$85 Billion Bailout
Our tax dollars 'hard at work'!
The government has agreed to bail out the 'world's largest insurer' - AIG - for $85 billion.
We don't get it!
AIG paid almost a billion dollars to have their name on the jersey of English soccer giants Manchester United a few years ago.
Then the company goes on to make more shitty business decisions AND then they get 85 BILLION as a hand out from Uncle Sam?
Will the U.S. tax payers get the profits of AIG since we're bailing them out?
Life is so unfair for the regular guy!
This was probably for the best, though. Right?????
[Image via WENN.]
That's What Friends Are For
A Worthwhile Cause
if you knew ANYTHING at all about the economy or business, you'd know that first of all, AIG is a financial insurer, not health care or car insurance. and also, without them being bailed out, our economy would have basically died. yesterday wall street went down over 500 points when the Lehman Brothers Investment Bank declared bankruptcy and was bought by Bank of America. without these corporations, there would be no economy! the tax dollars that you claim are going to a worthless cause are keeping the economy up and running, and keeping the US, and basically the entire world, from slipping into another Great Depression. before you start badmouthing these decisions, take a few microeconomics courses and learn something.
It's the necon way, privatize profits and socialize losses. God help we help the poor and less fortunate but welfare for corporations is just fine.
I actually am torn about AIG being bailed out because if we don't, not only does it hurt the U.S., but it'll have worlwide ripples. GRRR
In all honesty though, if the government didn't bail them out, we'd all still lose. Do you know how many people across North America have investments, insurance policies, pensions, and things like that with AIG? My grandma has her life insurance with them - years and years of investing money into that policy - and it was about to go south. I don't think the government had a choice - it's a lose-lose/win-win no matter which way you look at it.
If AIG had gone under the world economy would have suffered greatly. Not to mention all the people that have their entire life savings with the company. I honestly believe it would have been the start of another major depression that would have affected everyone. My grandmother in law would have lost 160k if they had gone under and that is all they have in savings. The FED did the right thing by bailing AIG out.
Let's look at the big picture here - the cost of the war in Iraq (not including Afghanistan) is now estimated to be $550 Billing (about 7 times of the AIG loan/bailout). AIG provides jobs and no one has died.
Use your anger to write to your congresspeople and state legislators to demand accountability to ensure that this does not happen again.
Because of all the natural disasters EVERYONE is taking a beating, especially the insurance industry. Lets hope the people of Texas and New Orleans are being treated as good.
To MeowMix - it is a liquidity issue, not a solvency issue. Don't you read the newspaper? Put it like this - you have $10,00 in CDs that you can't access immediately, but you have unexpected bills to pay - - you need a BRIDGE LOAN, so that you have time to liquidate your assets…get it??? It is not a bail out but simply a 2 year line of credit, with an 11% interest rate, and backed by the $1 trillion in assets.
To everyone who thinks this is a terrible nation with terrible people running it. LEAVE. Get out go live in a third world country. Then you'll see that this is the best nation in the world. We need to stop all the bipatisan bickering and hopefully figure this out. This is not the end but merely a low point for us. We have been through worse and as a extremely patriotic american I believe that things can and will improve. Let's all vote and pray that between the white house, senate, and congress changes can be made. Anyone ever heard of optimism?
i heard on NPR this morning that AIG plans to pay the 'loan' back in two years time by selling off smaller successful parts of the business like the auto sector. hopefully they can do this so that it won't have any affect on us as taxpayers.. but it's probably just wishful thinking!
We can give financial institutions, who failed by their own greed,a bailout but we can't allow average citizens with mounting medical bills the option to file bankruptcy? This country is so convoluted. The GOP financial philosophy is "No government involvement", but shouldn't there be, if at the end of the day, they're going to knock on Uncle Sam's door to bail them out anyway?
Re: njpaul0129 – Have you ever heard of the Keating 5 moron. The "liberals in congress" have nothing to do with it considering they don't hold majority enough to make it law….why don't YOU do some research before you spout off bullshit….makes you look stupid.
yeah taxpayers in australia invested in this shitty company too. -.-
***It's not quite a bailout folks, it is a two year loan at Libor + 8.5%, which equates to over 11%, that is not a favor. The loan comes from us, US Taxpayers, the good news is we (or the Govt) will be making money off of this, and they have only two years to get their act together and get out of this mess. Additionally, if the Government did not extend them this loan, the economic repercussions would be extremely hurtful to the economy. US Govt did the right thing here.
Wait! Don't you liberals love hand outs? I mean, you support welfare, universal healthcare, higher taxes, etc., so why are you so upset now? It's just another handout that only supports your desire to increase the welfare (i.e. bail out) state. Irony….
1. Kitten Poo your analysis is very good, thanks for doing this.
2. Perez thanks for providing this forum for discussion-I don't always agree with your analysis but just providing this forum is the best of democracy. Thanks.
3. This mess is the direct result of the repeal of Glass/Stengal Act in 1999 and replacing it with Gramm/Leach/Bliley Act.
Yes, Bill Clinton signed the Gramm legislation on the advice of Alan Greenspan. Please recall that Bill was busy defending himself by this point over his wayward dick. However, it was the Republican controlled Congress who wrote this legislation that deregulated our financial markets.
4. Bush and the Republican controlled Congress has had 6 years to modify this mess. They did not, rather they continued to champion deregulation.
5. It look like the survivors of this mess with be the regulated banks, like Band of America not the unregulated like Lehman.
I agree that there was no choice but to give out this bridge loan. That said we need to look forward about how to figure out how to get our economy back on the right track.
We need a smart leader with smart advisers.
Mr. Obama has Warren Buffet on his team.
McCain has Phil Gamm (the cause of this mess) leading his team.
Me thinks the election has become a no brainer. Vote Obama for a strong USA!
Re: Renfamous – And then McCain proceeded to retract his statement.
this is COMPLETE bullshit! maybe the gov can bail me out by paying off my student loans.
Re: adk sea baby – Why? You choose to get a student loan. This bail out is for the greater good of the nation. So why do you think your special and deserve your handout? I owe student loans and medical bills but I'm not waiting for a handout. I made my bed so Me, Myself and I are going have to fix it, instead of waiting to be saved.
Re: kitten poo – thanks for recommending those films! i put them on my que for netflix just now>>>>;)
I would suggest to a few people not to form such strong opinions without taking an Econ class first. The Fed loaning money to AIG is a godsend, if they hadn't, then many millions of people would have been direly affected by its bankruptcy, in the United States and internationally. AIG has more than just American clients. Beyond that, this has nothing to do with Republican fiscal politics or ideology. President Bush did not order the Fed to extend this loan, in fact the private sector was urged by the governor of New York (a democrat btw) to help AIG from going under. But when the private sector didn't step up, the Fed had to take action and this was the solution. Believe me, the rich are not getting richer in this situation, it's quite the opposite. Because of this wonderful foresight on the part of the government, a lot people are going to get to keep their homes and food on the table for a while longer.
Also, this is a LOAN, meaning that it is conditional and AIG will be set on a course of liquidating and selling their assets in a more suitable timeframe than losing it all in one day. Today could have been an awful day for the stock market and the American and international economies, so let's all take a deep breath and be relieved that this didn't turn out as badly as it could have.
One more thought: If elected, Senator Obama will be only the second president to not have served in the military. Personally, I don't much care whether or not he has served, but I also do not think that we should put down Senator McCain's POW experiences, though they don't necessarily add to his qualifications to be president. It's just an issue of respect. We should exercise more of that.
As ridiculous as it may seem that the gov't bailed them out I have to say that this American citizen is extremely happy that they did. The tremendous amount of damage their falling would have caused to not only our economy but the economy across the globe is not something I wanted to live through. We are already on hard times. Letting them go under would have just gutted us. I certainly don't think the gov't should be bailing out every corporation but I think in this case it was the right and necessary choice. We need as much economic stability as we can get right now!!!!!!
What I want to know is why aren't the heads of these companies being brought up on charges??? Freddie and fannie mac should be investigated for bad loans and greed. But oh wait, they are 85 million dollars in the pocket of Obama and Chris Dodd. Huge supporters of the democrat party. I am really sick of these companies being bailed out with our money and no one getting prosecuted but instead getting multi million dollar severance packages. Where were the warnings about the economy 3 years ago? Oh wait, John mcCain back in 06 was saying that FM and FM were in trouble and we needed to do something. But he was ignored. Honestly, this country needs a HUGE kick in the ass about incurring debt and buying stuff it can't afford. That goes for both the govt AND the people. The govt is BROKE and if it can't support its own systems, then how the hell is it going to support universal healthcare, more medicare AND social security???!!! It is just horrific that nothing has been done except to the govt taking over business which is a really bad idea in itself. the more the govt runs, the worse our economy is going to be. We need business to keep going. If something goes under, well too bad. I know AIG would affect us all, but maybe its the kick in the pants we need. Sorry about the employees, but I went through that with the dot.com fall. Let the market CORRECT itself. We will suffer a bit, but when you hit rock bottom, the only way to go is UP!
Re: Liza180 – #125
Very good post. Follow the political contribution money and you will see why we are where we are. A great non-partisan website that tracks money in politics is "opensecrets" (org).
Do your research dumbass. We(the tax payers) aren't paying a dime for this bailout. Yes, we are paying for fannie may and freddy mac but not aig. A term of the bridge loan(if you bothered to read the article) states that aig has to sell off their assets to pay off this bridge loan. By aig selling off their assets to pay for the loan means we the tax payers don't pay for this one.
It's sad that someone with a site like this would fail to do research before posting like cnn. Then again, this is a pro democrat site and anything you can do to make republicans look bad you will post without any logic on your part.
If you don't study the market and don't really know anything about the market, you should not post one comment about the market untill you put in some time in the market.
Hey kids with fucked-up college loans because of the bullshit on Wall Street, wake up and don't vote in the same people who caused this in the first place!
McCain says he saw this two years ago, yet his man Phil Gramm who was behind the big deregulation move was only let go 2 months ago and in still one of McCains best friends!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
MCCAIN MORE OF THE SAME!
Yes people lets give tax breaks to the rich and raise taxes to the poor who can't even afford it. How many people in this country make more than $2mill a year? I am sure no one on this post does or I may be wrong. As for welfare for those of you who think you know–its not even enough to rent an apartment, not to mention that people are not being supported by the gov because they have a limited amount of time to be on it until they get situated which is kinda tough in the first place when they give you only $300 a month. Ever wonder why there are so many homeless people? Yeah I guess we are supporting them too. As for the loan, its still BS but we had not much choice. The only reason its BS is because the big CEO were making themselves rich while they knew that AIG was in the crapper and don't face any repercussions for their careless tactics. The middle class and poor people are the ones who get screwed, but yet again lets give the rich tax breaks by voting republican. Read both party tax policies and unless you make 2million or more McCain/Palin are not helping you out. It was nice to see my boss buy 5 very high end cars this year because of some stupid tax break while I had to pay $1000 dollars for having my daughter after they switched my health insurance on me. Must be nice to be though without a care in the world.
What about other Americans that need help? Like a job in the first place!
If you bail out Aig bail out others who are looking for work. Shit if my tax
money is going to one place you may as well spread it around! What pisses
me off is Aig is not my insurance company! I don't want to see anyone without a job. But, this is a lot of money. Just saying…
Normally, I would agree with you. But this morning I read an article where Suze Orman (who h8s government bailouts) said THANK GOD to it. Apparently if they went down the issues with the finances would have had greater repercussions than if the gov't didn't bail them out. Something like 100,000 jobs lost, etc. Bust mostly, I still agree with you.
Re: sweetpiece – #129
Hey kids with fucked-up college loans because of the bullshit on Wall Street, wake up and don't vote in the same people who caused this in the first place!
McCain says he saw this coming in 2005. That's why he co-sponsored the Federal Housing Enterprise Regulatory Reform Act that the DEMOCRATS WOULDN'T PASS.
–
THE OBAMA/BIDEN !ECONOMIC ADVISORS! ARE FORMER MANAGEMENT AT FANNIE MAE / FREDDIE MAC!
—
Follow the campaign contributions at non-partisan site "opensecrets" (org). Don't believe the HYPE!!!
—
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
OBAMA - CHANGE IS JUST AN EMPTY PROMISE!
^^ Fix'd
When the regular guy overextends and stops making payments we all pay. Defaults on mortgages, credit cards and taxes by regular people along with overspending and overlending has made this happen. The gluttony of America has to stop and culpability has to start.
perez, i love your blog and the stuff you post about entertainment, and im trying to say this nicely… but please, if you know NOTHING about finance, banking, and economics, please don't post BS stories about American tax dollars being wasted on bailing out fat, greedy CEO's. This is such a complicated situation that I won't even start. Just trust me when I say that you are completely, completely wrong in your conclusions.
It is obvious to me after ready these comments that the majority (not all) of you have no idea what you are talking about.
1. The $85 bil is a loan package, available at the ready
2. The package has a 12% interest rate (your bank probably pays you 2.5%)
3. The government recieves a 79.9% stake
4. The loan is backed by AIG assets which are $1.1 trillion (yes, with a T)
AIG will start selling assets to help pay off the loan.
You have to remember, this company had a market value of $150 bil less than a year ago. Once the assets non-core assets are sold, this will be a tidy profit for the US government ($8 billion per month in interest)
Lastly, consider this.
In the last year, has your paycheck gone down or do you still make the same?
Most of you still make the same.
What has changed is what things cost, due mainly to the oil prices. Gasoline @ $4 a gallon hurts, Paying more for food (because freight costs/corn costs) hurts. Everything costs more because everything has to be shipped somewhere.
Last thing, the home/mortgage crisis is silly to blame on the gov as well. It is a case of simple greed on the part of banks and on the consumer. And yes, I bet 90% of the people in foreclosure over extended themselves.
Who know better than you what you can safely afford, NO ONE! People need to take responsibility for their on actions and quit blaming everyone else.
People are paying attention to wall street more than the elections!
Re: hokiegirl – Touche!
Hahahahahahah
You crack me up, girl! Best country in the nation, eh?
You can tell a lot about a country by the way they treat the less fortunate and most vulnerable members of society (e.g. children). In this "God fearing" country, it's interesting that so few people think it's their responsibility to look out for their fellow man. After all, how many children go without health insurance? How many homeless are on the streets?
Big government SUCKS…that is, when all your government does is LINE THE POCKETS OF THE RICH.
Americans have been asleep at the wheel for a LONG time. The problem has deep roots. There are so many factors:
–Our poor k-12 educational system that leaves so many Americans so uneducated that they will vote for someone with someone SO inexperienced to be 2nd in line for President (Pallin, duh).
–Campaign financing, which basically FORCES candidates to appeal to the wishes of the rich.
–The transition to electronic voting that leaves NO physical record of the votes cast if (WHEN) the machines fail. Guess the results will be fixed (just like they were in Florida).
–The electoral college, which gives people in a few key states–who may or may not represent the wishes of the rest of the nation–ALL of the power to decide the election (what ever happened to one man, one vote??)
I could go on and on (but I won't because I'm so mad I might give myself an aneurysm).
This country is turning into a banana republic.
Oh yeah, don't forget that the Lehman CEO who just received his 22mil bonus in March of this year…his kids and grandkids will never have to lift a finger…they are in the elite class now. Think about THAT folks when you are in the voting booth this fall. Think about that when you are pinching pennies to pay for your health care or kids' college education. He'd better watch out b/c pretty soon there might be a revolt…(it happened to Marie Antoinette and it can happen to him.)
McCain will just give us more of the same atrocious policies. America, you have your fate in your own hands.
WTF?! Why are rich people/companies getting handouts of taxpapayer's money? Explain this!! Poor taxpayers can hardly afford to live (we're living paycheck to paycheck here!) because Uncle Sam scams 50% of our already meager income for "taxes" (state/federal/"sales") only to GIVE IT AWAY to rich people?! Angry?? Bitter?? Sense of injustice?? You bet!!
I just need a $500 dolla bail out right now. Anyone? Anyone?
Some of you people are incredibly uneducated. Firstly, as other's have said it's a loan with interest - therefore a good investment for the government. They government did this "bail out" otherwise it would send the economy into a depression - think of the amount of jobs lost. "Your" tax payers money is not "yours" anymore, it is the government's. With the effect on economy you would all be effected by it, so thank fuck the people that decided to do this are have far more intelligence than yourselves. Go back to college.
Re: xLethalCocktailx –
Excuse the typos please! I need more coffee… !
Some people (I'd say a mere 10%) have stated exactly why. I love it how other's just give a pathetic answer such as "It's my money they just gave away!!" Nice that you think your own government are a bunch of idiots. Remember that they represent yourselves so make it matter at the Elections 08!
It goes a little bit like this (much as I hate it too)
If they didn't bail AIG out then there would be a full collapse of the financial system, which would change the world as you know it, even blogs like this would be affected because no-one will be able to afford to pay advertising. The lights would literally turn out. So consider it a good thing.
On face value it looks like the taxpayers are being jipped but it is for our own good. The problem is the idiots were allowed to get away with it for so long………
all these young twits buying shizz they dont need.
remember darfur!
If AIG were to go bankrupt, the US and the ENTIRE WORLD would have been affected. All these companies were greedy money hungry companies, who just wanted to profit profit profit. A major factor all the companies like Fannie Mae and Freddie Mac went under was due to the bad mortgage loans they gave. Those sub-prime loans which they would extend to people who did not qualify for regular mortgage loan because of their credit history would get these loans at higher interest rates and pay tens of thousands of dollars extra on a home because of their financial stability. To the companies, you reap what you sew! Serves you right for giving people that can't afford/qualify for a loan somewhere else that may have denied them because of the more conservative lending policies they practice. Adding to the fire, the FDIC is scared that if an other major bank like Washington Mutual falls through (which they more than likely are because they are looking for a buyer) they don't have enough money in reserve to pay on the funds that are insured for the banks customers. So then the FDIC will too seek the aide of the government to bail them out. This all because the FDIC only makes the banks pay a minimum monthly on the insurance of their funds. But now the FDIC board is going to raise the premiums the banks pay to help replenish the funds lost by Indy Mac which cost them about 8.9 billon and took them below the minimum required set by congress.
contiued… If Washington Mutual goes under, they will set the record for the largest bank collapse in US history. That title has belonged to Continental Illinois National Bank since 1984 with its collapse of 33.6 billion in assets (Indy Mac had assets of 32 billion when they went under). Washington Mutual had assets of about 309.73 billion as of June 2008. I do point blame at these companies for taking advantage of people and giving them products that would benefit the company in the long run (so they thought). I can also point the blame at the consumer. It's your responsibility for knowing what your signing and what your getting into. But why wait a few years save up to put a down payment on a home and get a less risky loan? Instead they get a loan that rates can go up and you don't put a dent in the principal for 10 years.
continued… If Washington Mutual goes under, they will set the record for the largest bank collapse in US history. That title has belonged to Continental Illinois National Bank since 1984 with its collapse of 33.6 billion in assets (Indy Mac had assets of 32 billion when they went under). Washington Mutual had assets of about 309.73 billion as of June 2008.
continued (disregard the above duplicate post)… Consumers look for instant gratification which many companies thrive off of. NOW NOW NOW! Which to companies means PROFIT PROFIT PROFIT! Thats why they offer you credit cards at every freakin department store you can think of. People need to educate themselves and look for other options out there and look at what is best for them today and in the long run. People need to ask questions if they don't understand what is going on or how things work. That is what gets us into trouble time and time again. We have become a nation of people who don't ask questions. And that is where we fall short. What we don't know IS what hurts us. Then when you go to ask the company that gave you that faulty loan why they didn't tell you about the possible repercussions of your investment, they will tell you simply "because you didn't ask!"
~Somebody has friends in high places~
.
Clearly, this was a decision of the Republican Administration.
.
Grab a brain ~ America ~ 0bama08
.
why the hell would they bail out a failing company? it's obviously not a good idea if they were failing by 85 BILLION freaking dollars!!! When it comes to taxes… if they want a depression, they got it. We're all screwed.
Re: Lola-itis – Read a macroeconomics textbook. In fact, I'll even suggest that you read Marc Lieberman's. Oh, and he's a democrat.
Don't spout your opinions if they have no founded intelligence behind them. Take an econ class and then we'll talk.
Love you Perez!