Moon of Alabama Brecht quote
Back to Main

September 16, 2008
Tick – Tock – …

Ratings agencies had threatened to downgrade the insurance giant’s credit rating by Monday morning, allowing counterparties to withdraw capital from their contracts with the company. One person close to the firm said that if such an event occurred, A.I.G. might survive for only 48 hours to 72 hours.
A.I.G. Allowed to Borrow Money From Subsidiaries, NYT Sept. 14

—

All three major agencies — Standard & Poor’s, Moody’s Investors Services and Fitch Ratings — dropped AIG’s ratings at least two notches late Monday.
AIG downgraded as it struggles to shore up books, AP, Sept. 16

Tick – tock -tick – tock – …

Posted by b on September 16, 2008 at 09:04 UTC | Permalink
Comments

I thought that Ben Bernanke was supposed to stave off this inevitability until after November. What went wrong?
And how can McCain try to distance himself from Bush’s policies and still claim to be a memeber of the same party? Or has the Republican Party been taken over by its evil twin?

Posted by: ralphieboy | Sep 16 2008 9:54 utc | 1

In previous periods of great individual greed one read of ‘captains of industry’ earning millions of dollars a year. At least the workers who supported their largesse made something useful, and perhaps the risks taken justified the inequity. More recently, we have read of heads of investment banks, hedge funds, and private equity groups taking home billions of dollars per annum for skim-off-the-top schemes that are entirely non-productive but depend upon more and more mugs at the bottom of the pyramid. Surely totally unsustainable.
I, for one, am delighted to see the demise of these parasites. Just wish the massive bonuses could be reclaimed. With any luck the corrupt ratings agencies themselves will turn upon each other to complete the process.

Posted by: gordon | Sep 16 2008 11:18 utc | 2

Credit squeeze: Money-Market Rates More Than Double Amid Global Credit Seizure

Sept. 16 (Bloomberg) — The cost of borrowing in dollars overnight more than doubled as banks hoarded cash amid speculation more financial institutions will fail.
The overnight dollar rate soared 333 basis points to 6.44 percent today,
…

Posted by: b | Sep 16 2008 11:51 utc | 3

The GOP’s poison legacy becomes apparent a little earlier than planned, hence the sacrifice of JohnnyPOW and Sarah the patsy Judas goat.
If the GOP had succeeded in ‘drowning government in a bathtub’ who would be bailing the financial sector out at the moment?

Posted by: waldo | Sep 16 2008 11:56 utc | 4

Credit squeeze. Wow. Cash really is king.

Posted by: gordon | Sep 16 2008 12:04 utc | 5

One of the pols where I live a finance minister trying to stave off the effects of being in that gig in a time of market meltdown just as his boss announced that we are now in an election campaign, provided the most laughable spin on the Lehman MerLyn mess for the day. he said.
“Hurrumph yes you are coreect this is the worst financial crisis we have seen in a very long time, but it is a financial crisis, not an economic crisis.””
In other words stick yer heads back in the sand now, it’s bisness as usual. Every pol on the planet is going to pretend this isn’t happening. Of course once the issue can no longer be avoided the pols will move to phase two blaming everyone but themselves for the mess.
As far as the impact on McCain goes. There won’t be one he has studiously avoided public contact withall things financial since becoming a pol.
Enough indoctrinated out there will interpret that as meaning this isn’t an issue for Mccain as prez. Since the other fella has been waxing on and on about things economic this will negatively effect him.
Mind you while I prolly would vote for Obama if I had to vote and couldn’t find an independent whose platform meshed with my views, I’m still uncertain as to whether Mccains senility, quick temper and slow wit aren’t gonna be better for the world in the long run than Obama’s sly deceit.
Mccain will have no standing with the foreign leaders amerika is gonna need to ramp up the murder of pashtuns, central to the Obama and the Mccain platform.
Most of the world leaders that matter have been told by their voters that Obama is the man. Mccain getting the gig under those circumstances means that the worse that leader treats Mccain the better the leaders voters will like him.
It is unlikely that mccains team will be anything like as sharp as the Bushco capos. Sally is gonna struggle to follow Cheney’s act and the sort of squeeze plays the bush whitehouse pulled to say legitimize Iraq’s invasion will be beyond mccain.
Obama on the other side has the european voters eating out of his hand. He will get support to raze afghanistan and all the ragheads living there.
All multi-tasked, Obama will do that while he implements the next phase of his Wall st bosses war on the ordinary human.

Posted by: Debs is dead | Sep 16 2008 12:10 utc | 6

AIG went big on insuring against losses in the mortgage backed securites market. As that meltdown arrived, AIG was not able to unwind those policies, it had to them pay off as investors realized huge losses.
That has cost AIG $18.5 billion so far this year, and their losses will be four or five times that before the diarrhea clears up.
AIG stocks are close to 40% down this morning, an hour before the market opens. Their only hopes are in selling off their subsidiaries to the best offers they can get, and soon. Today, while they still have value.
At this point, it really is just a matter of who wants to step in and buy what’s left.
The real problem is the hundreds of banks who call AIG stock one of the pillars of their balance sheet. Or used to call it that. Now they call it cardiac arrest.
Domino effect is in play.

Posted by: Antifa | Sep 16 2008 12:14 utc | 7

Heh Debs. It’s a question of timing. If this completely blows up before November it doesn’t really matter who gets in to play the great healer. But if they can kick the can down the road until then it means a great deal : whoever gets in then kills his party for a generation. After the last great depression the armament industry made jobs, and loans to the allies made money – hence the post-war boom. But now the US already spends most of its money on armaments and it has no money to loan. Check mate.

Posted by: gordon | Sep 16 2008 12:39 utc | 8

Goldman Profit Drops 70%, Says It’s `Well-Positioned’

Goldman Sachs Group Inc., the largest of the two remaining independent U.S. securities firms, said third-quarter profit fell 70 percent, the sharpest decline in its nine years as a public company, and said it remains “well positioned.”

The problem here is that the business model these investment banks are build on is essentially dead:

Revenue dropped 51 percent from a year ago to $6.04 billion. Fixed-income, currencies and commodities, the company’s biggest source of revenue, generated $1.6 billion, down 67 percent.
…
Equities trading revenue fell 50 percent to $1.56 billion and revenue from investment banking, which includes providing merger advice and underwriting stock and bond sales, dropped 40 percent to $1.29 billion.

All those segments are sure to fall further.

Posted by: b | Sep 16 2008 13:12 utc | 9

It’s almost noon, EST, and the Dow’s hardly down. What gives? Is the PPT in full gear?

Posted by: Kate | Sep 16 2008 15:57 utc | 10

Le Monde
A very thin straw, but a straw all the same. We’ll just have to wait and see….

Posted by: alabama | Sep 16 2008 16:28 utc | 11

it appears to me that it is essentially uncontrollable – not unlike their imperial wars turning into complete disasters – either way with aig – they lose – if not now, later

Posted by: remembereringgiap | Sep 16 2008 17:58 utc | 12

Seems the press has caught up with you now, b. Congratulations on predicting the situation well.
Financial disaster to dwarf Lehman looms as AIG takes a pounding
Le Monde’s article @ 11 doesn’t have much in it. How are the irons going to be pulled out of the fire? What methods are going to be used, could be used, may one ask.

Posted by: Alex | Sep 16 2008 17:59 utc | 13

As a curiosity for what conclusions can be drawn from it, this morning the DOW opened at the same 10,900 it was on Election Day, 2000.
Under Bill Clinton’s two terms as president, the DOW increased by 8000 points. Sure, there have been bubbles of varying types under both Bush and Clinton. But a zero increase?
There are posters here who are far, far more educated in economics than I am, and I am interested to hear their take on this.

Posted by: Ensley | Sep 16 2008 18:22 utc | 14

Alex, I have no earthly idea. Nor do I know anything about the reporter’s credibility. Maybe this “article” is a cry of desperation from the owners of Le Monde….

Posted by: alabama | Sep 16 2008 18:34 utc | 15

Bloomberg
Alex, it seems they were thinking of this….

Posted by: alabama | Sep 16 2008 18:57 utc | 16

Jesse on AIG:
quote:
If they can make it a short term bridge loan with tough conditions and the current management gets tossed out it might not be a bad deal if it includes tight time limits and a forced unwinding of certain positions. 

Its hard to render a strong opinion without better access to the data, unless you’re just tossing off ideological viewpoints. How much of the problem is true insolvency versus a short term liquidity squeeze? What are the costs of a failure, and how much of a loan for how long is required?
Why can’t AIG reach terms with the banks? Are we seeing brinksmanship at play? Are the lines of liquidity to the markets being manipulated by the Wall Street banks? They are in a position of privilege and obligation in this process by using the special facilities.


The Fed is the lender of last resort. AIG is not a bank, but this is part and parcel of the muddying of the waters we have seen with the erosions in the aftermath of the repeal of Glass-Steagall.


Jesse’s Café Americain
That seems to sum it up prudently pretty well.
My gut feeling is AIG is golden in the middle and crisp about the edges.

Posted by: Tangerine | Sep 16 2008 20:08 utc | 17

Looks like another Federal bailout.

Posted by: Tantalus | Sep 17 2008 0:56 utc | 18

& thepolitical culture of the right hates welfare – except for themselves
they make zimbabwe seem like a real economy. america has become a zimbabwe without the honour of struggle
they are slime, sleazy as the most hateful of hoods

Posted by: remembereringgiap | Sep 17 2008 1:25 utc | 19

Add AIG to the dole…

Posted by: Butch | Sep 17 2008 1:39 utc | 20

So what happens if they auction off Treasuries next week and nobody shows up to buy? Is it conceivable?

Posted by: Allen/Vancouver | Sep 17 2008 3:03 utc | 21

Allen: GCC real estate boom is “overheating”, like Greenspan, understating the race, long after the horses have gone back to the barn. And China exports have fallen below imports from the US, sure, it’s not apples to apples, but Chinese markets are down far more than US markets are. Two of the most liquid martial economies have either EU or US to invest in now, and EU’s prices are artificially being kept higher. Do the math.
Manna has no country, no politics, no religion but Alpha. America has lots of Alpha.

Posted by: Alpha Tau | Sep 17 2008 6:08 utc | 22

Back to Main