Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
they pull this crap with every bailout and throw good money after bad or just print more up
What they did with AIG is dramatically different than what they did with Bear Sterns. Its also rather different than what they did with Fannie/Freddie. Calling this a bailout is not very accurate.
Location: Sitting on a bar stool. Guinness in hand.
4,428 posts, read 6,509,244 times
Reputation: 1721
Quote:
Originally Posted by Humanoid
The $85 billion isn't really a bailout. They aren't just handing over $85 billion, they will only loan it if necessary and at very high rates (850 points above libor). This is a deal that the FED will probably make money on at the end of the day.
You are correct that this is more of a loan than a bailout.............at this point. But there really is not guarantee that they will be able to pay off this loan in 24 months. And there is no guarantee that if company can't pay the loan that there assets are going to cover the cost.
Look technically this is a loan. But you have to ask yourself honestly if you were an underwriter (I sure there are some on this board) and let say we keep out the "financial panic" aspect of situation.
Would you really allow a loan to this company? What is the real likelihood that they will be able to pay the loan off in full and on time?
Look the reason why I will still call this a bailout is because this is more about stopping the sheep from panicking on wallstreet than to save AIG. The FED and Treasury are trying to make an orderly decline. I honestly think this is not going to work in the end and we will have a couple of more "panics" this year.
You are correct that this is more of a loan than a bailout.............at this point. But there really is not guarantee that they will be able to pay off this loan in 24 months. And there is no guarantee that if company can't pay the loan that there assets are going to cover the cost.
Look technically this is a loan. But you have to ask yourself honestly if you were an underwriter (I sure there are some on this board) and let say we keep out the "financial panic" aspect of situation.
Would you really allow a loan to this company? What is the real likelihood that they will be able to pay the loan off in full and on time?
Look the reason why I will still call this a bailout is because this is more about stopping the sheep from panicking on wallstreet than to save AIG. The FED and Treasury are trying to make an orderly decline. I honestly think this is not going to work in the end and we will have a couple of more "panics" this year.
We will see.
This my take on it as well. The big question is whether the value of the assets up for sale holds at current levels. The loan may be for naught if AIG cannot sell its assets at a price that at least covers the loan. Timing is also key.
The problem cannot be solved until all the people who bought into all this overpriced housing are put into real productive jobs.
So the gov't "injected" $50 billion in liquidity into the markets this morning, and then did an $85 billion bailout in the afternoon...
Does that mean the dollar took a $135 billion dollar hit on it's value in a single day?
Only if those companies fail after giving that money... The Fed doesn't have any "real" money to give to them, its all imaginary... like short sellers borrowing funds without paying for them and earning a profit IF the stock prices increases BUT if the stock doesn't increase, the short sellers have to pay.. I imagine if Bear Stearns defaults then we lose billions... if AIG defaults we lose billions... the government is trying to stop them from defaulting now but here is the problem... why will they not default in the future and soon? Did they wave a magic wand and change the economy? Nope... Did they do something serious inside their corporations and change how they practice? Nope... so we have basically the same company that just didn't bankrupt today... and more than likely if investors still think they are bad investments, they will default later and soon... so in short, it all depends on how optimistic you are and "trust" that a company nearing bankruptcy is going to pull through... I don't trust them.. they have way too much debts than simply 85 billion dollars, it will save them for a couple of months as they operate but as soon as people start pulling money from AIG, it will go belly up.... unless the Fed injects more money when they fail for a second time and keep them alive for another couple of months trying to find money from... you... or to keep you from withdrawing money from them...
The government is trying to ensure an "orderly" decline in the market to allow the connected to get their money out while it still has some value. This has been going on for a couple of years but the diehard greed heads are still there. This will protect some of them but not all. In a couple of months the big boys will simply let the system fail while waiting in their McMansions with their gold intact for a recovery.
I agree that it's all posturing and trying to contain panic. Investors and funds are dumping like crazy. They've been dumping for months, which is why even good companies are taking a hit.
AIG's assets are not worth the "value" of the loan. They are worth even less at fire sale prices... and their books undoubtedly have toxic assets that haven't been disclosed. So, yes, it is technically a loan, but it's no moneymaker for the taxpayers. It will, as GregW pointed out, allow those at the top to curtail their losses at others' expense. And down the road, it will be deja vu all over again.
The government is trying to ensure an "orderly" decline in the market to allow the connected to get their money out while it still has some value. This has been going on for a couple of years but the diehard greed heads are still there. This will protect some of them but not all. In a couple of months the big boys will simply let the system fail while waiting in their McMansions with their gold intact for a recovery.
I think you have it right. The players are playing without the least little concern for the rest of us. Cash money is going to win in the end.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
