We are one week into the AIG deal. It opened at $1.85 last Tuesday and had a market cap. of around $4 billion. The government announced the loan and warrants to get 80% of the equity of AIG. The stock is now at $5.31 with a market cap around $14 billion. Ironically, AIG shareholders are scrambling to pay back the loan before the government can exercise the warrants.
bad bad example...nice try
of course it is for now since the government is now preparing to buy all of its CDS garbage NOW which is what brought it to its knees to begin with
the AIG shit woulda never had to happen if they took these steps prior to its demise
they needed an event to happen in order to get the power grab they want to help all these fraudulent bastards clean up the toxic shit
of course AIG shareholders scrambling under the new proposal
now there will be a market based on whatever the hanktator says in order to clear out their toxic portfolio and they have a good business otherwise
If 5 a & b don't fit the description of this situation I'm not sure what does.
You bring up capital requirements. If a bank is holding these assets at an unrealistic level and are forced (Paulson's original plan says he can force) to sell this toxic sludge for a significant haircut; what will that do to their capital requirements? I hope the FDIC has enough employees.
they are highly leveraged so even a 10-20% drop in value makes them worth next to nothing
RE prices aren't going back to bubble prices in the next 10 years or so unless we inflate in a big way
this was a biggest housing bubble in american history
home price/income ratios got super duper outta wack
also if you want to see historically how this type of situation has worked out....and with it big government intervention
look to japan for answers
What is unrealistic?
Any price for something that has no market is unrealistic. If you can't sell something it is worthless. These derivatives have been kept on books, or worse shifted off book to SIVs and other Level III holes, at the purchase price, thereby giving these institutions an unrealistic capital reserve. To think that buying these things at 30, 40, 90% discounts is gong to help them is unrealistic. Mark to Market is going to kill a lot of firms.
Any price for something that has no market is unrealistic. If you can't sell something it is worthless. These derivatives have been kept on books, or worse shifted off book to SIVs and other Level III holes, at the purchase price, thereby giving these institutions an unrealistic capital reserve. To think that buying these things at 30, 40, 90% discounts is gong to help them is unrealistic. Mark to Market is going to kill a lot of firms.
That's because thats the easy thing to do...blame Bush. I am no Bush fan (even though I voted for him twice) but the blame for this debacle does not fully belong on his doorstep. If memory serves, it was slick Willy who eased the restrictions on Fannie & Freddie which poured gasoline on this smoldering fire.
I didn't mean to imply you thought it was a handout C-gold, just that when you were yelling it wasn't a bailout what you were saying is it wasn't a handout. Nit picking? Maybe, but I have been going round and round with a lot of people the past week, and semantics always seems to get in the way.
hno:
