And to Wazzup, it might be simplistic to compare the CDS’ to a game of blackjack, but it was simple gambling nonetheless. As I understand it, the parties in the transaction didn’t have to be a party to the block of loans. It was essentially just a bet on a group of loans, that anyone could get in on. That sounds more like picking the Super Bowl winner than insurance to me.
The biggest difference is, instead of dealing with the mob, now we’re dealing with the largest bankers in the world, with the power and position to rquire our current government to make good on their bad decisions. Extortion to a new level.
…Dodd’s committee on top of this from the beginning? After all his Banking committee is at the top of the pyramid. Now its time to blame others? Maybe Chris was too busy counting all the campaign contributions he garnered from Fannie and Freddie…oh no, I guess he has people to do that for him.
What hypocrits he, Barnie Franks and all those other politicians are.
I’m glad no one is asking me why started this whole mess by giving AIG all this money. I hope their stock goes up so I can sell my shares and get the heck out of this stock market mess I helped create. I mean, helped to stabilize the economy by doing. whew, almost blew it for a second.
At the Senate hearing it was made clear that only ‘AAA’ rated securities were the subject of the AIG credit swaps. It was testified and agreed by the witnesses at the hearing, that none of the underlying debt obligations comprising these AAA rated tranches have defaulted. The reason AIG had to cough up billions is because they are contractually required to do so under the terms of the Credit Swap guaranteesas in the event their credit rating declines from the Investment Grade level stipulated. This reveals the incredible stupidity of our Congressional leaders who clearly do not grasp the fact that they could have saved the taxpayer billions of dollars, and still can, by simply issuing a U.S. government guarantee, to support the Credit Swap parties with AAA credit.
I agree that the US Gov’t could simply guarentee the CDS’bonds and avoid giving away our tax dollars but let’s not forget something you referred to but didn’t say. These instruments were rated AAA. Who rated them as AAA investment grade paper?
Does A.M. Best, S&P and Moody’s ring a bell??
Congress has every right to be angry about the failure of regulation of AIG, due to $440 billion of credit default swaps and other derivatives sold by AIG’s London office. AIG failed to set aside adequate reserves to cover these obligations, and no regulators watched carefully. We all should be angry.
Many in the industry have offered varying excuses for the failure.
Some wordsmiths tried to say this was not insurance, that it was a corporate obligation at the holding company level and did not have to be regulated. Nonsense . AIG promised to repay banks in the event there is a default of risky subprime mortgages, for which the bank paid consideration. Doesn’t that meet the classic definition of insurance?
Others have said that if state regulators were on the job, this problem would not have happened. This too is wrong. The current state by state regulatory system for insurance cannot handle this type of international transaction. A state would have a limited budget, limited staff, and questionable jurisdiction for this type of transaction. With 400,000 formal complaints already being filed each year with the state insurance departments, (this figure compiled by the NAIC has been approximately the same for the last 10 years), how could a state do an effective job overseas.?
Still others have said the AIG credit default swap transaction was exempt from regulation because of language inserted in the Gramm Leach Bliley Act. Of 1999. Didn’t AIG have a hand in crafting that act? And why was it exempted in the 1st Place?
And others have criticized the federal Office of Thrift Supervision(OTS), since AIG had acquired a small bank, and that supervision of the holding company(and credit default swaps) would have been under the OTS. OTS was caught offguard by not having any trained people to oversee AIG’s overseas transactions.
Confusing? The answer is to create confidence and restore trust of consumers and financial institutions in the insurance industry, a backbone of our economy. To do so, Congress needs to pass a federal insurance law, with a sole federal regulator, and with state insurance departments deputized to carry out federal law. Regulations would cover credit default swaps and other misunderstood derivatives as insurance, with oversight by a qualified regulator. The current state by state insurance regulatory system cannot handle international transactions. An optional federal charter (choice of federal or state regulation), being proposed by some, will be neither here nor there, and much too confusing. We cannot allow this kind of lax , loose regulation to occur again. Congress and the White House must put this high on the priority list
Well stated? Only if you want further disaster. This is just incredible!
What we really need to do is re-visit GLB and de-link insurance and other financial services. Insurance has kept our country together and in-business for centuries, and it can be effectively monitored by individual states.
The Federal Government, however, is only successful at increasing burdens and costing huge amounts of money, only to be left with congressional hearings to find out what when wrong – or, er, give a Senator a chance to pretend he’s really doing something so he can get re-elected.
Oh yeah, and we also need to make certain that Corporations know that gambling is illegal. Credit default swaps, which the previous poster said met the definition of insurance, were anything but insurance. They were gambling, on whether those loans would default. Well, had the loans been given to folks with a normal investigation on the credit-worthiness of the individual, instead of a desire by government to be another gimme to the sheep, there would have been no need to speculate on whether they would have been paid.
So, when you go to Vegas and play a little Blackjack, and you’re asked if you want to “buy insurance”, are you telling me that should be regulated by this Federal Regulatory body you so desperately want to see? Of course not. And, neither should credit default instruments. They should simply be illegal. Loan the money to worthy recipients, and take your own risk.
Congressional representatives have no right to be angry about their own malfeasance. Indeed, we have a right to be angry with the same congressional representatives for requiring Fannie and Freddie, who back at least 80% of all mortgages written, to comprise 50% of their loans to individuals who do not meet normal credit standards — thereby forcing banks to comply if they want Freddie and Fannie’s support. We have a right to be angry with them for inventing “subprime, and Ninja (no income no job) lending. We have a right to be angry with the same representatives rejecting the call to investigate Fannie and Freddie because their pockets were being lined by Fannie and Freddie executives whom our representatives allowed to be compensated based on volume, to encourage them to force this predictably illiquid lending, and thereby earning up to $50 million a year.
We have a right to be angry with our congressional representatives for passing a “Stimulus” bill that was 10% tax breaks, 20% welfare and 70% social engineering. And for proposing a budget that contains 4,500 pet projects not subject to debate or discussion that will have no meaningful impetus to our economy.
Yes we have a right to be angry of congressional stupidity for creating this problem, for the practice of blatant graft and corruption and for failing to take the most logical and efficient step to solve the problem, such as guaranteeing the credit swap parties or guaranteeing the insolvent debt of Fannie and Freddie. Instead they propose to subsidize the insolvent mortgage holders and create a deficit that will bankrupt our nation.
What we need fare more than federal insurance regulation is a reform of our congressional legislative process to eliminate the blatant graft and corruption that has systemically infected the country and our social/economic system.
If would all call congress every day to tell them to do their job and debate every spending measure and advertise it to the public, and stop taking bribes from lobbyist and special interests, and call them until they comply or get out, we might have a chance for survival.
This is not at all complicated. It is all really pretty damn simple.
Congress is trying to fix this insurance and financial mess. Ranting incoherently about Congress’ ineptitude, will not get us anywhere, will it? Face it-the federal government is the only game in town to help all of us. It has the money, and the power, to correct this situation. And it will correct the situation. The financial implosion was created in the rampant era of deregulation. Translation: no effective rules, and no enforcement of the rules that do exist — equals a mess. This has to change. We need a uniform federal insurance law, and a sole federal regulator, deputizing state’s insurance departments to carry out the federal law. With proper planning and enforcement, this will protect consumers and insurers alike,and will lower costs. It will also restore confidence among financial institutions and consumers, and return the economy we are looking for. Unless we realize this, and work with Congress, instead of beating up on Congress, we will be condemned to suffer the same fate again. Let’s focus our collective intelligence in a positive way, and make constructive changes.
I’ll bet you can’t name 3 problems the Federal Government has successfully solved other than the defense of our country and the relatively successful collection of our taxes.
I say relatively, because it appears after many of President Obama’s appointments, that there is quite a crowd of folks that have successfuly managed to play keep-away. Can you guess the common denominator? Uh, the same folks that give practically nothing individually to any kind of charitable organization, but have no problem giving away other people’s hard earned fruits.
I notice you used the term “collective”, and that’s just about right for this ill-fated mindset. Just trust Uncle Sam and he will save us? Fall in line, or be beheaded? You know that’s what this kind of thinking will lead us to, don’t you? The framers of the Constitution knew what troubles could lie ahead, and anyone that prizes freedom over caged needs being met, must wake up and fight for your rights.
Otherwise, we are headed quickly towards a few making all the decisions for the many – like they did in Nazi Germany, the Soviet Union, or now in China where you are required to kill any babies over the maximum allotment. Of course, that’s for the good of the many, right?
Work with Congress? That’s quickly becoming the equivalent of working with the gang bosses that control sections of urban neighborhoods. I suppose the quicker those little old ladies, and toddlers learn that lesson in their pitiful neighborhoods, the better off they will be too, huh?
It is quite clear that misplaced confidenec and glorification of the government is not the answer. Government tinkering with the nation’s mortgage industry precipitated the financial meltdown. If not for the fact Fannie and Freddie were directed by the President, with the support of congressional graft, to comprise half of their portfolios with nonconforming loans, resulting in our banks issuing trillions of dollars of predictably insolvent mortgages, none of the hi-jinks on Wall Street would have created a problem.
Our issue therefore becomes one of the need to regulate the exercise of government not to grow the government. Government is a colossal failure in this instance, as in others. They failed to issue guarantees instead of pouring billions into AIG, the large banks and Fannie/Freddie. They failed to regulate Fannie and Freddie when asked to do so; the payoff was too sweet. They have chosen to spend a trillion dollars of our money on largely wasteful projects that will not stimulate the economy. The government takes approximately $20 billion from our paychecks every week, equating to over $1 trillion per year. Declaring a tax holiday for a year on payroll tax and eliminating the capital gains tax would actually stimulate the economy, attract international investors like flies and create jobs. Doing so would lift us out of this meltdown in 1 month and the stock markets would take off like a rocket.
The answer is to downsize and outsource the government to private enterprise, not grow it.
outsource the goverment to private industry.. perhaps to those oversees investors you mention? Pardon me, but that doesn’t sound like an idea thta could possible be good for the USA ….
David, the Wall Street Journal reported that $50 billion of the $170 billion dollars handed out so far has gone to European banks. So, “yes”. The congressional argument is that a chain reactions from a crashing European bank system would be worse for our economy long term than having US taxpayers bail out the world…(or at least 1/3 bailout to Europe if not the whole world).
Your anger at the federal government is misplaced here. You have missed the point. The article was entitled “How AIG Fell Through the Regulatory Cracks”. AIG’s problem with credit default swaps, and now our nation’s huge problem, was not caused by an overabundance of government. AIG’ s problem, besides its own internal improprieties, was caused by deregulation, the lack of government watching to see that they have put aside sufficient reserves to pay for their obligations. AIG took advantage of this unregulated or poorly regulated area..
Looking at this in 2020 hindsight- is there anyone that realistically would say that our government shouldn’t fix this with better regulation, regulation which would involve qualified people on the federal level to have authority to act in this international arena?
The issues raised about political motivations, downsizing the government or outsourcing the government to private enterprise need to be discussed — but not in this forum. Right now, Congress is focusing correctly, and looking for realistic solutions to a raging economic ice storm.
Unfortunately, the Federal Government IS the only bureaucracy that can possibly regulate International banking and finance. No State could possibly do that.
Yes, there was a failure of regulation in that area. I will agree with that.
Where my problem lies, is on the Insurance side. There is no reason the Federal Government, which can never really do a good job at much, should insert itself into an arena in which a State, or Local Government can do a better job.
The only good reason for Federal Regulation of the Insurance Industry is so that huge, multinational conglomerates can take over the industry, and then we will be left with the same types of fiascos in the Insurance world. That’s the biggest lesson we should all take from this.
There is no question that the SEC and others dropped the ball on oversight. It is nearly comical to see Congress holding hearings to find out who is to blame, yet they don’t lay any blame on themselves, instead they allude to the fact that it was the State Ins Dept’s that didn’t regulate enough – so they can grab some more power. In addition, instead of holding those executives accountable that committed the criminal, or near criminal activity. Instead, they’ve allowed these manglers to not only remain in their positions, but now gain from the bonuses they are receiving, ostensibly for either doing such a great job, or to retain those people in the organization – neither of which are truly worthy!!!
How could the Federal Government and Federal Reserve handle this any more ineptly?
Answer, it would have been nearly impossible to do a worse job. And yet, there are still calls for this same group of legislators to be more responsible for these types of oversight.
Bunk! How about breaking up thise mulinational corporations into smaller units. How about detaching Insurance and Financial Products? Bigger is not necessarily better. As a matter of fact, it apparently true that if you can build yourself big enough, you can get away with financial murder, and still get off. Why? Because you’ve become too big to fail. Get out of jail free card, easily obtained.
AIG should not have given the money. The Feds could have guaranteed the credit default swaps and probably spent pennies on the dollar. They could have let the AIG organization, with their overpaid frat-boy execs fail, and not owe all those bonuses. They could have avoided most of the money being funneled to other countries, instead of stimulating our own economies.
Oh wait – if they did that, then we taxpayers wouldn’t have been able to have the opportunity to have these Federal dimwits own 85% of a worthless company. Silly me. It is such a perk, isn’t it?
And the best part is Mr. Geitner, and his facade of being shocked that as 85% owners, his chair was unable to stop the contentious bonuses from going out.
Waaaaaaa!
Or, the Republican Senate leader, Mitch McConnell, whining about what’s happened also.
Waaaaaaa to you too.
Or, Barney (I didn’t know my gay lover was running a prostitution ring from my apartment) Franks is now so appalled and calling for Mr Liddy’s firing.
Waaaaa! Who’s bright idea was it to hire this guy? He did such a wonderful job with Allstate – until the no reinsurance gamble failed. Oh, gambling, that was the job qualification for heading AIG.
The Waaaa list could go on for hours.
Wake up folks. All of this huge money movement was NOT to stimulate the economy. It WAS to be able to funnel off millions and billions for personal gains, and the ability to pay back political cronies on both sides of the aisles. We sucker taxpayers are just sitting back, letting these suited thugs rob us blind. What will it take to call people to action and take our government back again? I just don’t know.
“There is no reason the Federal Government, which can never really do a good job at much, should insert itself into an arena in which a State, or Local Government can do a better job” Peon Agent
Never do a good job?
It built a rail system, It built a highway system, the largest postal system in the world, as a mater of fact bioth the highway and rail systems are the largest in the world.
You may not like the Government involved in Medicare, but with out it medical coverage would not exist for those of us over 65.
Hate the Government all you want, then don’t use it’s services.
Your best examples of how the Fed would be better suited at regulating insurance is the highway and rail system? To call that apples and oranges probably assumes too much about your intelligence.
Ok, if you like Medicaid, then what can I say. I’ve never personally met a happy client yet, though.
Are we bailing out all of these counterparties and overpaying some executives so that the United States and the taxpayers can go bankrupt? I’ll bet that the hand will be out again soon.
In this case we need more regulation not less. Essentially AIG had no money of it’s own. Uncle Sam had the money on behalf of the taxpayers. When we give the money to AIG the company then has the money to fulfill the so called obligations to the counterparties and executives.Some of the counterparties could represent terrorist organizations for all I know. How smart would it be to finance them?
Why not stop the giveaway and have the Fed set up a government department to sort out and pay out what we decide is due. It certainly would be less expensive than the way that AIG is handling it now.
We all know that some foreign governments are noted for their consistantly crooked way of doing business. Did we give them a blank check too?
Let’s hold the money in the Government’s hands (read taxpayer’s hands) and dole it out under control as it is needed and when we know how it is going to be used. That way no one can have a legal claim on the money from AIG because AIG won’t have it. The same applies to bonuses and other fringe benefits. If AIG doesn’t have it, they can’t give it away indiscriminately.
Well said!!!
And to Wazzup, it might be simplistic to compare the CDS’ to a game of blackjack, but it was simple gambling nonetheless. As I understand it, the parties in the transaction didn’t have to be a party to the block of loans. It was essentially just a bet on a group of loans, that anyone could get in on. That sounds more like picking the Super Bowl winner than insurance to me.
The biggest difference is, instead of dealing with the mob, now we’re dealing with the largest bankers in the world, with the power and position to rquire our current government to make good on their bad decisions. Extortion to a new level.
…Dodd’s committee on top of this from the beginning? After all his Banking committee is at the top of the pyramid. Now its time to blame others? Maybe Chris was too busy counting all the campaign contributions he garnered from Fannie and Freddie…oh no, I guess he has people to do that for him.
What hypocrits he, Barnie Franks and all those other politicians are.
Ha! One of my favorite quotes from one of my favorite movies! The Dude abides!!!
I’m glad no one is asking me why started this whole mess by giving AIG all this money. I hope their stock goes up so I can sell my shares and get the heck out of this stock market mess I helped create. I mean, helped to stabilize the economy by doing. whew, almost blew it for a second.
Have we sent our AIG billions to Europe as well as Goldman???
Why are we bailing out Europe? Can they do it with Euros instead of Dollars that my kids are going to have to pay back?
At the Senate hearing it was made clear that only ‘AAA’ rated securities were the subject of the AIG credit swaps. It was testified and agreed by the witnesses at the hearing, that none of the underlying debt obligations comprising these AAA rated tranches have defaulted. The reason AIG had to cough up billions is because they are contractually required to do so under the terms of the Credit Swap guaranteesas in the event their credit rating declines from the Investment Grade level stipulated. This reveals the incredible stupidity of our Congressional leaders who clearly do not grasp the fact that they could have saved the taxpayer billions of dollars, and still can, by simply issuing a U.S. government guarantee, to support the Credit Swap parties with AAA credit.
I agree that the US Gov’t could simply guarentee the CDS’bonds and avoid giving away our tax dollars but let’s not forget something you referred to but didn’t say. These instruments were rated AAA. Who rated them as AAA investment grade paper?
Does A.M. Best, S&P and Moody’s ring a bell??
Congress has every right to be angry about the failure of regulation of AIG, due to $440 billion of credit default swaps and other derivatives sold by AIG’s London office. AIG failed to set aside adequate reserves to cover these obligations, and no regulators watched carefully. We all should be angry.
Many in the industry have offered varying excuses for the failure.
Some wordsmiths tried to say this was not insurance, that it was a corporate obligation at the holding company level and did not have to be regulated. Nonsense . AIG promised to repay banks in the event there is a default of risky subprime mortgages, for which the bank paid consideration. Doesn’t that meet the classic definition of insurance?
Others have said that if state regulators were on the job, this problem would not have happened. This too is wrong. The current state by state regulatory system for insurance cannot handle this type of international transaction. A state would have a limited budget, limited staff, and questionable jurisdiction for this type of transaction. With 400,000 formal complaints already being filed each year with the state insurance departments, (this figure compiled by the NAIC has been approximately the same for the last 10 years), how could a state do an effective job overseas.?
Still others have said the AIG credit default swap transaction was exempt from regulation because of language inserted in the Gramm Leach Bliley Act. Of 1999. Didn’t AIG have a hand in crafting that act? And why was it exempted in the 1st Place?
And others have criticized the federal Office of Thrift Supervision(OTS), since AIG had acquired a small bank, and that supervision of the holding company(and credit default swaps) would have been under the OTS. OTS was caught offguard by not having any trained people to oversee AIG’s overseas transactions.
Confusing? The answer is to create confidence and restore trust of consumers and financial institutions in the insurance industry, a backbone of our economy. To do so, Congress needs to pass a federal insurance law, with a sole federal regulator, and with state insurance departments deputized to carry out federal law. Regulations would cover credit default swaps and other misunderstood derivatives as insurance, with oversight by a qualified regulator. The current state by state insurance regulatory system cannot handle international transactions. An optional federal charter (choice of federal or state regulation), being proposed by some, will be neither here nor there, and much too confusing. We cannot allow this kind of lax , loose regulation to occur again. Congress and the White House must put this high on the priority list
Edge…on the gas….I think we will see this oversight shortly at the federal level….well stated
Well stated? Only if you want further disaster. This is just incredible!
What we really need to do is re-visit GLB and de-link insurance and other financial services. Insurance has kept our country together and in-business for centuries, and it can be effectively monitored by individual states.
The Federal Government, however, is only successful at increasing burdens and costing huge amounts of money, only to be left with congressional hearings to find out what when wrong – or, er, give a Senator a chance to pretend he’s really doing something so he can get re-elected.
Oh yeah, and we also need to make certain that Corporations know that gambling is illegal. Credit default swaps, which the previous poster said met the definition of insurance, were anything but insurance. They were gambling, on whether those loans would default. Well, had the loans been given to folks with a normal investigation on the credit-worthiness of the individual, instead of a desire by government to be another gimme to the sheep, there would have been no need to speculate on whether they would have been paid.
So, when you go to Vegas and play a little Blackjack, and you’re asked if you want to “buy insurance”, are you telling me that should be regulated by this Federal Regulatory body you so desperately want to see? Of course not. And, neither should credit default instruments. They should simply be illegal. Loan the money to worthy recipients, and take your own risk.
That’s all.
the difference is the government will not insure “cards” they will in effect regulate what contitutes insurance etc…poor example…much too simplistic.
Congressional representatives have no right to be angry about their own malfeasance. Indeed, we have a right to be angry with the same congressional representatives for requiring Fannie and Freddie, who back at least 80% of all mortgages written, to comprise 50% of their loans to individuals who do not meet normal credit standards — thereby forcing banks to comply if they want Freddie and Fannie’s support. We have a right to be angry with them for inventing “subprime, and Ninja (no income no job) lending. We have a right to be angry with the same representatives rejecting the call to investigate Fannie and Freddie because their pockets were being lined by Fannie and Freddie executives whom our representatives allowed to be compensated based on volume, to encourage them to force this predictably illiquid lending, and thereby earning up to $50 million a year.
We have a right to be angry with our congressional representatives for passing a “Stimulus” bill that was 10% tax breaks, 20% welfare and 70% social engineering. And for proposing a budget that contains 4,500 pet projects not subject to debate or discussion that will have no meaningful impetus to our economy.
Yes we have a right to be angry of congressional stupidity for creating this problem, for the practice of blatant graft and corruption and for failing to take the most logical and efficient step to solve the problem, such as guaranteeing the credit swap parties or guaranteeing the insolvent debt of Fannie and Freddie. Instead they propose to subsidize the insolvent mortgage holders and create a deficit that will bankrupt our nation.
What we need fare more than federal insurance regulation is a reform of our congressional legislative process to eliminate the blatant graft and corruption that has systemically infected the country and our social/economic system.
If would all call congress every day to tell them to do their job and debate every spending measure and advertise it to the public, and stop taking bribes from lobbyist and special interests, and call them until they comply or get out, we might have a chance for survival.
This is not at all complicated. It is all really pretty damn simple.
Congress is trying to fix this insurance and financial mess. Ranting incoherently about Congress’ ineptitude, will not get us anywhere, will it? Face it-the federal government is the only game in town to help all of us. It has the money, and the power, to correct this situation. And it will correct the situation. The financial implosion was created in the rampant era of deregulation. Translation: no effective rules, and no enforcement of the rules that do exist — equals a mess. This has to change. We need a uniform federal insurance law, and a sole federal regulator, deputizing state’s insurance departments to carry out the federal law. With proper planning and enforcement, this will protect consumers and insurers alike,and will lower costs. It will also restore confidence among financial institutions and consumers, and return the economy we are looking for. Unless we realize this, and work with Congress, instead of beating up on Congress, we will be condemned to suffer the same fate again. Let’s focus our collective intelligence in a positive way, and make constructive changes.
What? Do you really believe that nonsense?
I’ll bet you can’t name 3 problems the Federal Government has successfully solved other than the defense of our country and the relatively successful collection of our taxes.
I say relatively, because it appears after many of President Obama’s appointments, that there is quite a crowd of folks that have successfuly managed to play keep-away. Can you guess the common denominator? Uh, the same folks that give practically nothing individually to any kind of charitable organization, but have no problem giving away other people’s hard earned fruits.
I notice you used the term “collective”, and that’s just about right for this ill-fated mindset. Just trust Uncle Sam and he will save us? Fall in line, or be beheaded? You know that’s what this kind of thinking will lead us to, don’t you? The framers of the Constitution knew what troubles could lie ahead, and anyone that prizes freedom over caged needs being met, must wake up and fight for your rights.
Otherwise, we are headed quickly towards a few making all the decisions for the many – like they did in Nazi Germany, the Soviet Union, or now in China where you are required to kill any babies over the maximum allotment. Of course, that’s for the good of the many, right?
Work with Congress? That’s quickly becoming the equivalent of working with the gang bosses that control sections of urban neighborhoods. I suppose the quicker those little old ladies, and toddlers learn that lesson in their pitiful neighborhoods, the better off they will be too, huh?
Enough already,
It is quite clear that misplaced confidenec and glorification of the government is not the answer. Government tinkering with the nation’s mortgage industry precipitated the financial meltdown. If not for the fact Fannie and Freddie were directed by the President, with the support of congressional graft, to comprise half of their portfolios with nonconforming loans, resulting in our banks issuing trillions of dollars of predictably insolvent mortgages, none of the hi-jinks on Wall Street would have created a problem.
Our issue therefore becomes one of the need to regulate the exercise of government not to grow the government. Government is a colossal failure in this instance, as in others. They failed to issue guarantees instead of pouring billions into AIG, the large banks and Fannie/Freddie. They failed to regulate Fannie and Freddie when asked to do so; the payoff was too sweet. They have chosen to spend a trillion dollars of our money on largely wasteful projects that will not stimulate the economy. The government takes approximately $20 billion from our paychecks every week, equating to over $1 trillion per year. Declaring a tax holiday for a year on payroll tax and eliminating the capital gains tax would actually stimulate the economy, attract international investors like flies and create jobs. Doing so would lift us out of this meltdown in 1 month and the stock markets would take off like a rocket.
The answer is to downsize and outsource the government to private enterprise, not grow it.
outsource the goverment to private industry.. perhaps to those oversees investors you mention? Pardon me, but that doesn’t sound like an idea thta could possible be good for the USA ….
David, the Wall Street Journal reported that $50 billion of the $170 billion dollars handed out so far has gone to European banks. So, “yes”. The congressional argument is that a chain reactions from a crashing European bank system would be worse for our economy long term than having US taxpayers bail out the world…(or at least 1/3 bailout to Europe if not the whole world).
Your anger at the federal government is misplaced here. You have missed the point. The article was entitled “How AIG Fell Through the Regulatory Cracks”. AIG’s problem with credit default swaps, and now our nation’s huge problem, was not caused by an overabundance of government. AIG’ s problem, besides its own internal improprieties, was caused by deregulation, the lack of government watching to see that they have put aside sufficient reserves to pay for their obligations. AIG took advantage of this unregulated or poorly regulated area..
Looking at this in 2020 hindsight- is there anyone that realistically would say that our government shouldn’t fix this with better regulation, regulation which would involve qualified people on the federal level to have authority to act in this international arena?
The issues raised about political motivations, downsizing the government or outsourcing the government to private enterprise need to be discussed — but not in this forum. Right now, Congress is focusing correctly, and looking for realistic solutions to a raging economic ice storm.
Unfortunately, the Federal Government IS the only bureaucracy that can possibly regulate International banking and finance. No State could possibly do that.
Yes, there was a failure of regulation in that area. I will agree with that.
Where my problem lies, is on the Insurance side. There is no reason the Federal Government, which can never really do a good job at much, should insert itself into an arena in which a State, or Local Government can do a better job.
The only good reason for Federal Regulation of the Insurance Industry is so that huge, multinational conglomerates can take over the industry, and then we will be left with the same types of fiascos in the Insurance world. That’s the biggest lesson we should all take from this.
That’s all.
What do YOU think the I in AIG stands for…INTERNATIONAL is pretty self explanatory.
There is no question that the SEC and others dropped the ball on oversight. It is nearly comical to see Congress holding hearings to find out who is to blame, yet they don’t lay any blame on themselves, instead they allude to the fact that it was the State Ins Dept’s that didn’t regulate enough – so they can grab some more power. In addition, instead of holding those executives accountable that committed the criminal, or near criminal activity. Instead, they’ve allowed these manglers to not only remain in their positions, but now gain from the bonuses they are receiving, ostensibly for either doing such a great job, or to retain those people in the organization – neither of which are truly worthy!!!
How could the Federal Government and Federal Reserve handle this any more ineptly?
Answer, it would have been nearly impossible to do a worse job. And yet, there are still calls for this same group of legislators to be more responsible for these types of oversight.
Bunk! How about breaking up thise mulinational corporations into smaller units. How about detaching Insurance and Financial Products? Bigger is not necessarily better. As a matter of fact, it apparently true that if you can build yourself big enough, you can get away with financial murder, and still get off. Why? Because you’ve become too big to fail. Get out of jail free card, easily obtained.
AIG should not have given the money. The Feds could have guaranteed the credit default swaps and probably spent pennies on the dollar. They could have let the AIG organization, with their overpaid frat-boy execs fail, and not owe all those bonuses. They could have avoided most of the money being funneled to other countries, instead of stimulating our own economies.
Oh wait – if they did that, then we taxpayers wouldn’t have been able to have the opportunity to have these Federal dimwits own 85% of a worthless company. Silly me. It is such a perk, isn’t it?
And the best part is Mr. Geitner, and his facade of being shocked that as 85% owners, his chair was unable to stop the contentious bonuses from going out.
Waaaaaaa!
Or, the Republican Senate leader, Mitch McConnell, whining about what’s happened also.
Waaaaaaa to you too.
Or, Barney (I didn’t know my gay lover was running a prostitution ring from my apartment) Franks is now so appalled and calling for Mr Liddy’s firing.
Waaaaa! Who’s bright idea was it to hire this guy? He did such a wonderful job with Allstate – until the no reinsurance gamble failed. Oh, gambling, that was the job qualification for heading AIG.
The Waaaa list could go on for hours.
Wake up folks. All of this huge money movement was NOT to stimulate the economy. It WAS to be able to funnel off millions and billions for personal gains, and the ability to pay back political cronies on both sides of the aisles. We sucker taxpayers are just sitting back, letting these suited thugs rob us blind. What will it take to call people to action and take our government back again? I just don’t know.
And we wonder why people smoke crack.
“There is no reason the Federal Government, which can never really do a good job at much, should insert itself into an arena in which a State, or Local Government can do a better job” Peon Agent
Never do a good job?
It built a rail system, It built a highway system, the largest postal system in the world, as a mater of fact bioth the highway and rail systems are the largest in the world.
You may not like the Government involved in Medicare, but with out it medical coverage would not exist for those of us over 65.
Hate the Government all you want, then don’t use it’s services.
What?
Your best examples of how the Fed would be better suited at regulating insurance is the highway and rail system? To call that apples and oranges probably assumes too much about your intelligence.
Ok, if you like Medicaid, then what can I say. I’ve never personally met a happy client yet, though.
Congratulations, you proved my point.
Are we bailing out all of these counterparties and overpaying some executives so that the United States and the taxpayers can go bankrupt? I’ll bet that the hand will be out again soon.
In this case we need more regulation not less. Essentially AIG had no money of it’s own. Uncle Sam had the money on behalf of the taxpayers. When we give the money to AIG the company then has the money to fulfill the so called obligations to the counterparties and executives.Some of the counterparties could represent terrorist organizations for all I know. How smart would it be to finance them?
Why not stop the giveaway and have the Fed set up a government department to sort out and pay out what we decide is due. It certainly would be less expensive than the way that AIG is handling it now.
We all know that some foreign governments are noted for their consistantly crooked way of doing business. Did we give them a blank check too?
Let’s hold the money in the Government’s hands (read taxpayer’s hands) and dole it out under control as it is needed and when we know how it is going to be used. That way no one can have a legal claim on the money from AIG because AIG won’t have it. The same applies to bonuses and other fringe benefits. If AIG doesn’t have it, they can’t give it away indiscriminately.