Last night after my AIG posts I ducked out to a Reason Happy Hour. Naturally, everyone wanted to know what this would mean for the markets. With my crack talent for prognostication, I said, "Well, they will go up. Or they will go down. Though it's possible they might stay the same."
Is the Fed's move reassuring, because AIG is not going to wind its $100 zillion worth of trades? Or frightening, because what the hell kind of shape is the financial system in if the Fed is taking over insurance companies?
Damned if I know. But the markets seem a little unsettled . . . down 140 points as of this writing. Not catastrophic. But certainly not good.
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I disagree.
It means I don't get bought out and get to spend the winter bartending and skiing on my severance package until I can get into some random grad school. I suppose it's better for the old folks at the office though
Wait, you mean on the market? Hell if I know!
I think it means that the 'oughts are officially the suckiest decade.
What's the big deal? The AIG Bailout is only six (6) months in Iraq. And we all supported the glorious idea of invading Iraq, right? So what's the problem here, exactly?
There should be 'unearned profits' tax clawback on all the bonuses paid over the past 5 years to the top executives, bonuses in excess of 10 * avg. wage (~$45k, *10 = ~$450k).
Part of the way to reduce moral hazard is to increase the personal financial risk of 'private' decision makers. Clearly, Fannie & Freddie and, now, AIG, were not really 'private'. This should have been in place after the S&L bailout, or after the Long Term Credit Management bailout, or ...
There should probably also be a 'revenue tax' on all big financial institutions -- pushing for more, smaller firms. The consolidation of the 'Big 8' accounting firms was not good, nor will the consolidation of big financial firms be so good. Too much market power.
Finally, the Fed should be looking for ways to get more buyers buying real estate, now. Maybe matching funds for downpayments for good credit risks who want to buy a different place, larger or smaller. Just get more homes off the late payment lists -- by rewarding the previously virtuous, not those personal speculators.
From a comic point of view, the AIG bailout and the takeovers of Fannie Mae and Freddie Mac are wonderful. In his eight years of office Bush has eliminated our habeas corpus and sixth amendment rights, and is now seizing control of the commanding heights of our economy. Who would have imagined a Republican president so similar to Vladimir Lenin?
Since we as taxpayers now essentially own AIG, I want a business loss write-off on my 2008 taxes! I also want the geniuses who thought it was a good idea to let the industry police itself when it came to leveraging assets to no greater than a 10:1 ratio, sold into forced prostitution to help pay off some of their debt to society. Lehman CEO as a Thai lady-boy? Now that would be justice!
Finally, the Fed should be looking for ways to get more buyers buying real estate, now. - Tom Grey
How about making it cheaper? Oh, wait -- that IS what they're trying!
Astute analysis Megan. I hear they are carefully monitoring your thoughts in the bowels of the Treasury.
I hesitate to correct your notion that AIG has "$100 zillion worth of trades." First of all, they are not "trades" they are default insurance, as I'm sure you know. Second, experts peg the number at something like $48.2 zillion, which is an understandable error due to the whimsies of mark-to-market.
On the brightest side, every one of us is now an insurance mogul, just like Warren Buffett.
When using the DJIA as a proxy for "the market", it's useful to remember in this context that AIG is a Dow component.
On the brightest side, every one of us is now an insurance mogul, just like Warren Buffett.
I call first dibs on using the corporate jet this afternoon. I've got a hankering for Korean BBQ and know this great little out-of-the way restaurant in Seoul...
Who would have imagined a Republican president so similar to Vladimir Lenin?
Certainly no self-proclaimed libertarians who twice voted for George Bush, Jr.
brooksfoe quotes and writes: "Finally, the Fed should be looking for ways to get more buyers buying real estate, now. - Tom Grey
How about making it cheaper? Oh, wait -- that IS what they're trying!"
Time to dig out that "Mission Accomplished" banner and hang it on the front of the White House. I always knew it would come in handy.
Hey, just found out my dad had some AIG stock. So now I get to go around pontificating about how the Republickan gummint took my family's inheritance away at gunpoint! I surely loves me some right-wing ideology, I surely do.
The markets are in free fall. At this rate, the Dow could end the day below 10,000.
The AIG thing was supposed to prevent this. What's motivating the selloff? Panic? Does the market think that the AIG bailout will make things worse in the long run?
Somehow I get the feeling that we might have been better off taking the hit from AIG going under than having the Fed bail them out and sticking us with the bill, and still having the market sink.
Finally, the Fed should be looking for ways to get more buyers buying real estate, now.
The big problem is that nearly everyone that wanted a house in the last eight years bought one. We quite possibly had the lowest standards for home ownership in modern history. We took home ownership rates from around pre-bubble 65% and put it at 70%. With the pre-bubble financing rules in place, we're not going to get up to 70% again, and will likely decrease from the 68% currently back to the historic 65%. People can still buy zero down homes with seller-financed down payment assistance, with closing costs paid for by the seller. I'm not sure it gets all that much easier than this without going back to the bubble financing rules.
So, the only thing that's going to get these houses bought are fair prices based on historical affordability numbers. The sooner we get there, the sooner everyone can get on with their lives.
Why buy a house when you can just move into an empty one?
Happy Hour always sounds Reasonable. Is there a Non-Reason happy hour? Do you shoot tequila there?
"And we all supported the glorious idea of invading Iraq, right? So what's the problem here, exactly? "
We'll probably get a better return for our efforts in Iraq.
If you want to get more buyers into the residential real estate market, why not offer expedited green cards to foreigners who pass basic background checks (e.g., to make sure they aren't wanted by Interpol) and are willing to invest, say, $500k in residential real estate? The foreigners' investments can be channeled through residential REITs that meet certain criteria -- that they don't have more than X% of their assets in any one state, etc. That way, wealthy foreigners won't just further inflate the Manhattan condo market in exchange for a quick green card.
Watching the ticker here, it's just confirming my feeling that this is a great time to buy stocks!
Of food and ammunition, that is.
Deflation is the word of the day.
Morgan Stanley and Goldman stocks are now being crushed.
The SEC may have to outlaw shortselling altogether, and then selling.
wait, i thought the gov't couldn't do anything right. isn't that why we don't have national health care?
if gov't is so bad, why are we trusting it to fix the market?
privatize the upside, socialize the downside risk. nice work if you can get it.
i love how the banks are too big to fail, but the schools never are.
Gentlemen, I beg you do not be so practical. At last we have data on how the market reacts to two major events which it did not (and probably could not) begin to discount in advance - AIG and Merrill Lynch+Bank of America. We can at last address the question of how 'black swans' fit into perfect market theory.
Well it would drive ME to drink, too.
boy, this is cracklingly insightful
Your consumption of alcohol with a bunch of doughy, spotty, trustfund ponces will have no impact on the markets.
You should consider taking a remedial writing class instead of abusing the few brain cells you have.
"Well, they will go up. Or they will go down. Though it's possible they might stay the same."
And just last week, you told us stock prices would never change.
Barry writes:
Yet another MBA gone to seed.
You're about to get yet another boning from the merry pirates of the Good Ship Bush - to the tune of a trillion dollars by the time it's all over - & this time you're going to find it hellishly hard to rationalize away.
I hope for your sake you weren't stupid enough to actually vote for these criminals. They're about to ruin your economy for many many years to come ... & unless someone in America finds a spine, they'll get away with it.