
Fed Readies A.I.G. Loan of $85 Billion for an 80% Stake - iamelgringo
http://www.nytimes.com/2008/09/17/business/17insure.html?hp
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fusionman
This is really starting to bother me. These giant financial institutions make
tons of money by taking RISKS. When things go well they make lots of money,
people get big bonuses and the rest of society gets to read about "Talented
Bankers and Their $50mil Bonuses" on the latest cover of Forbes. When things
don't go well, the government gives them a loan to bail them out or else our
economy will collapse. What choice do we have?

I don't know the answer here, but I don't like this.

At least in Venture Capital and startups, we understand that risk is risky,
and we take the good with the bad.

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tptacek
Doesn't this deal basically amount to the orderly liquidation of AIG?

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fusionman
It would appear so. The government isn't an investment fund, so I am curious
as to what their exit strategy is for this "investment". I'm sure they'll come
out OK. I wonder where their profit (assuming there is a profit) will actually
go.

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shawndrost
"[Credit default swaps] are not securities and are not regulated by the
Securities and Exchange Commission. And while they perform the same function
as an insurance policy, they are not insurance in the conventional sense, so
insurance regulators do not monitor them either."

This whole affair is like looking through hosed legacy code and finding
comments like "I have no idea why this dirty, dirty hack works".

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nazgulnarsil
thomas jefferson warned against the pillars of finance being allowed to
conglomerate into these giant institutions we have today.

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dfranke
Citation, please? I think you're thinking of his opposition to the national
bank, on constitutional grounds. I don't think Jefferson or his contemporaries
ever dreamed of the existence of something like Lehman or AIG. Banking in his
day was a simple concept: borrow money at a low interest rate, lend it at a
high one. If we still stuck to that model, we wouldn't be in this mess.

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nazgulnarsil
banking in his day was NOT a simple matter: "Our public credit is good, but
the abundance of paper has produced a spirit of gambling in the funds, which
has laid up our ships at the wharves as too slow instruments of profit, and
has even disarmed the hand of the tailor of his needle and thimble. They say
the evil will cure itself. I wish it may; but I have rarely seen a gamester
cured, even by the disasters of his vocation." --Thomas Jefferson to
Gouverneur Morris, 1791. ME 8:241

"I own it to be my opinion, that good will arise from the destruction of our
credit. I see nothing else which can restrain our disposition to luxury, and
to the change of those manners which alone can preserve republican government.
As it is impossible to prevent credit, the best way would be to cure its ill
effects by giving an instantaneous recovery to the creditor. This would be
reducing purchases on credit to purchases for ready money. A man would then
see a prison painted on everything he wished, but had not ready money to pay
for." --Thomas Jefferson to Archibald Stuart, 1786. ME 5:259

