TPM: More lowdown on AIG

[antigop]

http://www.talkingpointsmemo.com/archives/2009/03/lowdown_on_aig.php

Using the loophole it had learned during Bear Stearns, the Fed set up two new companies: Maiden Lane II and Maiden Lane III. Two dealt with the secured lending and Three the shitty credit default swaps. The Fed lent each Maiden Lane $20 billion and $25 billion and then Maiden Lane paid off the investors that had either lent AIG the money to buy the shitty mortgage backed securities (ML II) and those who had the shitty mortgages and the corresponding insurance (ML III). To avoid booking a loss on the Fed's balance sheet, because the Fed had some legal problems if either of these Maiden Lanes lost money, and because of a reporting requirement that Dodd had put into TARP which actually required the Fed to report to the Congress and the public about the cost to taxpayers from ML I, the Fed did some creative accounting. They still paid all of the investors off at full value (par), so that they didn't lose anything. But they booked the loss on AIG's balance sheet and kept Maiden Lane clean. This is the hidden story behind how AIG went from losing $38 billion during the first 9 months of 2008 to losing $61 billion in the 4th quarter.

This was all exposed at today's hearing. And despite repeated requests from Senators on both sides - Dodd, Shelby, Corker, Warner - the Fed is still refusing to say who it bailed out through Maiden Lane II and III.

[wtbymark]

1. because of this shit right here...

the Fed should be nationalized, AIG should be broken up and sold off and a whole bunch of peeps should be going to jail. There are 250TRILLION dollars worth of these worthless mortgage backed securities flying around the world. It will take the WORLD GDP 10 years to pay it off - every penny on the face of the planet for 10 Years!!!! These people should be hung.

[aquart]

2. They should be hanged. I quite agree.

[jakeXT]

13. I don't know how much it is, or what it exactly is

Debate heats up over central clearing of credit-default swaps
by Karen Leigh
March 05, 2009

...

However, as McPartland and Stanford University finance professor Darrell Duffie point out, the CDS market has shrunk considerably since the AIG debacle to an estimated $27 trillion, according to the Depository Trust and Clearing Corp., from $57 trillion estimated last July by the Bank of International Settlements.

And now Duffie, in a study with graduate student Haoxiang Zhu of Stanford Business School, suggests it makes little sense to break out the $27 trillion CDS market from the larger $458 trillion interest rate swap market and put it on an exchange.

...

This week, SEC member Elisse Walter called on Congress to repeal a 2000 law that prohibits the SEC from regulating swaps. Without the law, the SEC could regulate all over-the-counter financial derivatives that impact debt and securities markets, including CDS.

In late February, Rep. Melissa Bean, D-Ill., vice-chair of Washington’s New Democrat Coalition, proposed new financial regulations, including limiting leverage on financial instruments and hedging against any potential losses on CDS contracts.

Also last month, House Agriculture Committee Chairman Collin Peterson, D-Minn., proposed draft legislation that would curb trading in the CDS market by banning trading of the swaps unless investors owned the underlying bonds.

http://news.medill.northwestern.edu/chicago/news.aspx?id=120177



And look who is here to help... the SEC :eyes:

[Bolo Boffin]

3. Oh, my God.

Incredible, just incredible.

You can watch the hearing here:

http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=284446-1&showVid=true

[antigop]

4. Thanks for that link. I appreciate it! n/t

[Bolo Boffin]

8. An article from December explaining Maiden Lane II and III more clearly

http://www.lifeandhealthinsurancenews.com/News/2008/12/Pages/Maiden-Lane-III-Buys-CDOs-From-AIG-Counterparties.aspx

[marketcrazy1]

5. ABOLISH THE FED

ABOLISH THE FED. let Treasury take control.................

[jakeXT]

14. there are problems

Timothy Franz Geithner (born August 18, 1961) is the 75th and current United States Secretary of the Treasury, serving under President Barack Obama. He was previously the president of the Federal Reserve Bank of New York.
http://sthweb.bu.edu/shaw/anna-howard-shaw-center/biography?view=mediawiki&article=Timothy_F._Geithner

[slipslidingaway]

6. K&R thank you n/t

[myrna minx]

7. K&R and Grrrr n/t

[DemReadingDU]

9. morning kick

[truebrit71]

10. Bloody hell...!

NOT good....not good at all...

[GliderGuider]

11. I'm finally beginning to get the "Bezzle".

It's truly systemic fraud. If it turns out top be too deeply embedded to be rooted out or regulated into submission, this cycle of civilization may already be history. These guys have eaten our young.

[dixiegrrrrl]

12. That is exactly what Enron did to hide its accounting problems.

That is what brought Enron down.

My god...NO learning curve.
Bernanke is an indicted c0-conspirator.

I just sent e-mail to White House...did anyone else here?