Tag: American International Group

Banking On AIG


The U.S. Treasury’s sale of its remaining stake in American International Group Inc (AIG.N) will leave taxpayers with a profit of nearly $23 billion – more than the next three most successful bailouts combined.

The government’s profit on the deal is a turnabout from what was one of the most reviled bailouts of the financial crisis.

The 2008 rescue later spurred a senator to suggest top executives at the insurer consider suicide. The Government Accountability Office at one point suggested there was a real chance taxpayers would never be repaid in full.

Yet they were, with $22.7 billion in total returns, including the proceeds of the sale Treasury launched Monday night, AIG said. The government provided AIG with some $182 billion of support.

Before we start dancing in the streets, let’s clarify a few things. We’re still about $38 billion in the hole on TARP, most of the outstanding sums being those lent to the automakers. A lot of the AIG money was actually money paid to European banks that had CDS’s with AIG. Moreover, some losses are not being counted here. How much tax revenue did the government lose because of a stinky economy created by the bailout culture? How much money did we all lose because of that? If the bailouts hurt our economy, on net, to the tune of one tenth of one percent, that would easily wipe out any “profit” from TARP. You might still argue it was necessary as the lesser of two depressions, but let’s not pretend TARP made us all rich.

Most importantly, the money was never the big problem. The big problem was and remains the moral hazard. A big signal has been sent to the big banks that the United State government will bail them out of trouble. Do you think that’s going to cause them to invest more conservatively? And the big banks used that money to consolidate the banking industry, with the Big Five gaining more market share by using the loaned money to buy banks rather than fix the mortgage market. I don’t think it’s all that remarkable that banks managed to turn a profit with monopoly money loaned to them without restriction by the government.

The big risk? This time we are only (so far) out $38 billion. Next time it may be far far worse. And every time someone celebrates TARP “turning a profit”, they should be reminded of the precipice we have put our economy on. If we do end up turning a profit on TARP, it will be because of luck, not because it was good policy.

Ain’t that a bitch?

Guess who so far has ended up being the biggest beneficiary of the Dodd-Frank financial regulation law? For those of you not familiar with Dodd and Frank, here is some background. Chris Dodd was a senator from my state, Connecticut, and one of the instrumental people behind the previous laws and government push to force lending to high risk people in his political career, ending up as the banking committee chairman (better to rob us blind!) right at the time the crisis happened. His meddling, in the name of “social justice”, but always while larding his friends and donors with government largesse, made him an instrumental player in setting the stage for the practices that led to first the housing and the following economic collapse back in 2007/2008. Dodd also was the guy that put regulation in the “must have” bailout plan to protect the big wigs and their bonuses at AIG. He was mired in one scandal after another, and basically decided not run for reelection in 2010, opting instead IMO to go steal people’s money doing something else.

Barney Frank, is a representative from Massachusetts. In addition to having the distinction as the only congress critter that dated a guy that run gay prostitution ring from their shared residence, he was also the head architect behind the scandalous and criminal repackaging of high risk loans, to make them palatable, through the government owned and run, but mysteriously categorized as private sector entities, Freddie Mac/Fannie Mae, and a key player in protecting Freddie & Fannie from any serious scrutiny – another one of his lovers was put in charge of running one of those – by accusing those pointing out the problem of being racists, until the whole house of cards came tumbling down.

As a reward for their roles in the horrible crisis and economic collapse it cause, these two where allowed, well they demanded, to be given the reigns of power, to produce the new series of regulations which they told us would prevent another crisis like the one their previous involvement caused. As expected, they didn’t do anything to end either the idiotic practice of having governments force lending institutions to give loans to high risk people looking for a loan, or to address the massive problems at Freddie/Fannie, but created a slew of regulation in a bill with over 2300 pages of bullshit, designed to allow people in government to increase their ability and power to pick which businesses would be winners and whom the losers. In return for some large donations, of course. So, don’t be surprised that the clock is already ticking on the next economic implosion, courtesy these two morons.

But back to the original question: guess how is making out real good because of the Dodd-Frank’s financial regulation law? Well, the very people involved in writing the rules then turning into evil lobbyists, of course.

It may not prevent another bailout or protect consumers from dangerous financial products, but the Dodd-Frank financial regulation law — now one year old — has already benefited one group of people: the government officials who wrote and implemented the law before cashing out as lobbyists or consultants for Wall Street, hedge funds and big banks.
The top staff lawyers in charge of crafting the legislation in both chambers of Congress have both left Capitol Hill for K Street, as has a Securities and Exchange Commission staffer who helped implement the law. This is “private-sector job creation, Obama-style,” as blogger Ira Stoll drolly notes.

The Great Wall Street Cashout is another example of how President Obama’s agenda of bigger government — and congressional Democrats’ style of leaving the key details up to executive-branch regulators — accelerates the revolving door and breeds crony capitalism.

Dodd-Frank was supposed to prevent future bailouts, tamp down on excessive risk taking by financial institutions and, through a new agency called the Consumer Financial Protection Bureau, protect regular people from predatory lenders or harmful and complex financial products.


Seriously. Why is this news? It’s of the “Dog bites man” variety. The very regulators engaged in writing this piece of garbage leave government, become lobbyists, and then rake in the cash? Who would have thunk that!

I can’t blame these guys for pulling this stunt, but I certainly can go off on the next leftist asshole that tells me how evil capitalism or Wall Street is. These government scumbags and their games make those guys look like pikers. Remember, Wall Street, or for that matter any other business/economic power center, can only do the things people in government write laws to make them do. We got more of the same in the healthcare takeover by government bill too. If we really wanted to curtail these kinds of bad practices, what we should have done is removed the power from government, by removing as much involvement by them from the equation. Instead we did exactly the opposite. Go figure.