McCain and the AIG crisis
Quote:
Originally Posted by The Figment
Remember.....The Republicains (McCain,Bush,ect) for years have been trying to get the idea that it "Would be good for the Economy to Privatize Social Security" Crammed down our necks.....our 401k's aint worth a shit,our Real Estate Equity is falling thru the basement,Employer Benefits for employees are being eroded away at a breakneck pace,Wages are Down,Unemployment is up.....And These Assholes Wanna Take The Social Security Income WE Pay Every Week and Invest It In Wall Street????????????????
OH HELL NO!!!!!!
Nobody is saying that all social security contributions should be placed in the securities market. It might be a good idea to let people have the option of electing to put some of it, such as 10 to 20 percent, in stocks, preferred stocks, bonds, mutuals, treasury bills, etc. If it was correctly done, many people would have more money for retirement and the economy would be better. Presently, the interest earned on social security deductions is very low.
I see large busloads of seniors, and many other people, going to Atlantic City every day 24/7, and nobody is screaming about that. :D
McCain and the AIG crisis
Quote:
Originally Posted by Breukelen advocaat
Nobody is saying that all social security contributions should be placed in the securities market. It might be a good idea to let people have the option of electing to put some of it, such as 10 to 20 percent, in stocks, preferred stocks, bonds, mutuals, treasury bills, etc. If it was correctly done, many people would have more money for retirement and the economy would be better. Presently, the interest earned on social security deductions is very low.
I see large busloads of seniors, and many other people, going to Atlantic City every day 24/7, and nobody is screaming about that. :D
Exactly.
People should have the option of what they want to do with their Social Security funds. SS is a failing system as it is right now and will dry up way before I ever see a penny of it. The government seems to think they can spend our money better than we can.
Putting your SS funds into Wall Street was never the only option. That was only one of the many options.
McCain and the AIG crisis
I agree with both of u on letting me do with my SS as I feel is right for me.....But ya'll know that for a long time (I'm not sure of HOW long) the Feds have put the SS Income Stream into the General Fund as opposed to its own separate Fund as was originally planned....As they said after the 1997 Az. Medical Drug Proposition passed by a Landslide...."The Voters Are Too Stupid to Understand What They are Voting About"
I believe this Quote Was Fife Symington (R) the then Gov of Az!!!
Even if only 20 percent our SS income had been invested in Wall St as of last week the loss to the SS system may have been a Disaster!!
McCain and the AIG crisis
I think his all trickles down to the fact that politicians think they can pull the wool over our eyes b/c they know we don't know the issues.
And they are right, most of America (and it's true in all countries, not just here) don't want to spend the time looking for the issues, instead they rely on soundbites and t.v. shows to give them thier daily "news".
And we could all fix this by just caring and giving a damn.
McCain and the AIG crisis
Quote:
Originally Posted by The Figment
Even if only 20 percent our SS income had been invested in Wall St as of last week the loss to the SS system may have been a Disaster!!
The bottom line is the lower the risk, the lower the return. Diversity is the key.
If you keep the money is in something like the S&P, you only lose if you sell.
I have some preferred AIG. I'll still get the quarterly dividend payments even while the stock itself is down.
We bought other stock this week, Kraft preferred, and already made two grand when the market came back a little.
McCain and the AIG crisis
Yeah I heard Kraft took the place of that one company that went under.
McCain and the AIG crisis
Quote:
Originally Posted by rebgirl420
Yeah I heard Kraft took the place of that one company that went under.
Kraft is now listed on the Dow Jones industrial average, replacing AIG.
Business Feed Article | Business | guardian.co.uk
McCain and the AIG crisis
Yeah I seen that on the news.
Good stuff.
McCain and the AIG crisis
Bottom line, the entire global economy almost collapsed this week, a collapse that would have made the great depression seem weak. I will elaborate.
Lehman Brothers, formerly one of the largest investment banks on the planet, was heavily invested in short term liabilities in the form of securitized paper. Securitized paper is "deed" to receive the interest payments from loans. Securities generally do not pay a high rate of interest unless they are of a higher risk, which translates into loans for people/ businesses with poor credit ratings. People who have poor credit have to payer a higher rate of interest throughout the life cycle of the loan. Due to the enormous amount of sub prime mortgaged backed securities (SPMBS) floating throughout financial institutions, large investment firms caught wind of an idea to pull higher than normal gains; buying up these securities from the original lenders (neighbor hood banks and lenders such as Ditech) at a premium. This in turn created a demand to issue SPMBS, by giving people who ordinarily would not qualify for loans, loans. l
Many of you are probably thinking by now, "so what, they have bad paper, i dont see how this could bankrupt a billion dollar corporation." But remember, these SPMBS are also liabilities.
The money that is given to the loan applicants has to come from somewhere right? Typically, when a bank lends you money, it has the right to "create it out of thin air" via an FDIC license. What this means is, the bank borrows the money from a regional reserve bank at or around the current federal funds rate (2% currently), and then charges say 7% to the loanee. Sub prime interest rates were in the neighbor hood of 8%-15%, paying much higher returns to the holder of the set liability. It is a liability because the holder of this paper, regardless of whether the mortgage payments are being paid, still has to make the original 2% payment to the federal reserve for giving them the ok to create the money.
Now that a large percentage of investment banks were allowing short term liabilities (paper who's interest that has to be paid at a faster rate throughout a period of time) to be a very large part of their portfolio's, they in turn were making a larger amount of mortgage payments to the original lenders of the original money.
Lehman basically did not have the money to keep making their mortgage payments because foreclosures were in record numbers, and payments dropped dramatically. Another thing to point out that i forgot is when you would issue sub prime debt, you would have to pay a little bit (not much but still more) higher premium to a reserve bank (say 2 & 1/2%). The profits from regular mortgage backed securities were then used to make payments on the defaulted loan swaps. Lehman eventually ran out of money to make payments and they failed. This caused investors to pull their money out of virtually every global trading market resulting in losses of around 5% or even greater.
AIG was also a large holder of SPMBS with short term liability. The difference is, AIG was able to make their "mortgage payments" but had to issue debt to cover various costs associated with the insurance industry. This forced their tripple A credit rating to be lowered to A-. In doing so, collateral accounts that contractually required for example 10% at AAA rating, now required say 15%, 20% or even 25% collateral. This type of collateral was in the form of liquid assets held in collateral accounts. Once the rating dropped, AIG was then contractually obligated to deposit the upwards of $80 billion into these collateral accounts to stay in business by Wednesday (the 17th).
Had AIG been allowed to file Chapter 11, it would have sent a signal to all investors to pull out of investment markets due to AIG's interwoven relationship to virtually every business entity on the planet. They insured cars, houses, business, bonds, manufacturing plants, etc...
Suffice to say, this next week could have been a really fucked up period of history.
McCain and the AIG crisis
Quote:
Originally Posted by GoldenBoy812
...........AIG was also a large holder of SPMBS with short term liability. The difference is, AIG was able to make their "mortgage payments" but had to issue debt to cover various costs associated with the insurance industry. This forced their tripple A credit rating to be lowered to A-. In doing so, collateral accounts that contractually required for example 10% at AAA rating, now required say 15%, 20% or even 25% collateral. This type of collateral was in the form of liquid assets held in collateral accounts. Once the rating dropped, AIG was then contractually obligated to deposit the upwards of $80 billion into these collateral accounts to stay in business by Wednesday (the 17th).
Had AIG been allowed to file Chapter 11, it would have sent a signal to all investors to pull out of investment markets due to AIG's interwoven relationship to virtually every business entity on the planet. They insured cars, houses, business, bonds, manufacturing plants, etc...
Suffice to say, this next week could have been a really fucked up period of history.
Great post.
AIG also INSURED those SPMBS, as you know.
Bailing out AIG was not "bailing out Wall Street". It is MAIN STREET.
There would have been panic in the streets today if AIG was not rescued. And McCain was against it. Boggles the mind.
