Within minutes of the FED announcing the rescue of the crumbling insurer, I had the luck of being able to chat with an AIG employee about the Government’s repsonse and AIG’s current financial situation:

AIG employee looks like the Fed will be bailing us out. take THAT, taxpayers!

xyz ugh. this is really sickening.

AIG employee bwahahahaha!!

xyz you do realize that youre part of that “tax payer” category, right?

AIG employee yeah but the money this will bring me personally is probably more than Ipaid in taxes in the past year or so. finally the government does something right for a change. yay Fed!

xyz i disagree

AIG employee No, if AIG bit the dust then I just would’ve been canned with everyone else. Now we’ll be offered buyouts. That’s a lot of money for me.

xyz you should have been canned, just like lehman brothers. AIG was bankrupt and deserved to fail

AIG employee No, AIG is solvent and I did not deserve to be canned. There is a liquidity due to the Financial Services arm of the company. liquidity *issue*. Anyway, the insurance part of the company (where I work) is healthy and we have $1 trn in assets worldwide.

xyz an $85 billion rescue plan is solvent?

AIG employee You’re talking about something you don’t know anything about. it’s a bridge loan. AIG has more than enough assets to cover its credit default swaps, but not enough to to capitalize them. enough *time* to capitalize them


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So they gots to go.  Such is the case in East Harlem.  From Shagya blog:

From London’s Grosvenor Square you can’t see East Harlem, but you can buy it. For £250 million, 47 buildings, and 1,137 homes at a time. That, at least, was supposed to be the deal for UK-based investment bank Dawnay Day Group when it reached across the ocean last March and snatched up entire blocks of this historic neighborhood of low-income immigrants ­ one of the last such communities left in Dawnay Day Group’s plan follows the typical logic of displacement for “development,” a logic well known both to real estate profiteers and to the poor people they displace.

Here is the full blog post.  It’s nice to see people fighting back.  Here’s a radical thought, if a family is making use of a scarce resource such as an apartment and the landlord is not and cannot use the apartment for its primary purpose then the family possesses the apartment.  It sickens me to see things under-utilized because people with capital choose to sit on them.  Let the property rights fracas ensue.

“You have NOTHING worry about.”

http://www.bloomberg.com/…

Federal Reserve Chairman Ben S. Bernanke, seeking to allay renewed concerns over the health of the nation’s financial system, said the central bank may extend its emergency-loan program for investment banks into next year.

“The Federal Reserve is strongly committed” to financial stability and is “considering several options, including extending the duration of our facilities for primary dealers beyond year-end,” Bernanke said in a speech to a conference in Arlington, Virginia.

Woot! More inflation!

Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank. The Treasury should “take a leading role in any such process” in consultation with regulators, he said. Such a resolution mechanism may help reduce concern that investors and dealers begin counting on Fed aid in case their bets go wrong.

So like enforcing the current bankruptcy laws? I somehow doubt it.

Fed officials are working with the Securities and Exchange Commission and securities dealers “to increase the firms’ capital and liquidity buffers,” Bernanke said.

More inflation!!

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told the same conference that he supported Fed and Treasury proposals for “policies, because of what happened, to take proper action if a large investment bank goes bankrupt.”

Of course he does. He, and the rest of Wall St., directly benefit from this intervention and inflation.

Without any liquidation procedure in place, the Fed in March decided to make a bridge loan to keep Bear Stearns out of bankruptcy. The central bank then agreed to take on $30 billion of hard-to-trade Bear Stearns assets to help secure its takeover by JPMorgan.

“The Federal Reserve in essence bought $30 billion of mortgage product from Bear Stearns; I want to remind people we bought $350 billion,” Dimon said today. “We don’t really think” the deal will end up costing taxpayers money, he also said.

I do. Anyone with a cursory understanding of economics could see that taxpayers will be both directly and indirectly paying for this. The indirect in terms of all the likely new regulations and powers the Fed will get on top of the inflation that will continue to destroy the middle class and poor are likely the greatest costs.

Congress should legislate “consolidated supervision” of investment banks and other big securities firms, with the unspecified regulator having authority over capital, liquidity holdings and risk management, Bernanke also said today.

The Fed should also get “explicit oversight authority” over payment and settlement systems, putting the it on a par with counterparts from around the world, Bernanke said.

U.S. central bankers will already play a part in setting capital cushions at securities firms under an agreement yesterday with the SEC. The two agencies will collaborate in determining “guidelines or rules concerning the capital, liquidity and funding” arrangements of investment banks, the accord said.

Because obviously planned economies have worked so damn well. They function like clockwork everywhere they have greater control. Right Ben?