“conservatives in both parties will balk at having the government forcibly break up private companies” BOO HOO, nobody cares. Our sympathy is GONE.
Too Big To Fail = BREAK THEM UP *NOW*
We do NOT need to codify “too big to fail” into law. If a company is so big that its failure would result in the collapse of the world economic system, then it needs to be broken up. No if’s and’s or but’s.
If there is an explicit guarantee–and yes, since the bailouts even an implicit guarantee– of these firms by the federal government then the moral hazard cannot be ignored. The incentive to keep the gains and force the government to absorb the losses is too great.
Wall Street gets billions in bonuses in the good years and the rest of us get hosed in the bad years. This has to end, and it has to end now.
The way to fix that is to make it impossible for a firm to get so big that the government has to step in and pay the losses. You lie in the bed you make. Just like the rest of us, these firms should have to feel the pain of their losses.
Anything else means we are simply kicking the can down the road.
Everything that you have posted is correct and I agree. I just hope you do not waste your insight on this sight only and that you share your opinion with your political reps who may not support your commonsense facts.
You completely misunderstand what AIG did and how it got in trouble. It was phony reinsurance that nailed it to the wall and BROKERING the phony financial instruments packaged by the banks. They didn’t insure them.
Re USPS, has been relatively self supporting in the last few years (they were cut off from government subsidies) but have been killed by the precipitous drop in “real mail” because of the internet. Now they only carry a small percentage of what they used to have in first class, but still have huge amounts of advertising, etc. which has always been seriously underpriced because of political pressure from the mailers.
They do relatively well with parcel service, but it’s not enough to support the whole shebang.
Amtrak was always intended to be subsidized, for what reason I don’t know.
I once rode the train from NY to Orlando. What a horrible experience. Although I had a round trip ticket, I flew back. Despite the subsidies, no one ever said Amtrak had to make the trip bearable in return.
The trip cost almost as much as airfare, took 18 hours instead of 3, and was horribly miserable and uncomfortable.
what more can I say? they should have never repealed the Glass-Steagall Act – and now the $%#^& in Congress know why after bailing out Wall Street and the banking industry…
Insurance is insurance, banking is banking, and investing is investing. When they were allowed to mix the distinctions were too blurred. You wouldn’t want your dentist also performing proctologies!
Anyone who knows anything about insurance versus banking and finance, also knows that the two businesses are totally incompatible; always were and always will be. A crude example is as follows: Banks can loan a “multiple” of what it can prove in deposits and “assets”. As we have painfully learned, while deposits are hard to manipulate, “assets” are all over the board. They use “funny” asset valuations to lend a MULTIPLE of these assets in the form of loans, leveraging those assets in anticipation of future returns.
INSURANCE is regulated by the States (say AMEN to that!), and those regulations are strict, conservative, and REQUIRE that a
company’s policyholder reserves are SAFE, SECURE and LIQUID. Earnings are reliant upon SOUND underwriting results and CONSERVATIVE investment strategies. You can’t put “damn the torpedoes” Financial Services executives in charge of insurance operations and expect them to suddenly become the conservative managers the insurance industry requires. It was financial services management that ruined the financial services industry, drove the country to the brink, and WOULD HAVE taken the insurance industry down with it – if it had not been for STATE regulation that kept banking/finance greedy fingers off insurance company assets. Two entirely different industries serving two entirely different purposes – and that should have remained that way. Nuff said.
The merging of insurance operations and bank activities at the largest Wall Street banks did not create this mess. AIG “insured” the bad mortgages written by the largest banks. It’s not like AIG wrote the mortgage and then insured it themselves.
I do not agree with what happened on Wall Street last year nor do I like the idea that the American taxpayer got screwed (which in reality we didn’t because the government owns preferred stock in all the companies and each of the companies has made a return on the investment…the decision by the Bush administration to invest in these companies was GENIUS as it follwed the loans given by the government during the S&L crisis in which the government made money). But the sad reality is that the reinstatement of Glass-Steagall would not have stopped this. The banks, who make money by investing it’s depositors money by lending money for mortgages, businesses, capital projects, threw out the books on financial underwriting of borrowers, as a result the mortgages they had on their books failed which resulted in AIG’s failture because they “insured” the bonds backed by the bad mortgages.
So where in this sequence did Wells Fargo, Citi, JPM, Goldman etc write a mortgage and then insure it? No where. They wrote it, then packaged the mortgage with others as a bond, had S&P slap AAA on it and then sold the bonds to AIG. When the bonds defaulted AIG had to pay the money for the bond.
Sure the banks screwed us, and sure they are not lending any money right now (they have excess reserves of over $600 billion right now when they are normally at $1-$2 billion). Sure AIG screwed us and owes $65 billion to the US taxpayers (not the $180 like everyone thinks). And sure everyone thinks the government is spending money all over the place (unfortunately though, TARP, after making some money, is close to being fully paid back with interest, and of Barack’s stimulus in Feb 09, there has only been about $200B sent out). But guess what at the end of the day, without these institutions doing what they are doing and without the government bailing them out you wouldn’t be sitting in a cube pissing and moaning about how bad corporate America is.
If you want to piss and moan about how bad something is, lets look at the government sponsored entities like USPS, NFIP, Fannie and Freddie Mac. We see how well run these operations are, and we want the same morons in Washington running our health care. Forget how screwed we got by Wall Street, think about how screwed you’re going to get by the Feds.
Finally! something coming the “Planet Wash DC” that really makes sense – this law should never have been overturned; how many times do we need to be poked before we wake up and realize we’re getting hosed once again. I agree I do not want dental work done by a GP!!
Before you people go changing another wonderful thing Clinton(s), the messiah, and the Democrats did to I mean for America please consider this. NYC is the largest city in America. It is a socialist mecca jewel of America that we show case to visitors. Taxes are very very high because not much work really gets done in NYC. Ain’t outsourcing great. The way NYC survives is by getting a lot of money from other places via crazy laws we got passed. Please don’t ruin it now!
Any darn fool could have and should have anticipated the harmful results of the Graham-Leach-Bliley Act of Congress when it re-regulated any and all financial services industry into one melting pot.We now see those results, in part, but more harm is coming at us. For example, GLB required parity and retroprocity among the state with respect to Insurance Producer (agent-broker) licensing education etc., so for the past year or two we’re turning out agents that are woefully and inadequately trained for their profession. Another example of how government interference screws things up.
You sound very close to this (An AIG Employee)?
A few questions:
1) How did AIG determine the premium to charge for insuring these mortgages?
2) Did Goldman hold 33,000,000,000 in bonds at the time of the bailout?
3) Who other than Goldman Sachs sold the bonds for AIG? Who was the largest seller?
4) Did AIG have a fiduciary responsiblity to the following: Bondholders, Banks, Policyholders?
5) When will the money be paid back by AIG?
6) Why do they continue to quote at rates far less than the market?
7) If the “insurance” of mortgages was not insurance, than what was it?
Look forward to your responses.
In enacting Gramm Leach Bliley Congress let the genie out of the bottle, giving rise to unbridled growth and concentration of economic power in the hands of a few. At least the prevuous firewalls kept business entities at a reasonable size and reduced the temptation for other financial services blending with insurance to create entities too big too fail Note that where there was insurance regulated by states in some of these behemoths, it remained well-managed. It was only in the new Wild west financial services sanctioned by GLBA that things got weird. Come to think of it, those were supposed to regulated by the Federal Gov’t, Hmmm…
I don’t see how that will contribute to unemployment. Those that now work for the banks will be needed by the (real) insurance industry to pick up the load the banks would have to shed.
Thank you Bill for bringing this issue in the proper context. State regulation should remain however there are several states at this time that are looking to implement federal regulation of the insurance contracts we sell. Why? Because they want to assist the insurance companies in reducing payments to the consumer. The problem is some states have attorney’s that are running the insurance divisions and these lawyers have absolutely no insurance knowledge or backround what so ever! The agents of this country need to send a message to congress that we need products for our clients that will provide the coverage and benefits our clients paid for. Not a policy full of exclusions and limitations. It is time to stand up for the rights of the insurance buying public. The agents of this country need to stand up for our clients and the consumers!
CJ, are you actually a fiction writer? Please give specific names and states in your accusations. This sounds like a novel by a former trial lawyer from several years ago.
“conservatives in both parties will balk at having the government forcibly break up private companies” BOO HOO, nobody cares. Our sympathy is GONE.
Too Big To Fail = BREAK THEM UP *NOW*
We do NOT need to codify “too big to fail” into law. If a company is so big that its failure would result in the collapse of the world economic system, then it needs to be broken up. No if’s and’s or but’s.
If there is an explicit guarantee–and yes, since the bailouts even an implicit guarantee– of these firms by the federal government then the moral hazard cannot be ignored. The incentive to keep the gains and force the government to absorb the losses is too great.
Wall Street gets billions in bonuses in the good years and the rest of us get hosed in the bad years. This has to end, and it has to end now.
The way to fix that is to make it impossible for a firm to get so big that the government has to step in and pay the losses. You lie in the bed you make. Just like the rest of us, these firms should have to feel the pain of their losses.
Anything else means we are simply kicking the can down the road.
You forgot Amtrak.
Matt,
Everything that you have posted is correct and I agree. I just hope you do not waste your insight on this sight only and that you share your opinion with your political reps who may not support your commonsense facts.
You completely misunderstand what AIG did and how it got in trouble. It was phony reinsurance that nailed it to the wall and BROKERING the phony financial instruments packaged by the banks. They didn’t insure them.
Re USPS, has been relatively self supporting in the last few years (they were cut off from government subsidies) but have been killed by the precipitous drop in “real mail” because of the internet. Now they only carry a small percentage of what they used to have in first class, but still have huge amounts of advertising, etc. which has always been seriously underpriced because of political pressure from the mailers.
They do relatively well with parcel service, but it’s not enough to support the whole shebang.
Amtrak was always intended to be subsidized, for what reason I don’t know.
I once rode the train from NY to Orlando. What a horrible experience. Although I had a round trip ticket, I flew back. Despite the subsidies, no one ever said Amtrak had to make the trip bearable in return.
The trip cost almost as much as airfare, took 18 hours instead of 3, and was horribly miserable and uncomfortable.
what more can I say? they should have never repealed the Glass-Steagall Act – and now the $%#^& in Congress know why after bailing out Wall Street and the banking industry…
Insurance is insurance, banking is banking, and investing is investing. When they were allowed to mix the distinctions were too blurred. You wouldn’t want your dentist also performing proctologies!
Anyone who knows anything about insurance versus banking and finance, also knows that the two businesses are totally incompatible; always were and always will be. A crude example is as follows: Banks can loan a “multiple” of what it can prove in deposits and “assets”. As we have painfully learned, while deposits are hard to manipulate, “assets” are all over the board. They use “funny” asset valuations to lend a MULTIPLE of these assets in the form of loans, leveraging those assets in anticipation of future returns.
INSURANCE is regulated by the States (say AMEN to that!), and those regulations are strict, conservative, and REQUIRE that a
company’s policyholder reserves are SAFE, SECURE and LIQUID. Earnings are reliant upon SOUND underwriting results and CONSERVATIVE investment strategies. You can’t put “damn the torpedoes” Financial Services executives in charge of insurance operations and expect them to suddenly become the conservative managers the insurance industry requires. It was financial services management that ruined the financial services industry, drove the country to the brink, and WOULD HAVE taken the insurance industry down with it – if it had not been for STATE regulation that kept banking/finance greedy fingers off insurance company assets. Two entirely different industries serving two entirely different purposes – and that should have remained that way. Nuff said.
The merging of insurance operations and bank activities at the largest Wall Street banks did not create this mess. AIG “insured” the bad mortgages written by the largest banks. It’s not like AIG wrote the mortgage and then insured it themselves.
I do not agree with what happened on Wall Street last year nor do I like the idea that the American taxpayer got screwed (which in reality we didn’t because the government owns preferred stock in all the companies and each of the companies has made a return on the investment…the decision by the Bush administration to invest in these companies was GENIUS as it follwed the loans given by the government during the S&L crisis in which the government made money). But the sad reality is that the reinstatement of Glass-Steagall would not have stopped this. The banks, who make money by investing it’s depositors money by lending money for mortgages, businesses, capital projects, threw out the books on financial underwriting of borrowers, as a result the mortgages they had on their books failed which resulted in AIG’s failture because they “insured” the bonds backed by the bad mortgages.
So where in this sequence did Wells Fargo, Citi, JPM, Goldman etc write a mortgage and then insure it? No where. They wrote it, then packaged the mortgage with others as a bond, had S&P slap AAA on it and then sold the bonds to AIG. When the bonds defaulted AIG had to pay the money for the bond.
Sure the banks screwed us, and sure they are not lending any money right now (they have excess reserves of over $600 billion right now when they are normally at $1-$2 billion). Sure AIG screwed us and owes $65 billion to the US taxpayers (not the $180 like everyone thinks). And sure everyone thinks the government is spending money all over the place (unfortunately though, TARP, after making some money, is close to being fully paid back with interest, and of Barack’s stimulus in Feb 09, there has only been about $200B sent out). But guess what at the end of the day, without these institutions doing what they are doing and without the government bailing them out you wouldn’t be sitting in a cube pissing and moaning about how bad corporate America is.
If you want to piss and moan about how bad something is, lets look at the government sponsored entities like USPS, NFIP, Fannie and Freddie Mac. We see how well run these operations are, and we want the same morons in Washington running our health care. Forget how screwed we got by Wall Street, think about how screwed you’re going to get by the Feds.
uh, I guess I need to find a new dentist!.. But he did say he was filling a cavity.
Finally! something coming the “Planet Wash DC” that really makes sense – this law should never have been overturned; how many times do we need to be poked before we wake up and realize we’re getting hosed once again. I agree I do not want dental work done by a GP!!
Before you people go changing another wonderful thing Clinton(s), the messiah, and the Democrats did to I mean for America please consider this. NYC is the largest city in America. It is a socialist mecca jewel of America that we show case to visitors. Taxes are very very high because not much work really gets done in NYC. Ain’t outsourcing great. The way NYC survives is by getting a lot of money from other places via crazy laws we got passed. Please don’t ruin it now!
Any darn fool could have and should have anticipated the harmful results of the Graham-Leach-Bliley Act of Congress when it re-regulated any and all financial services industry into one melting pot.We now see those results, in part, but more harm is coming at us. For example, GLB required parity and retroprocity among the state with respect to Insurance Producer (agent-broker) licensing education etc., so for the past year or two we’re turning out agents that are woefully and inadequately trained for their profession. Another example of how government interference screws things up.
You sound very close to this (An AIG Employee)?
A few questions:
1) How did AIG determine the premium to charge for insuring these mortgages?
2) Did Goldman hold 33,000,000,000 in bonds at the time of the bailout?
3) Who other than Goldman Sachs sold the bonds for AIG? Who was the largest seller?
4) Did AIG have a fiduciary responsiblity to the following: Bondholders, Banks, Policyholders?
5) When will the money be paid back by AIG?
6) Why do they continue to quote at rates far less than the market?
7) If the “insurance” of mortgages was not insurance, than what was it?
Look forward to your responses.
We are not tellers and they are not agents. Bring back the day when brokers didnt have to deal with bankers management practices.
it seems both sides (on this site anyway) are in agreement. now we will see (on both sides of Congress) who is wholly owned by the banks, etc.
In enacting Gramm Leach Bliley Congress let the genie out of the bottle, giving rise to unbridled growth and concentration of economic power in the hands of a few. At least the prevuous firewalls kept business entities at a reasonable size and reduced the temptation for other financial services blending with insurance to create entities too big too fail Note that where there was insurance regulated by states in some of these behemoths, it remained well-managed. It was only in the new Wild west financial services sanctioned by GLBA that things got weird. Come to think of it, those were supposed to regulated by the Federal Gov’t, Hmmm…
I don’t see how that will contribute to unemployment. Those that now work for the banks will be needed by the (real) insurance industry to pick up the load the banks would have to shed.
Thank you Bill for bringing this issue in the proper context. State regulation should remain however there are several states at this time that are looking to implement federal regulation of the insurance contracts we sell. Why? Because they want to assist the insurance companies in reducing payments to the consumer. The problem is some states have attorney’s that are running the insurance divisions and these lawyers have absolutely no insurance knowledge or backround what so ever! The agents of this country need to send a message to congress that we need products for our clients that will provide the coverage and benefits our clients paid for. Not a policy full of exclusions and limitations. It is time to stand up for the rights of the insurance buying public. The agents of this country need to stand up for our clients and the consumers!
CJ, are you actually a fiction writer? Please give specific names and states in your accusations. This sounds like a novel by a former trial lawyer from several years ago.