Fed takes over AIG • Hacker News Board

Re: Fed takes over AIG

#31

Post by reynolds » Wed, Sep 17, 2008, 1:13 AM UTC

sethg wrote: post #9

krschultz wrote: post #6

So if big companies can't fail what prevents them from taking a risk that ends up this way in the future? Small companies have the advantage of being able to risk it all, big companies have the advantage of large sums of capital. To upset that balance is to increase the barrier of entry for small players.

Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big company sucks up insolvent small company for pennies on the dollar" than "government helps cronies by pouring money into badly-run business".

Is the Federal Reserve part of the government?

Re: Fed takes over AIG

#32

Post by thomasmallen » Wed, Sep 17, 2008, 1:13 AM UTC

This is just the finance world's Tower of Babel of credit and cheap money falling over, and will mostly affect rich bankers. I think that the everyday economy will be the same but with fewer imports as the dollar weakens.

Re: Fed takes over AIG

#33

Post by iamelgringo » Wed, Sep 17, 2008, 1:17 AM UTC

yamil wrote: post #5

Welcome to socialist states of America

The US has actually had a much more mercantile approach to business than socialistic. They are capitalistic up to a point, but the governent tends to step in and manage, regulate, bailout, give tax cuts to companies and industries when they deem necessary.

There are entire industries that are heavily subsidized and regulated, Telecom, Healthcare, Energy, Transportation, etc... Our countries national roadway system came about more or less as an assistance to the automotive industry. The 401k laws have been a huge boon to the stock market.

And, now, the government is making a big move into finance and investment banking.

Re: Fed takes over AIG

#34

Post by [deleted] » Wed, Sep 17, 2008, 1:21 AM UTC

reynolds wrote: post #31

sethg wrote: post #9

Earlier quoted context omitted.

Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big company sucks up insolvent small company for pennies on the dollar" than "government helps cronies by pouring money into badly-run business".

Is the Federal Reserve part of the government?

[deleted]

Re: Fed takes over AIG

#35

Post by pmorici » Wed, Sep 17, 2008, 1:26 AM UTC

yamil wrote: post #5

Welcome to socialist states of America

Isn't this called fascism?

Re: Fed takes over AIG

#36

Post by sd » Wed, Sep 17, 2008, 1:35 AM UTC

ojbyrne wrote: post #28

sd wrote: post #25

Earlier quoted context omitted.

Obviously, it's impossible to determine the effect of any one action on the economy -- but if this $85b prevents the markets from crashing, I'd argue its money well "spent." U.S. market cap has already fallen $4t in the past year. Do you really want to risk losing considerably more?

That was the argument for Fanny and Freddie. Didn't seem to work, and I bet it won't this time. WAMU is next.

Just to clarify, I meant that the other course might result in much more massive decline than has already happened. Think 22 sigma level -- like the '87 crash. Bailing out distressed financial firms is almost expected now. Thus, if it doesn't happen, then a lot of market participants may reevaluate their choice to invest in firms with heavy debt.

Obviously, these bail outs have their costs, such as the value of money lent as well as increased moral hazard, but it's worth considering whether this is worth the potential cost of a market collapse to the whole economy.

Re: Fed takes over AIG

#37

Post by rglovejoy » Wed, Sep 17, 2008, 1:42 AM UTC

reynolds wrote: post #31

sethg wrote: post #9

Earlier quoted context omitted.

Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big company sucks up insolvent small company for pennies on the dollar" than "government helps cronies by pouring money into badly-run business".

Is the Federal Reserve part of the government?

Yes and no:

http://en.wikipedia.org/wiki/Federal_Reserve#Independent_wit...

Re: Fed takes over AIG

#38

Post by byrneseyeview » Wed, Sep 17, 2008, 1:45 AM UTC

sd wrote: post #25

yamil wrote: post #5

Welcome to socialist states of America

Obviously, it's impossible to determine the effect of any one action on the economy -- but if this $85b prevents the markets from crashing, I'd argue its money well "spent." U.S. market cap has already fallen $4t in the past year. Do you really want to risk losing considerably more?

You're ignoring the question of whether or not the market should crash. If stocks are overpriced, then intervention like this just means we'll spend more time acting as if they are not overpriced, and that would be awful.

For what it's worth, my day job and my main part-time job are both entirely dependent on the market, so I sure hope the market doesn't need to crash. I agree with David Einhorn (who, by the way, has been short Lehman for a while): the stock market is okay, but the credit market is way overpriced.

Re: Fed takes over AIG

#39

Post by rsheridan6 » Wed, Sep 17, 2008, 1:45 AM UTC

yummyfajitas wrote: post #19

nickb wrote: post #13

Earlier quoted context omitted.

Partially correct. It's socialism for the rich. If it were socialism, you wouldn't have poor/middle-class people dying from treatable diseases.

What treatable diseases are poor/middle-class people dying of, that could be prevented by socialism?

When I worked at a pharmacy I regularly saw people choosing which of their prescriptions they would actually fill based on what they could afford. If these were life-saving drugs, as they were supposed to be, I would have to assume that some of them did or will end up dying prematurely.

Re: Fed takes over AIG

#40

Post by GavinB » Wed, Sep 17, 2008, 1:45 AM UTC

sabat wrote: post #26

yummyfajitas wrote: post #19

Earlier quoted context omitted.

What treatable diseases are poor/middle-class people dying of, that could be prevented by socialism?

Cancer. Diabetes. Yadda yadda. Do you know how many people are not insured and cannot afford insurance? ("Go to the emergency room" is not a health plan.) Do you know how many people with serious illnesses are turned down by their own insurance companies every year? I'm not saying socialism is an automatic answer, but it'd better than this mess.

Actually, "go to the emergency room" is a health plan. It's just the most inefficient health plan for all involved.