1929crash Posted February 7, 2009 Share Posted February 7, 2009 Fed Overwhelmed, Calls Emergency Consultants To Untangle AIG AIG is just one piece of the derivatives mess. Nonetheless AIG alone is so complex no one can figure it out. In response, the Fed Calls Emergency Consultants To Untangle AIG. “I don’t think the Fed has seen anything like this,” former New York Fed general counsel and AIG executive Ernest Patrikis said in an interview. “AIG just got so complex in terms of private corporate matters that you just need that outside expertise.” Patrikis is now with the law firm of White & Case in New York. In addition to hiring consultants, the Fed and the Treasury have retained Wall Street firms to help manage more than $2 trillion in bailout and emergency-loan programs. Pacific Investment Management Co. runs a $259 billion program to backstop the commercial-paper market. BlackRock Inc., Goldman Sachs Asset Management, Pimco and Wellington Management Co. are managing the Fed’s purchases of up to $500 billion of mortgage-backed securities. JPMorgan Chase & Co. oversees a separate program under which the Fed may lend up to $540 billion to support money market mutual funds. Last month, the House passed conditions for releasing the remaining $350 billion of financial-rescue funds, including a requirement that the Fed give details of the contracts and selection process for the mortgage-backed securities purchase program’s managers. The Senate isn’t planning to take up the legislation. BlackRock is also managing and selling assets acquired in the Fed’s $29 billion rescue of Bear Stearns Cos., as well as securities called collateralized debt obligations the central bank purchased in the bailout of AIG, the largest U.S. insurer by assets. http://globaleconomicanalysis.blogspot.com...-emergency.html Quote Link to comment Share on other sites More sharing options...
uncle rogi Posted February 7, 2009 Share Posted February 7, 2009 bailing out AIG was the final signpost that the road to the inflationary endgame had been taken, as the whole mess being taken on the back of the US goverment and thus the dollar will result in trillions being pumped into this black hole. hence "fed overwhelmed by complexity". Quote Link to comment Share on other sites More sharing options...
Y-QUERK Posted February 7, 2009 Share Posted February 7, 2009 wtf are you guys doing awake?? GO to sleep. Quote Link to comment Share on other sites More sharing options...
Injin Posted February 7, 2009 Share Posted February 7, 2009 wtf are you guys doing awake?? GO to sleep. ? Quote Link to comment Share on other sites More sharing options...
Frank Hovis Posted February 7, 2009 Share Posted February 7, 2009 I used to do work for AIG. It was one of the most unintelligently run organisations I had seen. They had a set of standad reporting rules and everything had to fit into these little boxes with very little analysis, certainly not enough to understand their expsoures or the riskiness of the business. Other companies I worked for had senior underwriters whose entire job was going round doing a detailed check of all significant underwriting so that there was a real awareness of the risks. But even they all got caught out by Financial Insurance, as that is just too complex for your standard London market underwriter to understand. Quote Link to comment Share on other sites More sharing options...
Patfig Posted February 7, 2009 Share Posted February 7, 2009 The outcome may of course be rather simple Quote Link to comment Share on other sites More sharing options...
Methinkshe Posted February 7, 2009 Share Posted February 7, 2009 The outcome may of course be rather simple As in: if an when they manage to get to the bottom of all the paper and untangle the web, they will find at the bottom a big pile of......NOTHING! Just a giant ponzi scheme. Quote Link to comment Share on other sites More sharing options...
mooncat69 Posted February 7, 2009 Share Posted February 7, 2009 Too complex == Fraud? Quote Link to comment Share on other sites More sharing options...
Patfig Posted February 7, 2009 Share Posted February 7, 2009 As in: if an when they manage to get to the bottom of all the paper and untangle the web, they will find at the bottom a big pile of......NOTHING! Just a giant ponzi scheme. Said with rare insight Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted February 7, 2009 Share Posted February 7, 2009 Too complex == Fraud? If it's that complex it's fraud it also means a jury won't understand it meaning they'll get away with it. Perhaps we have a new saying too big to fail, is now joined by too complex to fail? Quote Link to comment Share on other sites More sharing options...
Patfig Posted February 7, 2009 Share Posted February 7, 2009 If it's that complex it's fraud it also means a jury won't understand it meaning they'll get away with it.Perhaps we have a new saying too big to fail, is now joined by too complex to fail? Too complex to be allowed to survive. Complexity is not defense Quote Link to comment Share on other sites More sharing options...
LuckyOne Posted February 7, 2009 Share Posted February 7, 2009 If it's that complex it's fraud it also means a jury won't understand it meaning they'll get away with it.Perhaps we have a new saying too big to fail, is now joined by too complex to fail? Lehman was a pretty complex and systemically important business. It's failure was traumatic but it didn't bring down the system. AIG's lightly regulated, complex derivatives business (AIG FP) should be carved out from the well regulated insurance part of AIG's business and forced to fail while the sound, well regulated business should be allowed to survive. We are getting closer to the day when we have a new saying : "Too big to be saved" ..... Quote Link to comment Share on other sites More sharing options...
A.steve Posted February 7, 2009 Share Posted February 7, 2009 Perhaps we have a new saying too big to fail, is now joined by too complex to fail? It became my considered opinion in early 2007 that some major corporations had elected to engage in projects that could only be justified as being 'too complex to be refuted' - but which stood negligible chance of returning any profit. For me this was the warning bell - long before Northern Rock. I talked to friends and even came up with the line "Banks might go bankrupt - or, erm, whatever banks do when they can't pay their debts." Perhaps all that's required is to produce a mess that takes longer than the statute of limitations to unpick... that way, if the scam is sufficiently audacious, it won't be prosecuted since it will be past the date prescribed by the statute of limitations. Quote Link to comment Share on other sites More sharing options...
A.steve Posted February 7, 2009 Share Posted February 7, 2009 AIG's lightly regulated, complex derivatives business (AIG FP) should be carved out from the well regulated insurance part of AIG's business and forced to fail while the sound, well regulated business should be allowed to survive. I fail to see why that would be more ethical than letting the entire business fail and auctioning its assets. Quote Link to comment Share on other sites More sharing options...
LuckyOne Posted February 7, 2009 Share Posted February 7, 2009 I fail to see why that would be more ethical than letting the entire business fail and auctioning its assets. I was thinking about cost to the taxpayer and ease of execution. My liberterian bent agrees with you and supports just letting the whole thing fail. In this environment, I am willing to relax my stance if the insurance customers can be protected while the AIG FP customers bear the brunt of the failure of the AIG FP business which is threatening to bring down the entire company. AIG FP is at the root of AIG's problems and is probably too large and complex to save at a sensible cost. The basic insurance business is a going concern and can continue to run on its own if it is freed from the shackles of AIG FP. Quote Link to comment Share on other sites More sharing options...
uncle rogi Posted February 7, 2009 Share Posted February 7, 2009 the point that bob chapman (and others) made about this over a year ago....was.. allowing AIG to fail would have resulted in a domino effect crash of the entire global financial system, bailing AIG out will result in the dollar inflating to the point that the entire global financial system crashes... Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 7, 2009 Share Posted February 7, 2009 complex, and yet a CDS is very simple. you receive a premium for the chance to payout if an event occurs, and keep the premium if it doesnt.. although its not insurance for some reason. AND you pass on your own credit rating to the covered risk. SO as AIG is bust, cant see how any of the financial deals they backed can remain AAA. So, complexity is added to hide the fact. this is normally to cover a fraud or other crime. course, wall street people are 100% whiter than white, what with paying for their own credit rating, self regulation and glossy, white teeth. Quote Link to comment Share on other sites More sharing options...
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