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More bad behavior from the people who brought us the financial crisis

Original post made by Patriot, Vintage Hills Elementary School, on Jan 8, 2013

Board members at AIG are meeting tomorrow to consider suing the federal government for giving them unfavorable terms on a $182 billion bailout.

Remember AIG? The company right at the heart of the financial blowup? That is the company that, because of no one's fault but its own, made horrible bets in the derivatives markets. When those bets went bad, and they couldn't pay, they turned to the tax payers for one of the biggest bailouts in history. One of the side effects of this was a precipitous tightening in credit throughout the financial industry that caused a deep and long lasting recession.

Now the very same AIG, whose executives are still raking in millions, wants more or your tax dollars, because they didn't like the terms of their government loan.


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Comments (10)

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Posted by Steve
a resident of Parkside
on Jan 8, 2013 at 9:59 am

This is unbelievable. All brought to you by the folks at the 'White' House. We have been hoodwinked by the worst president since Jimmy Carter, and now the chickens are coming home to roost. How anyone could have voted for this clown over a proven businessman like Mitt Romney is beyond me. The private sector has so much more integrety then tyrrannical state led by Barry the Chosen One.

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Posted by Cholo
a resident of Livermore
on Jan 8, 2013 at 10:19 am

George = Iraq War...completely unnecessary. He got to live while others died for our country...duh...he also made a few bucks off this war.

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Posted by Mike
a resident of Charter Oaks
on Jan 8, 2013 at 3:01 pm

I thought at the time, and still think that AIG should have been allowed to go under. There needs to be a price to pay for poor decision making and bad oversight.

That being said, the "investiment" made by the government to AIG has not only been paid off by AIG's shareholders, with cash generated selling off parts of the company, profitable ongoing operations and additional shareholder investment, the government made a profit of about $23 billion. So there is at least an arguement to be made for the viability of this transaction and by the shareholders that the price was too high. The shareholder arguement is garbage. The company agreed to the terms in order to save itself. The harshness of the terms is irrelevant.

On the other hand, the government's investment in the auto industry has not been paid off. Chrysler, now owned by Fiat, received almost $11 billion and has paid back almost $10 billion. General Motors was on its way to paying back their loan, but the value of their stock has dropped to the point where even their entire market cap would not cover the outstanding loss.

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Posted by Berty
a resident of Bordeaux Estates
on Jan 8, 2013 at 3:19 pm

Mike's right lets let them all fail because then they'd bankrupt and people would be out of luck but let them suffer because they were greedy and deserve whats coming to them. People would be back at ground zero which is where there supposed to be. Then I could start a bank on my street corner and who knows the glory of capitalism?

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Posted by Doug Miller
a resident of Country Fair
on Jan 11, 2013 at 10:12 pm

Then there is the other side of this argument which says that the government forced banks to loan to people who couldn't afford such loans. To do this, the banks created sub prime loans and no interest loans. This started under Clinton. Banks then acted to protect themselves by selling off mortgage portfolios to the government. Resulting in the housing bubble and eventual collapse of the banking system. Then the bail outs followed by more regulations.

Now for the fist time, just this week the federal government is issuing regulations to make sure borrows can pay back their loans. What a concept!

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Posted by Steve
a resident of Parkside
on Jan 11, 2013 at 10:33 pm

Doug Miller is so right. Yes, Doug, the banks' hands were tied and first Clinton and then Obammy held a gun to their head, terrorizing them into the subprime loan game. And the way the loans were packaged and sold to other banks, with ratings agencies giving inflated ratings to survive government whippings. All because govt forced the private sector into making profits they otherwise would certainly have avoided. Brilliant. Thanks, Doug. You're one smart cookie. Down with the burrows! And let's do away with government regulations. And, any chance of having an election makeover? I'm sure if we had one Acorn wouldn't have stolen it for Obammy like it did the last too times.

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Posted by Hey Steve (YAT)
a resident of Another Pleasanton neighborhood
on Jan 12, 2013 at 12:32 am

What about the pensions for CA government workers? The impending implosion (bailout?) of state, county, city, and special districts should make the other bailouts look like chicken feed. The new GASBy accounting changes, as well as the soon to come debt rating adjustments for pension & unfunded public employee health care debt, from both Standard & Poor and Moody's, are about to force cities to take an honest look at the real cost of government/government debt. The new formulas will demonstrate that government debt, and not just at the state level, is two to three times what's reported on the balance sheet. That's HUGE!

It's gonna get ugly when taxpayers realize that government entities, that are supposed to manage taxpayer resourses, have instead been padding their own pockets. The amount of debt that will be uncovered, because practical methodolgies will soon expose accounting gimmicks and ridiculous amounts of debt deferrals (hidden debt currently) can NOT be paid by the current generation - it is that massive. That means that our legacy will be the tremendous financial burden we leave to our children and grand children - the next two generations.

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Posted by Steve
a resident of Parkside
on Jan 12, 2013 at 11:27 am

Way to keep things relevant! Way to keep things in proportion. Because, yes, hedgefund managers absconding with billions of citizens' dollars is nothing compared to a public school teacher making a whopping 70K per year. The former is just capitalist in all its finery. But it's the teachers who are killing us. Because they are unionized. And unions are bad. Really bad. They rob their members of their freedom to work for less.

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Posted by Patriot
a resident of Another Pleasanton neighborhood
on Jan 12, 2013 at 11:38 am

Doug Miller said,

"Then there is the other side of this argument which says that the government forced banks to loan to people who couldn't afford such loans."

Doug, this is about AIG, not banks. AIG was not and is not a bank. I have never seen an argument anywhere that the government forced AIG to do anything that caused their derivatives portfolio to collapse and bankrupt the company. AIG never made that argument. No one I know made that argument. AIG collapsed because it made side bets in the derivatives market using credit defaults swaps. The made horrible bets and the bets went sour. It is as simple as that. I can't see any "other side" to this.


Can you point me to any information, a link or anything, that shows AIG was in any way forced by the government to bet the way it did in the swaps market? Or were you not talking about AIG?

P. S. I'm glad AIG decided not to sue the government in this case. It would have been nuts.

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Posted by Patriot
a resident of Another Pleasanton neighborhood
on Jan 14, 2013 at 8:22 pm


Sorry, but further commenting on this topic has been closed.

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