Sunday, March 15, 2009

Trader Mark on AIG

I read Trader Mark's (TM) 1 March 2009 post about Joseph Nocera's (JN) 28 February 2009 NYT article about AIG. TM covered the points I intended to raise. Here's a link: JN's article is here:

Goldman Sachs rules! Pay up serfs! $250 billion if necessary. The AIG bailout isn't! One issue, Seamus McMahon, "a banking expert at Booz & Company['s]" comments. He claims "we could have a domino effect" if AIG fails. I agree. So? Let AIG and all its counterparties fail. When I hear the term "expert" I assume I will read a plea to support the "expert's" clients.

What should be done? The CPAs for AIG and its counterparties should all be indicted for securities fraud as should these various companies controllers and CFOs. That may be the only way to end this nonsense. Long prison terms for all responsible parties combined with no more bailouts.


Anonymous said...

I think "financial stability" for the Fed is passively letting corrupt excesses build up in the name of "liquidity provision" and when the excesses blow gathering everyone down at Liberty Street to prop each other up...

I really wish they would improve on the old interconnected saw ... it's the same problem over and over... 1907...xxxx....xxxx....1998......2007

If the Fed didn't exercise policy through a closed collaboration with primary dealers it could be more stable... few parties, relatively unsupervised creates instability as the geniuses at GS etc grow in unregulated, massively leveraged ways...

Oh sure... I'm hoping that we see some folks in prison... the eyes of America are watching and waiting...

Printfaster said...

What you are really seeing is that AIG is paying out risks that were implicitly insured by the US government. This is similar to the Fannie and Freddie failure where their obligations were picked up by the federal government.

The real problem in this systemic worldwide collapse is that all of the US government obligations are off balance sheet, just like Enron.

This is ghastly, and presages collapse of the US treasury and government, just as it presaged the collapse of Enron.

Anonymous said...

"financial stability" for the Fed consists
of performing their primary mission:

Allow congress to spend money they don't have.

They do this by purchasing treasury securities as needed (and now by supporting the banks which buy treasury securities).

It's really important (to Congress) that the spending continue. No amount of future pain is counted to avoid pain today (spending cuts today).