Hello all,
AIG rescue fails to boost investor confidence
$85 billion plan seen as stopgap; uncertainty over assets weigh on markets
http://www.msnbc.msn.com/id/26758157/
ANALYSIS
By John W. Schoen
Senior producer
MSNBC
updated 1 hour, 17 minutes agoindow.DateTime) { var dt = new DateTime(); pdt = dt.T2D(pdt); if(dt.GetTZ(pdt)) {n.innerHTML = dt.D2S(pdt,((".toLowerCase()==`false`)?false:true ));} } } UpdateTimeStamp(`633572850810300000`);
The government’s rescue of insurance giant AIG prevented a deeper financial catastrophe but failed to restore confidence Wednesday as investors continued to flee the stock market.
Part of the reason is that the unprecedented move late Tuesday is only a stopgap measure in the ongoing unwinding of a credit bubble that continues to weigh on the financial markets and the economy.
The Fed`s decision to extend an $85 billion lifeline to AIG was intended to prevent the insurance giant`s cash squeeze from spreading to the hundreds of institutions, investors and governments it does business with.
The immediate concern Wednesday was whether the Federal Reserve’s $85 billion loan to AIG would be enough to stop the company`s bleeding.
Continued uncertainty about the value of AIG’s holdings left some on Wall Street wondering if the capital infusion is big enough to turn the company around.
Investors began selling at the opening bell Wednesday, and losses accelerated in the final hour of trading, when the Dow, of which AIG is a component lost over 300 points. AIG lost another 45 percent Wednesday to close at $1.70 a share, compared with more than $20 last week and nearly $50 as recently as June.
The blue-chip index already is down 7 percent this week.
AIG’s problem stemmed from uncertainty about the value of a class of investment known as credit default swaps — a kind of insurance against a debt going bad.
The explosion of this paper — some $60 trillion of these swaps are held by banks, brokerages, hedge funds and other financial institutions — is clogging the credit markets and lies at the core of the crisis now engulfing the entire financial system.
“If the markets turn against them and those assets lose value, they’ll have to post additional collateral,” said Carlos Mendez, senior managing director with ICP Capital, referring to AIG. “The majority of that $85 billion will go out the door for collateral calls and other more immediate needs for cash.”
Officials involved in the the rescue said it’s unlikely AIG will need more cash.
“There could be a greater need for capital, but the valuations that were done assumed a lot of worst-case scenarios. Some of the holding companies and the noncore insurance companies were given very, very low valuations,” said Eric Dinallo, superintendent of the New York state Insurance Department.
“So I think that while it is possible and there may be continued degradation and it would require more capital, the federal government has put into place enough to handle those transactions,” he said.
Dinallo added that, with breathing room to sell parts of its business in a more orderly fashion, AIG can get a better price for those assets than if it had to sell under pressure. Other insurance companies already have expressed interest in buying pieces of AIG, he said.
Here is a wikipedia biography excerpt on Phil Gramm. If you don`t trust wikipedia don`t complain. Provide any more legitimate sources that disprove it:
http://en.wikipedia.org/wiki/Phil_Gramm
While advising the McCain campaign, Gramm was being paid by UBS to lobby Congress about the U.S. mortgage crisis. During this time, "the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages."[10] According to Politico.com, Gramm had input on McCain`s March 26, 2008 policy speech on the mortgage crisis.[10]
In a July 9, 2008 interview explaining McCain`s plans in reforming the U.S. economy, Gramm downplayed the idea that the nation was in a recession, stating, "You`ve heard of mental depression; this is a mental recession," and "We have sort of become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline."[11]
Gramm`s comments immediately became a campaign issue. McCain`s opponent, Senator Barack Obama, said, "America already has one Dr. Phil. We don`t need another one when it comes to the economy. ... This economic downturn is not in your head."[12] McCain strongly denounced Gramm`s comments.[13] Gramm later attempted to clarify his comment, explaining that he had used the word "whiners" to describe the nation`s politicians rather than the public, stating "the whiners are the leaders."[14][15] In the same interview, Gramm stated, "I`m not going to retract any of it. Every word I said was true."
On July 18, 2008 Gramm stepped down from his position with the McCain campaign. However, he often accompanies McCain during the campaign, and continues to be an unofficial adviser on economic and financial matters.[16]
Korbel
AIG rescue fails to boost investor confidence
$85 billion plan seen as stopgap; uncertainty over assets weigh on markets
http://www.msnbc.msn.com/id/26758157/
ANALYSIS
By John W. Schoen
Senior producer
MSNBC
updated 1 hour, 17 minutes agoindow.DateTime) { var dt = new DateTime(); pdt = dt.T2D(pdt); if(dt.GetTZ(pdt)) {n.innerHTML = dt.D2S(pdt,((".toLowerCase()==`false`)?false:true ));} } } UpdateTimeStamp(`633572850810300000`);
The government’s rescue of insurance giant AIG prevented a deeper financial catastrophe but failed to restore confidence Wednesday as investors continued to flee the stock market.
Part of the reason is that the unprecedented move late Tuesday is only a stopgap measure in the ongoing unwinding of a credit bubble that continues to weigh on the financial markets and the economy.
The Fed`s decision to extend an $85 billion lifeline to AIG was intended to prevent the insurance giant`s cash squeeze from spreading to the hundreds of institutions, investors and governments it does business with.
The immediate concern Wednesday was whether the Federal Reserve’s $85 billion loan to AIG would be enough to stop the company`s bleeding.
Continued uncertainty about the value of AIG’s holdings left some on Wall Street wondering if the capital infusion is big enough to turn the company around.
Investors began selling at the opening bell Wednesday, and losses accelerated in the final hour of trading, when the Dow, of which AIG is a component lost over 300 points. AIG lost another 45 percent Wednesday to close at $1.70 a share, compared with more than $20 last week and nearly $50 as recently as June.
The blue-chip index already is down 7 percent this week.
AIG’s problem stemmed from uncertainty about the value of a class of investment known as credit default swaps — a kind of insurance against a debt going bad.
The explosion of this paper — some $60 trillion of these swaps are held by banks, brokerages, hedge funds and other financial institutions — is clogging the credit markets and lies at the core of the crisis now engulfing the entire financial system.
“If the markets turn against them and those assets lose value, they’ll have to post additional collateral,” said Carlos Mendez, senior managing director with ICP Capital, referring to AIG. “The majority of that $85 billion will go out the door for collateral calls and other more immediate needs for cash.”
Officials involved in the the rescue said it’s unlikely AIG will need more cash.
“There could be a greater need for capital, but the valuations that were done assumed a lot of worst-case scenarios. Some of the holding companies and the noncore insurance companies were given very, very low valuations,” said Eric Dinallo, superintendent of the New York state Insurance Department.
“So I think that while it is possible and there may be continued degradation and it would require more capital, the federal government has put into place enough to handle those transactions,” he said.
Dinallo added that, with breathing room to sell parts of its business in a more orderly fashion, AIG can get a better price for those assets than if it had to sell under pressure. Other insurance companies already have expressed interest in buying pieces of AIG, he said.
Here is a wikipedia biography excerpt on Phil Gramm. If you don`t trust wikipedia don`t complain. Provide any more legitimate sources that disprove it:
http://en.wikipedia.org/wiki/Phil_Gramm
While advising the McCain campaign, Gramm was being paid by UBS to lobby Congress about the U.S. mortgage crisis. During this time, "the mortgage industry pressed Congress to roll back strong state rules that sought to stem the rise of predatory tactics used by lenders and brokers to place homeowners in high-cost mortgages."[10] According to Politico.com, Gramm had input on McCain`s March 26, 2008 policy speech on the mortgage crisis.[10]
In a July 9, 2008 interview explaining McCain`s plans in reforming the U.S. economy, Gramm downplayed the idea that the nation was in a recession, stating, "You`ve heard of mental depression; this is a mental recession," and "We have sort of become a nation of whiners, you just hear this constant whining, complaining about a loss of competitiveness, America in decline."[11]
Gramm`s comments immediately became a campaign issue. McCain`s opponent, Senator Barack Obama, said, "America already has one Dr. Phil. We don`t need another one when it comes to the economy. ... This economic downturn is not in your head."[12] McCain strongly denounced Gramm`s comments.[13] Gramm later attempted to clarify his comment, explaining that he had used the word "whiners" to describe the nation`s politicians rather than the public, stating "the whiners are the leaders."[14][15] In the same interview, Gramm stated, "I`m not going to retract any of it. Every word I said was true."
On July 18, 2008 Gramm stepped down from his position with the McCain campaign. However, he often accompanies McCain during the campaign, and continues to be an unofficial adviser on economic and financial matters.[16]
Korbel
