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  1. #1366
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    Re: Economic News/Discussion

    http://money.cnn.com/2008/11/10/news...city/index.htm

    NEW YORK (CNNMoney.com) -- Circuit City Stores Inc., the No. 2 electronics seller after Best Buy, filed for bankruptcy protection Monday, becoming the latest retailer hurt by a worsening economic downturn that's left more consumers with less money to shop...
    Promote then, as an object of primary importance, institutions for the general diffusion of knowledge. In proportion as the structure of a government gives force to public opinion, it is essential that public opinion should be enlightened.

  2. #1367
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    Re: Economic News/Discussion

    It's official:

    http://money.cnn.com/2008/11/10/news.../aig/index.htm

    NEW YORK (CNNMoney.com) -- Troubled insurer American International Group got a reworked $152.5 billion deal from the federal government Monday, as the Federal Reserve and Treasury Department made significant changes to the terms of the company's original bailout.

    The Fed announced that it will reduce AIG's original $85 billion bridge loan to $60 billion, and it will cut the interest rate by 5.5 percentage points.

    In addition, the Treasury will use its special authority under last month's $700 billion bailout law - the so-called Troubled Asset Relief Program - to purchase $40 billion in preferred stock...
    Promote then, as an object of primary importance, institutions for the general diffusion of knowledge. In proportion as the structure of a government gives force to public opinion, it is essential that public opinion should be enlightened.

  3. #1368
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    Re: Economic News/Discussion

    I don't get the AIG thing at all.

    If your insurance carrier goes belly up, its not a big deal to get a new insurance policy with a different company. They tanked over investments. Why not let 'em die?

    Its a head scratcher for me.

  4. #1369
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    Re: Economic News/Discussion

    Trust me. This isn't charity.

  5. #1370
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    Re: Economic News/Discussion

    Quote Originally Posted by Dutchcedar View Post
    I don't get the AIG thing at all.

    If your insurance carrier goes belly up, its not a big deal to get a new insurance policy with a different company. They tanked over investments. Why not let 'em die?

    Its a head scratcher for me.
    Don't think of an insurance company as something that just carries insurance policies- though there are entitlement issues involved there.

    View them as financials. They take the premiums and invest them into securities, loans...kind of like a bank. Only bigger. Moreover, they are leveraged- which means that a possible loss of a dollar will cause a loss in the leveraged amount. For example, a dollar leveraged 4:1 means that $4 can be lost for every one leveraged. Sort of like a hedge fund.

    Someone correct me if I get this wrong (i'm not a banker or a professional stock player) but, let's say you take $1, and use it as collateral to borrow $4 from a bank. You invest it in a stock. The stock goes up a point, you've made five bucks minus interest for your $1. Marvelous.

    However, if the stock goes down a point, you could wind up owing the bank four plus interest if they call it in. So if AIG has $560 billion dollars in securities leveraged about 4:1 and their securities get called in....
    Last edited by AeroSim; 11-10-2008 at 11:39 AM.

  6. #1371
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    Re: Economic News/Discussion

    My point was that if their investments went south, that's not my problem or anyone else's as a taxpayer. It may be as an investor or as one who relies on them for their retirement investments. I just get the feeling that we're bailing out companies that are little more than river boat gamblers and that's just nuts.
    The U.S. government reached a deal Sunday night to scrap its original $123 billion bailout of American International Group Inc. and replace it with a new $150 billion package, according to people familiar with the matter. While the arrangement stands to considerably ease terms on the faltering insurer, it gives the government an unprecedented role as an actor in financial markets…Under the terms ironed out late Sunday, the government would give AIG more money, including $40 billion from the U.S. Treasury’s $700 billion Troubled Asset Relief Program. It would also receive less interest than on the bulk of the original loan, while freeing AIG from exposure to some of the risky financial instruments that nearly caused it to file for bankruptcy protection.

    The $150 billion in government aid consists of a $60 billion loan, a $40 billion preferred-stock investment and $50 billion in capital largely to purchase distressed assets which are to be placed into two separate financing entities.”

  7. #1372
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    Re: Economic News/Discussion

    More:
    We apologize for sending this to you as a mass e-mail distribution, but we thought you would want to receive this information as soon as possible, especially since you and your readers have been following this story closely.

    Below are two announcements that AIG released minutes ago at 6 a.m. New York Time. For more information, you can listen to AIG Chairman and CEO Edward M. Liddy’s investment community conference call today, November 10, at 8:30 a.m. New York Time at www.aigwebcast.com.

    Best regards,
    AIG Blog Relations

    U.S. TREASURY, FEDERAL RESERVE AND AIG
    ESTABLISH COMPREHENSIVE SOLUTION FOR AIG

    Designed to Create Durable Capital Structure, Resolve Liquidity Issues From Credit Default Swaps and U.S. Securities Lending, Facilitate Orderly Asset Sales, and Enable Repayment of Loan Plus Interest

    NEW YORK, November 10, 2008 - American International Group, Inc. (AIG) today announced agreements with the U.S. Treasury and the Federal Reserve to establish a durable capital structure for AIG, and facilities designed to resolve the liquidity issues AIG has experienced in its credit default swap portfolio and its U.S. securities lending program.

    Edward M. Liddy, AIG Chairman and CEO, said these agreements are a dramatic step forward for AIG and all of its stakeholders: “Today’s actions send a strong signal to our policyholders, business partners and counterparties that AIG is on the road to recovery. Our comprehensive plan addresses the liquidity issues that threatened AIG, and gives us the financial flexibility to complete our restructuring process successfully for the benefit of all of our constituencies.”

    Liddy continued, “The $85 billion emergency bridge loan was essential to prevent an AIG bankruptcy, which would have caused incalculable damage to AIG, our economy and the global financial system. Thanks to decisive action by Congress, Treasury and the Federal Reserve, there are now additional tools available to create a durable capital structure that will make possible an orderly disposition of certain of AIG’s assets and a successful future for the company. Our goal is to repay taxpayers in full with interest, and emerge as a focused global insurer that will create meaningful value for taxpayers and other stakeholders.”

    The actions announced today include both ongoing financing facilities and one-time transactions designed to address AIG’s liquidity issues. The ongoing financing facilities include:

    Preferred Equity Investment: The U.S. Treasury will purchase, through TARP, $40 billion of newly issued AIG perpetual preferred shares and warrants to purchase a number of shares of common stock of AIG equal to 2% of the issued and outstanding shares as of the purchase date. All of the proceeds will be used to pay down a portion of the Federal Reserve Bank of New York (FRBNY) credit facility. The perpetual preferred shares will carry a 10% coupon with cumulative dividends.

    Revised Credit Facility: The existing FRBNY credit facility will be revised to reflect, among other things, the following: (a) the total commitment following the issuance of the perpetual preferred shares will be $60 billion; (b) the interest rate will be reduced to LIBOR plus 3.0% per annum from the current rate of LIBOR plus 8.5% per annum; (c) the fee on undrawn commitments will be reduced to 0.75% from the current fee of 8.5%; and (d) the term of the loan will be extended from two to five years. The extension of the term of the loan will give AIG time to complete its planned asset sales in an orderly manner. Proceeds from these asset sales will be used to repay the credit facility. In connection with the amendment to the FRBNY credit facility, the equity interest that taxpayers will hold in AIG, coupled with the warrants described above, will total 79.9%.

    The one-time transactions involve the creation of two financing entities capitalized with loans from AIG and the FRBNY. These entities will purchase assets related to AIG’s U.S. securities lending program and Multi-Sector Collateralized Debt Obligations (CDOs) on which AIG has written credit default swap (CDS) contracts. The entities will collect cash flows from the assets and pay interest on the debt. FRBNY and AIG will share in any recoveries in the market prices of the assets.

    Resolution of U.S. Securities Lending Program: AIG will transfer residential mortgage-backed securities (RMBS) from its securities lending collateral portfolio to a newly-created financing entity that will be capitalized with $1 billion in subordinated funding from AIG, and senior funding from the FRBNY up to $22.5 billion. After both amounts have been repaid in full by the financing entity, the parties will participate in any further returns on RMBS. As a result of this transaction, AIG’s remaining exposure to losses from its U.S. securities lending program will be limited to declines in market value prior to closing and its $1 billion of funding.

    This financing entity, together with other AIG funds, will eliminate the need for the U.S. securities lending liquidity facility established by AIG and FRBNY in October, which had $19.9 billion outstanding as of November 5th. Upon repayment to all participants, AIG will terminate its U.S. securities lending program.

    Reduction of Exposure to Multi-Sector Credit Default Swaps: AIG and FRBNY will create a second financing entity that will purchase up to approximately $70 billion of Multi-Sector CDO exposure on which AIG has written CDS contracts. Approximately 95% of the write-downs AIG Financial Products has taken to date in its CDS portfolio were related to Multi-Sector CDOs.

    In connection with this transaction, CDS contracts on purchased Multi-Sector CDOs will be terminated. AIG will provide up to $5 billion in subordinated funding and FRBNY will provide up to $30 billion in senior funding to the financing entity. As a result of this transaction, AIG’s remaining exposure to losses on the Multi-Sector CDOs underlying the terminated CDS’s will be limited to declines in market value prior to closing and its up to $5 billion funding to the financing entity. As with the securities lending program, FRBNY and AIG will share in any recoveries in the market prices of assets.

    AIG will continue to have exposure to CDS contracts on Multi-Sector CDOs that are not terminated. As AIG winds down its Financial Products division, it will also have exposure to other types of remaining CDS contracts, which have generated substantially smaller total collateral demands than the CDS contracts on Multi-Sector CDOs.

    Taxpayers will benefit from the transactions with AIG as follows: fees, interest and repayment of the FRBNY loan in full, payment of a 10% coupon on the newly issued preferred shares, cash payments from the assets purchased by the two financing entities and potential asset appreciation in the underlying securities held by those entities. Taxpayers will own 77.9% of the equity of AIG and will hold warrants to purchase an additional 2% equity interest, and so will benefit from any future appreciation in AIG shares.

    AIG will also continue to participate in the recent government program being utilized by many companies for the sale of commercial paper. The Commercial Paper Funding Facility (CPFF) has allowed AIG to reenter the commercial paper market. AIG is authorized to issue up to $20.9 billion to the CPFF and has currently issued approximately $15.3 billion as of November 5.

    Mr. Liddy continued, “All of these steps, which would not have been possible in September, will benefit AIG, its stakeholders and the American taxpayers. This plan contributes to stabilizing the financial system and provides the opportunity for the public to realize gains on its AIG investment in the future. These measures will also put AIG on track to emerge as a nimble competitor with good long-term growth prospects.”

    “This innovative solution enhances AIG’s liquidity position. At the same time, American taxpayers will be fairly compensated for funds lent to AIG, and they will capture the majority of any appreciation in the value of the securities involved in the program in the years ahead.”

    Liddy added, “Today’s announcement would not have been possible without the vision and extraordinary hard work, dedication and cooperation of officials from the U.S. Treasury, the Federal Reserve Bank of New York, the Federal Reserve Board and the state insurance departments. On behalf of AIG, I would like to extend sincere thanks to all of those involved in crafting this mutually beneficial solution.”

  8. #1373
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    Re: Economic News/Discussion

    Liddy added, “Today’s announcement would not have been possible without the corruption, manipulation, and willingness to f^&k over the US taxpayer by officials from the U.S. Treasury, the Federal Reserve Bank of New York, the Federal Reserve Board and the rest of the corporate mafia. On behalf of AIG, I would like to extend sincere thanks to all of those involved in crafting this vigorous lubeless shafting.”
    This sounds a bit more accurate eh?

  9. #1374
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    Re: Economic News/Discussion

    Quote Originally Posted by Dutchcedar View Post
    My point was that if their investments went south, that's not my problem or anyone else's as a taxpayer. It may be as an investor or as one who relies on them for their retirement investments. I just get the feeling that we're bailing out companies that are little more than river boat gamblers and that's just nuts.
    Yes. And I did writie a post about some things I learned from someone who knows this issue a lot better than I do. They got caught trying to eek out a little more profit from what they thought were high rated mortgages. A good corporate system might have done more than just look at the ratings and did their homework to see where these things were coming from. Someone like deposed CEO Hank Greenberg would likely have caught it.

    However, these Harvard (for example) graduated crap shooters got too clever. And this problem is more widespread than in just AIG. AIG (and others) needs to "clean house" of these people- and I'm NOT seeing any indication of that.
    Last edited by AeroSim; 11-10-2008 at 11:57 AM.

  10. #1375
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    Re: Economic News/Discussion

    Quote Originally Posted by AeroSim View Post
    However, these Harvard (for example) graduated crap shooters got too clever. And this problem is more widespread than in just AIG. AIG (and others) needs to "clean house" of these people- and I'm NOT seeing any indication of that.
    Why should they when they know the government will just step in and save their asses?
    Promote then, as an object of primary importance, institutions for the general diffusion of knowledge. In proportion as the structure of a government gives force to public opinion, it is essential that public opinion should be enlightened.

  11. #1376
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    Re: Economic News/Discussion

    Quote Originally Posted by Orangutan View Post
    Why should they when they know the government will just step in and save their asses?
    Profound statement of the day.

    Especially when they've leveraged their way to the top or close to it. I can imagine the party they'll have for nearly doubling their bailout.

    The beauty of it for me is that there is one truth that purges these types of things.

    The fundamentals always win in the end.

    And it's getting more beautiful every day.

  12. #1377
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    Re: Economic News/Discussion

    Quote Originally Posted by BlackDragon24 View Post
    This sounds a bit more accurate eh?
    We should all learn how to read that well.
    AIG (and others) needs to "clean house" of these people- and I'm NOT seeing any indication of that.
    We see the exact opposite... they're being put in charge of more shit.

  13. #1378
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    Re: Economic News/Discussion

    Quote Originally Posted by AeroSim View Post
    Profound statement of the day.

    Especially when they've leveraged their way to the top or close to it. I can imagine the party they'll have for nearly doubling their bailout.
    Quote Originally Posted by Dutchcedar View Post
    We see the exact opposite... they're being put in charge of more shit.

    Theres a lady who's sure
    All that glitters is gold
    And she's buying a stairway to heaven.
    When she gets there she knows
    If the stores are all closed
    With a word she can get what she came for...

    Spoiler!
    Promote then, as an object of primary importance, institutions for the general diffusion of knowledge. In proportion as the structure of a government gives force to public opinion, it is essential that public opinion should be enlightened.

  14. #1379
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    Re: Economic News/Discussion

    *cough* lame ass gold diggers :B

  15. #1380
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    Re: Economic News/Discussion

    Trust in Barney Frank.... you have got to be sh*tting me.

    The Fed Refuses to Disclose Who Is Getting Loans and What It's Accepting as Collateral

    While he was at Congress two months ago begging for a hand-out, Secretary Paulson announced that transparency was needed in Fed rescue efforts and promised that he wanted to provide that transparency. Now the Fed is fighting a FOIA request for disclosure of the identity of emergency loan recipients and their collateral.

    Taxpayers deserve to know where their money is going and what is being done to safeguard it. Emergency loans are supposed to be paid back with interest. The Fed isn't supposed to be offering money to banks without adequate collateral. Unfortunately, in September the Fed announced wider standards to accept less-than-top-rated assets as collateral.

    The banks accepting emergency loans would like to keep it a secret because disclosure might give investors reason to doubt their financial soundness. Some would argue that's the point.

    In an interview Nov. 6, House Financial Services Committee Chairman Barney Frank said the Fed's disclosure is sufficient and that the risk the central bank is taking on is appropriate in the current economic climate. Frank said he has discussed the program with Timothy F. Geithner, president and chief executive officer of the Federal Reserve Bank of New York and a possible candidate to succeed Paulson as Treasury Secretary.
    "I talk to Geithner and he was pretty sure that they're OK," said Frank, a Massachusetts Democrat. "If the risk is that the Fed takes a little bit of a haircut, well that's regrettable." Such losses would be acceptable, he said, if the program helps revive the economy.

    Frank said the Fed shouldn't reveal the assets it holds or how it values them because of "delicacy with respect to pricing." He said such disclosure would "give people clues to what your pricing is and what they might be able to sell us and what your estimates are." He wouldn't say why he thought that information would be problematic.
    In fact, investors and taxpayers deserve to know how shaky their investments in banks are so they can take appropriate action to protect themselves. Not knowing which banks are solvent and which are teetering on bankruptcy is a large part of the credit panic. By covertly propping up failing banks, the Fed is prolonging the financial crisis
    Guy is pretty gracious with OUR money.
    "The most dangerous myth is the demagoguery that business can be made to pay a larger share, thus relieving the individual. Politicians preaching this are either deliberately dishonest, or economically illiterate, and either one should scare us...
    Only people pay taxes, and people pay as consumers every tax that is assessed against a business."


    -The Gipper


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