Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[Arachno-capitalist]

Someone PMed me asking about the current thing going on - the thing that has been called Financial Armageddon.

    Recent events are the culmination of the mortgage crisis plus some other highly leveraged bad investments. Without getting into the particulars of the mortgage thing (I feel like it has been talked to death on the news), financial institutions ended up with large amounts of mortgage backed securities that they are forced to continually down-value on their books as people default and housing prices decline. Investments at this level are very highly leveraged, so writing down 1 dollar actually results in a much larger effect. The financial institutions can't make new investments, their old investments are failing, and no one will give them a loan - not even the foreign oil barons or the Asians.
    Now they are having trouble keeping enough cash around to operate so they seek buyouts, bailouts, and bankruptcy protection so they can get rid of their bad investments and move on.
    AIG has the added problem of holding Credit Default Swaps which are like insurance policies against debt defaults, and defaulting on debt is kind of in style lately.
    When a 160 year old company fails and a trillion dollar company fails, we get very uncertain about the future and pull money out of investments.
    Today the government put together an 85 billion dollar bailout loan to AIG to keep them from bankruptcy, which would be bad news for everyone.

So there. Just in case anyone is interested.

[littlefallsmets]

So in other words, all that big scary Government Regulation between FDR and Reagan was actually a good thing, a fire wall against the kind of short-term profiteering that can bring down an entire economy if done on a large enough scale.

And now we're fucked, because laisse-faire ain't so faire after all.

Still.

Better than that asteroid movie.

[Arachno-capitalist]

I predicted this response, and it would seem like that is the case. A lot of supposedly smart people made very bad decisions.
However, the government contributed to this in at least three ways:
1. The Community Reinvestment Act which requires banks to offer mortgages to every group of person, not just the ones who are likely to afford them.
2. The repeal of the uptick rule, which requires a stock to have upward movement before it can be sold. Hedge funds can spiral a stock into oblivion.
3. Policies that increase Moral Hazard. When the government goes out and actively participates in bailouts like it has, people come to expect it as an option. Bailing out failed companies may have more net benefits in the end, I prefer to live in a world where the governments policy isnt "You pays ya money, ya takes ya chances" when it comes to homes and jobs. Govt bailout activity, though, is addictive.

But even I can't pretend that most of the fault is on people who made very poor decisions about mortgages. People in boardrooms and people in bedrooms, alike.

[wombat]

A-Cap, I thought this was all your fault. Didn't we lately learn in another thread that the top financial decisions for the nation were made according to information that you provided?

OK, I'm going out now to exchange money for some things that can't vanish like food and books.

[CortJstr]

I keep hearing that AIG is the biggest insurance company, but the news never seems to answer the most important question about them. Which is, does AIG own any of my insurance?

[Doc]

Not anymore?

[Arachno-capitalist]

I keep hearing that AIG is the biggest insurance company, but the news never seems to answer the most important question about them. Which is, does AIG own any of my insurance?

All insurance policies are solvent and will continue to pay as normal. Its unclear yet where these policies will go from here, as in, will they stay in subsidiaries or be bought by other insurance companies.

[AugustWest]

I keep hearing that AIG is the biggest insurance company, but the news never seems to answer the most important question about them. Which is, does AIG own any of my insurance?

Who is your insurance with?

[CortJstr]

Who is your insurance with?

Honestly I don't even know what sort of insurance AIG provides. Health? Car?

But to answer the question Anthem BC/BS, Delta, Progressive, and Travellers

[AugustWest]

None of those are AIG companies.

[Arachno-capitalist]

Today the Russian stock market tried to open, but closed again, it is unclear when it will reopen. Washington Mutual announced it is auctioning itself, and Wachovia has moved to take over Morgan Stanley. Lloyd's is acquiring merging with England's largest lender HBOS. The FDIC that insures your bank deposits is operating below their legislated minimum reserves, so in an interesting move, the government will likely loan money to itself to keep the FDIC solvent. Dow Down 449 points.

[wombat]

If you want to keep your money in a mattress, are you just supposed to put it between the mattress and the boxsprings, or are you supposed to cut the mattress open and actually put the money inside?

[theinevitable]

ew, Wachovia is trying to hire my dad back, apparently he left due to tensions over decisions they were making that he thought were stupid... now he gets a call saying basically "you get to say I Told You So if you want, but please come work for us again."

considering he was in "Consumer Lending" I feel pretty proud if in fact he was telling them that they were being stupid.

[CortJstr]

The FDIC is about 2 blocks from my house. Today I rode down in the apartment elevator with a guy who had an FDIC badge on his belt. Everybody else in the elevator was like, "damn, it must really suck to be in that office right now."

I also got an e-mail from ING basically saying, "we mainly do savings and CDs. Those are both totally safe. Please don't panic and close your accounts."

[wombat]

now he gets a call saying basically "you get to say I Told You So if you want, but please come work for us again."

Damn, there are so many places I would kill to get that call from, and say noooo fuck*ng way.