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2008/9/16-19 [Finance/Banking] UID:51195 Activity:kinda low |
9/16 Fed to loan $85B to AIG while it sells its assets, since no one else wanted to lend $85B. Hopefully the Fed gets back $85B--it's not clear how long that may take (loan is for 2 years but may be extended). \_ How the hell does the Fed have the power to make $85B loans without congressional approval? \_ exigent circumstances necessary to maintain stability of the financial markets \_ 85 BILLION! That's a pretty amazing amount of money. \_ We spend more than that in Iraq every year. The Pentagon as a whole spends that every two months. \_ Financial markets are too fragile. We should clamp down on this money is debt shit like from that one video. Is the inflated money supply from bank credit really worth the fragility introduced by their complex webs of interdependent debt relationships? So much of the economy is built on top of speculative vs. real assets. \_ The Fed is a private entity, and is arguably the most powerful organization on earth (even more so than the US gov). \_ No one else has $85B to lend. \_ correction: up to $85B, it's like a HELOC. Interest rate is 11% on outstanding balance. regardless, Fed gets 80% equity (diluting existing). -op \_ URL? \_ http://www.federalreserve.gov/newsevents/press/other/20080916a.htm \_ BAIL OUT IS THE NEW IPO! Company in trouble? No problem! Just keep spending. We'll get a bail-out... perfect exit strategy. The more companies require BAIL OUT, the hotter it gets. It is just like the dot-coms. BAIL OUT NOW! \- i'm not an expert on this, but based on recent and not so recent history BEAR STERNS almost certainly "deserved" a bail out less than LEHMAN [BS played a very "me first" role in various past episodes like the LTCM intervention (speaking of people who didnt derserv a bailout) as well as in the lead up to the eventual collapse]. LEH was a slightly better citizen. But unfortunately "just deserts" has little to do with the decision making. AIG is a quite evil company too, but its hard to be gleeful over this ... although I am pleased to see the self-serving probably criminal HGREENBERG taking a bath.] |
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www.federalreserve.gov/newsevents/press/other/20080916a.htm The secured loan has terms and conditions designed to protect the interests of the US government and taxpayers. The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance. The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility. The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firms assets. |