The Goat Pen

I keep trying to tell people that we were looking at a full global hell hole in 2008. Really, every developed nation was about to be royally fucked.

It's a shame we don't have an "It's A Wonderful Life" angel that can show everyone that alternate reality. The banks took advantage of the lifelines that were thrown to them, but don't get it twisted...they all were happy to see those life lines thrown. Even the well capitalized banks were threatened because the rip tide from the fall of Citi and then B of A would have pulled Goldman and JP Morgan out to sea too.

Don't mistake this slow deleveraging as anything close to what was happening in 2008. It was armageddon at the front door then. Seriously.

AIG is a different matter, IMO.

AIG was the center of the banking universe because of their CDS exposure. If they went down, they take about 6 of the huge banks with them. Totally take them off the face of the earth.

My biggest problem with Obama/Paulson/Geithner out of all of this was deciding to fully honor all of the payouts by AIG. They should have paid out $0.65 on the dollar and no bank (or hedge fund) would say shit because they were looking at a total capital wipeout if they got nothing. I don't know why the administration decided to lose their balls (didn't want to shit on their hometown?) and pay out in full, but it was a total lack of managerial courage to do so.

Maybe Merril would have been a casualty, but Goldman could have absorbed the hit. It would have been painful, but they could have. Why not just let AIG go through bankruptcy and help the banks in trouble directly from losses of the default? Because bailing out AIG hid the fact, at the time, that we were bailing out two Wall Street firms and a handful of foreign banks. That would have been a political nightmare.

Maybe Merril would have been a casualty, but Goldman could have absorbed the hit.

Not according to a friend (and former student) at Goldman. The bankruptcy of AIG would have cost so many financial institutions that it would have been extremely hard for Goldman to also survive without declaring bankruptcy. Worse, AIG handled most state pensions. States, which already were having problems would have been in a worse position.

I think they could have survived; but, even if your friend is right, let the TARP help Goldman directly rather than through AIG. Goldman could more easily pay TARP money back in future years than AIG. In fact, AIG will never pay it back. Which brings me to another point. The banks involved in AIG have a greater advantage than other banks who received TARP directly because the obligation to pay back is with AIG and not them. Makes my skin crawl every time Goldman's earnings come out.

The problem with AIG was it's multiplication effect. That's why you needed to go through AIG. I agree with Bkln that there should have been better monitoring, regulation and that it shouldn't have been in full. Sadly, in retrospect, AIG bailout wasn't the problem, it was the full extent of how they bailed them out (actually, it was the lack of regulation that allowed them all to get in that position in the first place)

Yep. Sardis, you are neglecting the psychological and domino effects of watching bank after bank take a knee. A run on banks does not only cripple the undercapitalized, it impacts the ones that are "well" capitalized because it paralyzes other business lines. The concept of contagion is not solely about the capital, but also about the belief behind the capital structure. That's why the US guaranteed deposits up to $250K (raising it from the $100K). It really meant nothing, overall, but the government did it to add some psychological support to the consumer.

If Citi (which was struggling before the crisis and the Arabs bailed them out) went down, the fear that would have engendered would have impacted the big "stable" banks, as well as banks that were not playing heavily in the derivative markets (PNC, Wachovia, etc). Spacer's student is correct. Goldman was the strongest on the street (still is), but they did not want to see AIG default on the CDS instruments because hell was on its way if that happened. They needed the world to feel that banks, overall, were not going anywhere. It was in everyone's (banks, that is) best interest to save as many institutions as they could. That's why the largest 10 (or so, memory failing) banks all agreed to take TARP money from the govt, even if they were not in direct trouble with a bunch of toxic shit on their balance sheets.

How come Goldman folks claimed they were hedged against an AIG downfall throughout this process. I'm confused here.

Anyway, AIG still owes about $38 billion. Since we learned the last few years that the fed has the power to force financial marriages, and since they have "saved" certain institutions from financial oblivion through the propping up of AIG, and since now things are stabilized and these firms are making money, they need to make these "saved" banks buy-out the Treasury's interest at face value.

I am certainly not against a payment repayment plan, although my bigger desire would be to separate banks from the hedge

I agree, if we can't stomach letting them fail without a bailout, then break away the traditional banking from the asshats who never seem to suffer the consequences of their douchbaggery.

Article in the Times this morning.

http://www.nytimes.com/2012/08/01/opini ... .html?_r=1

Of course these banks are crying for more regulation rather than breaking them up. There is never any pain for them in breaking rules and regulations. Dodd Frank only puts addtional burdens on traditional banking and does little to rein in the investment side.

Watching a natgeotv doc on Waco. My opinion, what needed to be done was done. The guy was a loon who was given everything he asked for yet didn't keep his word. After 51 days of being played the FBI really didn't have a choice. He killed those kids, not the feds.

Uh oh, here comes eCat...

Sardis, on the GS question you asked a few posts back, I'll try to tackle that tonight if I get out of my office before the calendar turns

Heh @ Brook, I thought the same thing as I posted that.

I wish the ATF would storm Rat's house and kill him.

They won't. Half of your family lives here. They make good pancakes.

Jungle Rat wrote:Watching a natgeotv doc on Waco. My opinion, what needed to be done was done. The guy was a loon who was given everything he asked for yet didn't keep his word. After 51 days of being played the FBI really didn't have a choice. He killed those kids, not the feds.

not even close to the right take

One of my students swore Obama was going to take his gun when he was elected. Told him that watching Fox makes you think stupid shit like that. His response, they better not come for his gun. He'll start firing.

A even dumber statement. Give them your gun and go get another one. That's not something to die for.

There was a lawyer in northwest Louisiana. There was a dispute between Louisiana and Arkansas overall but specifically about where this lawyer's land boundaries were located. He chased some people off his land at gunpoint. Of course, as a result 2 Arkansas sheriffs came out and the lawyer defended his right to his land.

Dead.

Study: Romney tax plan would shift burden toward poor

http://money.cnn.com/2012/08/01/news/ec ... -tax-plan/

Of course, Romney called it just a liberal group, but he praised the group during a debate against Pawlenty.

I don't know much about Gore Vidal but after listening to him for about 20 minutes with Terry Gross I wish I did.

Whether his viewpoint is right or wrong, America needs more intellectuals willing to lead from an idealogical standpoint and a helluva lot less asshats trying to rig the system to get wealthy

In other words, more Gore Vidals, fewer Rick Perry's.