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Rescued by a Bailout, A.I.G. May Sue Its Savior

dealbook.nytimes.com

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Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#61

Post by OGinparadise »

fleitz wrote: post #36
OGinparadise wrote: post #26

Earlier quoted context omitted.

" That's not true, the shareholders would only have gotten nothing if the creditors insisted on immediate payment / and/or liquidation. " Do you really think that the banks (already in the brink of bankruptcy) would have ponied up tens of billions so AIG would continue to operate? I don't think you know how much of the world's finance AIG controlled via their insurance. http://en.wikipedia.org/wiki/American_Internati…

I happen to have had a Bloomberg terminal on my desk the day AIG was bailed out. Lets just say I have a pretty good idea of what AIG meant to the economy. For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity.

"For the same reason the government gave AIG $187 billion, the banks would have figured out how to craft a deal such that to the public it appeared that AIG was a viable financial entity."

So why didn't they? Maybe because they were BROKE and people were wondering which bank would collapse the next morning. AIG gobbled over $100 billion in a month or so, otherwise they would have defaulted and everything would've been toast.

That same week even the mighty Goldman Sachs kissed Buffet's ring and got $5 billion from him, yet you expect dozens of top banks, with different exposures and interests, getting together to put up $150+ billion in a few hours. This is recent and I remember it really well.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#62

Post by OGinparadise »

techsupporter wrote: post #37
OGinparadise wrote: post #23

Any corporation too big to fall should be too big to exist. No company should be allowed to hold hostage our entire financial system.

That makes for a nice sound bite but how do you decide it? I'm not even opposed to the idea (I'm overwhelmingly in favor, actually) but what mechanism is used to establish "too big to fail?" I realize that we can't legislate on the basis of "unforeseen consequences," but legislation by bumper sticker slogan is just as bad.

I didn't propose a law, it was a principle and details can be worked out. For example you can start by deleting the past 10-20 years that created such monsters. Citibank, BOFA, Goldman Sachs etc were /are too big to exist in the current form so they need to be broken up. If they fail because they made stupid bets for short term bonus cash, they go bankrupt and not many people care.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#63

Post by tripzilch »

icambron wrote: post #52
ChuckMcM wrote: post #7

Earlier quoted context omitted.

I agree with the emotion but I can also see the argument that the agreement was made under duress. If you are about to die and the only person who could save you, offers to do so, but asks you to agree to something reprehensible in exchange for saving you, what do you do? At the risk of creating a strawman (the goal is illustration not substitution) let us construct a scenario, you're hanging by a rope which is break…

I know you don't mean to draw a parallel, but I'm nevertheless going to point out that the illustration isn't very...illustrative. AIG was in a situation where the expectation was for it to go out of business because of its own (possibly illegal) mismanagement. It was offered a deal whose price, rather than being morally repugnant or open-ended, was merely expensive. And no one was going to die in any case. So let's…

I am loving all of these crazy analogies!

Man, if I were a timetravel agency, I'd be selling front-row tickets to the 21st century as "comedy night".

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#64

Post by jfager »

makomk wrote: post #60
earbitscom wrote: post #12

Earlier quoted context omitted.

Actually, it's more like a guy who just conned your family out of their life savings is hanging by a rope, which is breaking. You don't feel inclined to save them, but unfortunately, they're hanging over a crowd of innocent bystanders. You agree to save them, mostly so that the others are not injured. While you do, you make them agree to give back all of the money they stole under shitty terms. They do so by screwing…

Not exactly. The key thing you're missing is that AIG weren't actually the main beneficiaries of the AIG bailout, the people who bought CDSs from them were. Effectively, a bunch of other companies convinced AIG to to sell them insurance for way less than it should cost, in many cases on property they didn't actually own, by conning them as to how risky it would be. To continue the metaphor, it's like if a guy conned…

AIG isn't a company run by widows and orphans. The department that issued that insurance was full of the most stereotypical Wall Street shark assholes around, who thought they were smarter than everyone else and getting a big free payday. They got scammed in the way a casino scams the idiot wearing sunglasses at the craps table.

Yes, the government bailout of AIG went towards paying off their counterparties. But those were actual debts that AIG owed because of their own stupidity and greed. Had AIG gone bankrupt instead, the counterparties would not have received anywhere near full payment, and there's a compelling case to be made that that's how it should have been. But this idea that AIG somehow got screwed by having to pay off their shitty bets with our money is laughable and disgusting. If the shareholders want to sue someone, it should be their own board.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#65

Post by tripzilch »

ChuckMcM wrote: post #17
roc wrote: post #13

Earlier quoted context omitted.

Except that bankruptcy (particularly corporate bankruptcy) is hardly as permanent as death. And no-one making decisions at AIG was personally on the hook for remotely that level of responsibility. Conflating their position with calamitous death seems borderline disingenuous. You're soliciting emotional reactions to an unforeseeable emergency. But AIG was in a situation that years of rational business decisions put in…

If you review the situation with AIG, the only available bankruptcy option available to AIG was Chapter 7, aka liquidation. There was no scenario without the government stepping in that they could have used Chapter 11 to re-organize. In this case, a corporate liquidation is exactly like death, the assets are divided up amongst the creditors and the company ceases to exist.

> In this case, a corporate liquidation is exactly like death

If you actually believe this, then I believe you are a terrible person.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#66

Post by tatsuke95 »

yummyfajitas wrote: post #58
earbitscom wrote: post #12

Earlier quoted context omitted.

Actually, it's more like a guy who just conned your family out of their life savings is hanging by a rope, which is breaking. You don't feel inclined to save them, but unfortunately, they're hanging over a crowd of innocent bystanders. You agree to save them, mostly so that the others are not injured. While you do, you make them agree to give back all of the money they stole under shitty terms. They do so by screwing…

I'm confused about the analogy - who did AIG shareholders con?

This is standard operating procedure on the internet: everyone who wears a suit is a parasitcal criminal.

Back in reality, most banks have paid back their TARP funds, as did AIG, generating a hefty return over 3 years to the Treasury. You know what bailout is still significantly in the red? The auto industry. But we hear little about that because those guys don't work on Wall Street.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#67

Post by pohl »

afarrell wrote: post #22
ChuckMcM wrote: post #17

Earlier quoted context omitted.

If you review the situation with AIG, the only available bankruptcy option available to AIG was Chapter 7, aka liquidation. There was no scenario without the government stepping in that they could have used Chapter 11 to re-organize. In this case, a corporate liquidation is exactly like death, the assets are divided up amongst the creditors and the company ceases to exist.

No, liquidation of a corporation is only like a human's death in that it implies the division of the entity's assets. But the humans making the decision to accept the deal do not feel fear that they will cease to exist and they will leave their loved ones behind. They don't have the animal fear of physical pain either. Unless they have been terribly reckless with their personal finances, they are not at any risk of a…

No, liquidation of a corporation is only like a human's death in that it implies the division of the entity's assets.

The resemblance between this and becoming worm-food is uncanny, though.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#68

Post by tatsuke95 »

smsm42 wrote: post #24

It's kind of funny that the government apparently (if AIG claims are true) did the same to them as what politicians long criticized the bankers for doing as "predatory lending". I.e. if you consider that using one's bad situation to trick him into a loan which terms are unduly onerous is despicable thing to do for a bank - shouldn't be the same thing despicable for the government? On the other hand, if it's OK for th…

>"if you consider that using one's bad situation to trick him into a loan which terms are unduly onerous is despicable thing to do for a bank"

I feel like these conversations are so one-sided: Why is it always this?

Yes, predatory lending happened. But you know what else happened? People fraudulently reported personal information (with little verification required, which was a government mandate) to get mortgages. People who knew they had no chance in hell to repay the mortgage, but thought they could "flip" the house in time, or that prices would never fall. I can't tell you how many stories I've read or listened to where people tell their tale of going into the bank, reporting their income way too high (yes, sometimes thanks to a pushy mortgage broker) and getting a massive mortgage. All with no job. This is fraud, but the banks don't worry too much, because worst case scenario they take back the property.

The papers you sign are your responsibility. That goes for both parties.

Re: Rescued by a Bailout, A.I.G. May Sue Its Savior

#69

Post by sswaner »

Mvandenbergh wrote: post #57
anigbrowl wrote: post #43

Earlier quoted context omitted.

Yes, the board of directors of AIG are exactly like financially illiterate people trying to get a mortgage to buy their own home.

I'd like to see them try and prove they were taken advantage of by referencing their own incompetence. "Your honor, the defence claims that we were sophisticated investors but look at what we did. Are these the acts of a sophisticated man who knows what he's doing?"

You are glossing over the fact that the current board of directors are not the same people who got the company into trouble in 2008. They are the ones who turned the company around. They also have the same mandate as the board of any other publicly traded company: maximize value for the shareholders.
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