing.