Now, AIG's bailout is going up to $150 billion dollars - and their loan terms are being extended. Plus, their interest rates have been cut by 2/3rds.
Clearly, paying 8.5 interest on taxpayer loans was just too hard for them. Every subprime borrower in America? Feel free to ask for that deal in your next bankruptcy hearing.
Money keeps disappearing into AIG - under the new plan taxpayers will own 79.9% of the equity AIG has - and we still have little understanding of what this giveaway is doing, or how it works.
It's not a giveaway, it's just a loan... Yes, but these loans are guaranteed by collateral that has yet to be disclosed.
Per Yves Smith - the orginal loans were collateralized against everything AIG had, so these additional loans are collateralized by....?
Bloomberg has picked up the ball on this and is suing the fed to disclose what collateral exists for the many loans it is forcing consumers to make.
I'm with CJR and Dean Starkman:
We hope a second suit on AIG comes soon.
AIG's central role in the Credit Default market means their implosion will do serious damage to financial firms who are tied to them.
While a true picture of where the tottering firms are at may do even more damage - you would think we'd be better off understanding what is actually wrong before we start sending our money on suicide missions.
3 comments:
The AIG bailout is small change and means nothing to the Fed. The Fed is transparent in that it is subject to the oversight of Congress. Is twice a year not fast enough? The intent of Congress in shaping the Federal Reserve Act was to keep politics out of monetary policy. Legislation requires that the Federal Reserve reports annually on its activities to the Speaker of the House of Representatives.
http://nomedals.blogspot.com
It isn't so much the current size of the AIG bailout that concerns me.
It's the fact that it keeps increasing - for undisclosed reasons.
AIG may well end up costing well more than $150 billion and the fact that part of its bailout could well be interpreted as a bailout of its creditors makes true transparency a pressing concern.
Bernanke's twice a year visits to Congress are all well and good in normal times - but things are obviously not normal.
The earliest he's required to show up would be January 1 of 2009.
At the speed things are changing - an awful lot of decisions will be made before then.
As some of those decisions will be all but irreversible, finding out about those decisions after the fact may not be enough.
I'd agree that keeping politics out of monetary policy is a laudable goal - but we've already seen a Treasury Secretary waste valuable time resisting capital investment in banks for ideological reasons.
Politics will always be part of monetary policy.
Transparency (with regular updates as Sec. Paulson assured us we would have) that keeps a reasonable pace with the speed of decision making will at least allow investors and policymakers to make informed choices.
I've mistakenly confused Paulson's statement about the TARP with the Fed's lending program.
CJR's Dean Starkman reminds me they are two separate things.
But he also re-states my point better than I did:
"Nov. 10 (Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral."
Unbelievable. But true!
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