McCain and the AIG crisis

I agree with he article below. McCain does not understand the AIG crisis. McCain just does not have the ability or brainpower to handle something like this, which involves saving the American financial system from complete ruin.

Does McCain Understand The AIG Crisis?
Huffington Post | Rachel Sklar | September 17, 2008 12:21 PM

Last night around 7:30 p.m., news emerged that the federal government would bail out troubled insurance giant AIG with an $85 billion loan. In exchange, the federal government will own 79.9% of the company.

The bailout was an effort of last resort, meant to save AIG from being forced to declare bankruptcy â?? which would have made it the biggest bankruptcy of all time, with major reverberations across the economy considering its trillion-dollar balance sheet and global ties across numerous industries. Earlier in the day yesterday, when a loan package failed to emerge, the market dropped just contemplating the possibility of an AIG bankruptcy. Last night on CNN, Campbell Brown introduced the news saying, "This affects almost everyone out there who has a 401K." An AIG bankruptcy would have been a very, very big deal.

You would not have known that, however, from John McCain yesterday on the "Today Show." Yesterday morning, McCain sat for an interview with Matt Lauer that was notable first and foremost for the strangeness of his demeanor: Wooden, sullen, and repeating the same talking points over and over again. Lauer asked all the right questions, but failed to elicit more from McCain than repeated exhortations against "fat cats" and "Beltway insiders." At one point, McCain was almost hostile to Lauer when he pressed him on the "fundamentals" issue ("There's nothing wrong with the workers of America. I believed that they're the fundamentals. You may not, others may not").

But Lauer was able to break through a bit on AIG, pinning McCain down on whether he thought the Feds should bail out the insurance giant, even if McCain gave no indication as to why:

LAUER: So many people in this room today will be watching what happens with American Insurance giant AIG....you heard Maria [Bartiromo talking about it a second ago. They need something in the neighborhood of 75 billion dollars to become secure again. What should the government do? First of all, do we even have that kind of money in the system?


McCAIN: The government should not â?? of course, this is one of the outstanding and glaring examples of the terrible problems and corruption and greed and excess that has caused all of this fallout â?? which is going to harm the average American worker...no, I do not believe that the American taxpayer should be on the hook for AIG. And I'm glad that Secretary Paulson has apparently taken the same line.

LAUER: So if we get to the point middle of the week as we heard in that report where AIG might have to file for bankruptcy, they're on their own?

McCAIN: Well...quote, "on their own"...we have to - we cannot have the taxpayers bail out AIG or anybody else...this is something we're gonna have to work through â?? there's too much corruption, there's too much access, we can fix it, I believe in America - we can have a 9/11 commission such as we had after 9/11, 'cause this is a huge crisis and we can come up with fixes and we can make sure that every American has a safer future and that is to make them know that their bank deposits are safe and insured.

That was yesterday morning in the 7 a.m. hour. Cut to twelve hours later, and the feds did the exact opposite. Why? Because of those 401Ks, because of the interdependence of the economy with AIG's vast web of interests, because, to paraphrase CNN's Ali Velshi last night, the economy could take losing an investment bank but AIG, not so much.

From this interview, there is absolutely no indication that McCain knew and appreciated this. His response was unilateral, couched in terms of taxpayers being "on the hook" rather than being vulnerable to the losses that an AIG bankruptcy would trigger. Meanwhile, yesterday's market tanked even more just contemplating the possibility of an AIG bankruptcy, hours before the buyout plan was finally announced.

This should worry Americans, for obvious reasons â?? not only because of what McCain clearly failed to grasp about the situation, but because he didn't seem even really to try. In the middle of the worst financial crisis in years, he was surly, wooden, and uncooperative as an interviewer asked legitimate questions â?? precisely when it was most important to be forthcoming.

While McCain's testiness yesterday morning was well-noted, his glib assertion regarding AIG didn't get traction in the news cycle until today, when he reversed himself somewhat (see here and here; I didn't see this moment highlighted on "NBC Nightly News" or on MSNBC's post-AIG announcement coverage, though I may have missed it). But to my mind, it was the most important and revealing moment of the interview, because it revealed that McCain had little to no understanding of the issue. Even his statement today on "Good Morning America" â?? "There are literally millions of people whose retirement, whose investment, whose insurance were at risk here" â?? was not even hinted at in his Today show comments.

McCain's answer yesterday on AIG was not an accident. Put bluntly, I can't see any evidence that he knew what he was talking about; nor any evidence that he wanted to try. This is a blatant moment, on tape, under urgent questioning from the media at a moment of crisis, and not only was his lack of preparation apparent but his attitude spoke volumes. This isn't a matter of left or right, of "gotcha" or "in the tank" or anything else â?? it's a matter of accountability at a pretty critical moment. It should be noted, and remembered.

Does McCain Understand The AIG Crisis?

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Originally Posted by Billionfold

Interesting...

Wonder how this is going to play out.

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Obama should publicize this. McCain was one of the people in favor of deregulation, and when it blows up in our faces he's stupefied. He's not someone that I would want to put my confidence in.

His suggestion not to devalue the American dollar is true. Is the US government in the business to bail financial companies who are not responsible? More companies are going to keep failing, should the government bail out every company? It sets a precident. One of these days the bullet has to bitten, otherwise the deficit will continue to rise.

McCain is definitely an elitiest, after all, he voted against keeping companies from price gouging oil and gasoline. He's the typical for-profit republican. However, I think he's right in some sense. When do we draw the line?

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Originally Posted by Billionfold

Who can draw the line is the real question. :stoned:

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lol, that's a good question.

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Originally Posted by thcbongman

His suggestion not to devalue the American dollar is true. Is the US government in the business to bail financial companies who are not responsible? More companies are going to keep failing, should the government bail out every company? It sets a precident. One of these days the bullet has to bitten, otherwise the deficit will continue to rise.

McCain is definitely an elitiest, after all, he voted against keeping companies from price gouging oil and gasoline. He's the typical for-profit republican. However, I think he's right in some sense. When do we draw the line?

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They let Lehman Brothers go under. That was bad enough.

This is only a loan, which they (AIG) must pay back with interest. If the company really takes off agin, and it very well could, the taxpayers will be rewarded with profits. To let the company go down would have been a disaster.

AIG aside, 40,000 jobs in NYC alone are lost because of the economic downturn in the past few weeks. Additionally, for every job in the security industry that is ended, two or three jobs in other sectors are lost accross the country.

We're trying to avert a major depression, the beginnings of which have already has had worldwide consequences.

I did not intend to vote for Obama, but I'm afraid he's the only one smart enough to understand the situation.

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Originally Posted by thcbongman

Is the US government in the business to bail financial companies who are not responsible?

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Assuming no one has the common sense and the balls to regulate them to act responsibly, then yes. Right now they are just going to the casino with other peoples money. They don't have to follow the rules, because there aren't any. Every republican president deregulates everything in site and the tax payers clean up the mess. Anyone remember the S&L mess? I'll bet john mccain does, but he seems to have learned nothing from it.


BTW Why when I point my cursor at those green blocks does it say "AJ is just really nice" Apart from that being absolutely untrue, what does it even mean?

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Originally Posted by Billionfold

That sir is called reputation. You give someone reputation, click the scales that are above the area where you can see their flag and post count.

Green bars mean positive rep.

Haven't you read those messages in your CP when someone sends you rep?

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Actually no, I pretty much just post whatever pops in my head while I burn some CD's. Thanks though, that's interesting.

AIG, with assets spanning a global total of $1.2 trillion, facing bankrupsy without a government bail out. Freddie Mac and Fanny May, owning 50% of America's mortgages, go bankrupt.


Seems companies right left and center have been going bankrupt these last few years. Meanwhile the national debt has exploded to over $9.3 trillion. And yet, somehow, McCain keeps insisting that the economy is strong and George Bush has done a bang-up job with it. Where's the change? Where's the awakening to fiscal responsibillity? Has McCain anounced some major change to the way things are done in Washington, and I was sleeping in a cave that day? Good Christ; and people will continue to vote for same 'ol, then expect change.

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Originally Posted by Gandalf_The_Grey

AIG, with assets spanning a global total of $1.2 trillion, facing bankrupsy without a government bail out. Freddie Mac and Fanny May, owning 50% of America's mortgages, go bankrupt.


Seems companies right left and center have been going bankrupt these last few years. Meanwhile the national debt has exploded to over $9.3 trillion. And yet, somehow, McCain keeps insisting that the economy is strong and George Bush has done a bang-up job with it. Where's the change? Where's the awakening to fiscal responsibillity? Has McCain anounced some major change to the way things are done in Washington, and I was sleeping in a cave that day? Good Christ; and people will continue to vote for same 'ol, then expect change.

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While I think mccain would be an improvement over bush, and obama over mccain, things have gone to far for political solutions. The time is right for violence, revolution does not come through elections. It comes when leaders are crucified on telephone poles.

"While I think mccain would be an improvement over bush, and obama over mccain, things have gone to far for political solutions. The time is right for violence, revolution does not come through elections. It comes when leaders are crucified on telephone poles."


I could not disagree more. More good would come from a politician such as Ron Paul in office then could ever come with you being locked in a room with a machine gun and the countries political power players. To think violence is the only solution is silliness. After we hang the bastards who is in charge? Probably the person who hung the most people. No thanks.

Of course it wouldn't solve anything, in the in end you get a napoleon or stalin. But that misses the point, there is no past, no future, only the sheer joy of the orgy of destruction. GW nailed up there screaming "oh, father why have you forsaken me?" And we would all wonder if he were speaking to god or papa bush or maybe The Dick. People babble endlessly about the end days. Lets quit waiting and make it happen.

Damn AJ you really aren't nice are you. :D
Way to earn that rep. LOL

Heard on the news this morning that we have already bailed out $800 billion worth of failed businesses so far this year not counting AIG. 300 million men women and children in America divided into $800 billion equals $2,666 each that very man woman and child is going to have to ante up for this year alone, much less our national debt.
Keep following all the lemmings people. Your chief is leading you off the cliff.

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Originally Posted by allrollsin21

"While I think mccain would be an improvement over bush, and obama over mccain, things have gone to far for political solutions. The time is right for violence, revolution does not come through elections. It comes when leaders are crucified on telephone poles."


I could not disagree more. More good would come from a politician such as Ron Paul in office then could ever come with you being locked in a room with a machine gun and the countries political power players. To think violence is the only solution is silliness. After we hang the bastards who is in charge? Probably the person who hung the most people. No thanks.

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oh revolutions are dangerous, not that they are bad but u cant imagine the force they can have and what they cant do... i know it first hand cuz ive seen one major one in recent times first hand and its effects in comparison to its promises

all u need to get from bad to worst! is to have one of these hidden corrupt bastards run your revolution, people never unite without a leader for such massive movements

and as far as i remember, we americans respect our system so much (sadly or happily) that even in the 1930s and depression we did not revolt and that was the worst time in modern american history

Revolution is really not a "safe" choice for change, its pretty much like wars, starting one may be the easiest part, controlling one and winning one is very very hard and it can have very unpredictable results... even if there is a good and people-loyal leader on top, she/he may get assassinated and then what...

revolutions are strong sweeping forces of mad masses, like a wild fire, it will burn guilty and innocent togtether

Here's the way this works.

Republicans like to deregulate buisneses. The argument is that regulations stifle competitiveness and opportunity, and the buisnesses should be free to take greater risks if they want to. A crucial piece of the argument is that those companies don't need regulation relating to risk, because it is they themselves and their shareholders who take the risk --- they have their own self interest in being responsible, becasue if they act irresponisibly they might fail. They should be able to reap the rewards of risk, but also have to pay the costs of irresponsibiltiy.

But then after deregulation has resulted in years of those companies and their CEOs and shareholders walking away with record profits, the irresponsibility eventually does catch up, and they go bankrupt. But instead of being left to face the consequences, they are called "too big to fail" and WE TAXPAYERS have to bail them out! Right now we have a Republican president NATIONALIZING our financial industry! We go for years of privatizing all the profits, and as soon as these companies go bankrupt, we nationalize the loss!

Man, I wish I could get this deal! I'd go to Vegas and bet a million dollars on Roulette. The deal is this: If I win, I get to keep the profit. But if I lose, then I get declared "too big to fail" and the US taxpayers cover the loss and pay the casino for me! It's great! How do I get in on this?

The fact is that these companies ARE to big to fail. It is totally true, and we have to save them. It would be a disaster for everyone if these companies went bankrupt, and it could tank our economy into something like the Depression.

So why do we let this happen? If we already know these companies are too big to fail, and we know we are going to be on the hook if they do something irresponsible, we should be exercising appropriate oversight and having adaquate regulation to make sure they don't get to this point! We should be able to protect our stake if we are going to have to bail them out! We should not just let them do whatever irresponsible thing they want, walk off with the profit, and leave us holding the bag! That's robbery and fraud!

Now that we are at this point, we have to save our own asses by bailing them out, but let's not get into this shit again.

And we have been in this shit before. We did it with the Savings and Loan crisis in the 80's. Reagan deregulated the S&L industry, and soon taxpayers were covering $160 billion in losses when some 700 S&Ls went under.

John McCain was part of that fiasco and was one of the so called "Keating Five." MCain and four other senators were investigated for taking money from an S&L CEO and pressuring regulators to back off on investigating his S&L. They did back off, and then when that S&L went under, we taxpayers picked up the billions in losses.

McCain was right in the middle of the previous deregulation-related financial industry bailout, and now he's showing some serious poor judgemnt in this one. I don't think he can be trusted to deal with this situation responsibly.

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Originally Posted by dragonrider

We go for years of privatizing all the profits, and as soon as these companies go bankrupt, we nationalize the loss!.........
Man, I wish I could get this deal!

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Wow... great post. That sentence ^ pretty much sums it up. I'm slowly realizing that "survival of the fittest," applies more to species than individuals. We are proving that we are not fit for this world...

Sad but true...

Aye tis true, we just dont care about accountability anymore.

What's that? You caused the rapid downfall and bankruptcy of your own company because you gambled and lost? Don't worry dude, I'm here for you. Ohhhh nice severance package, how big is that? 5 million? Not bad, not bad. Nah nah keep it, you can buy a sweet house in the Hamptons with that, and then some. Well I KNOW you have three houses already, that doesn't mean you don't need a few more.

I'd have rather risked a depression to be honest. Sometimes we need to do something radical so people wake up. We can't keep saying that wealth is the most imporant thing in the country, and that if you screw over millions of Americans you should get PAID millions of dollars. I think it's becoming very close to a proven fact that the government cares more about big companies and money than they do about us.

:)...

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Originally Posted by killerweed420

Heard on the news this morning that we have already bailed out $800 billion worth of failed businesses so far this year not counting AIG. 300 million men women and children in America divided into $800 billion equals $2,666 each that very man woman and child is going to have to ante up for this year alone, much less our national debt.
Keep following all the lemmings people. Your chief is leading you off the cliff.

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I think my opinions on the whole economy thing are clear in the other post but I just had to say that the lemming example isn't actually true haha.

I was watching Animal Planet the other day and they said that lemmings don't actually leap to their deaths like that. And that the whole idea is a wash because the people who originally filmed it actually chased them off the cliff.

Random yes, but I thought everyone would like to know haha.

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!!!!!!

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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!!!!!!

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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

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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

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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.

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!!

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.

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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!!

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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.

Yeah I heard Kraft took the place of that one company that went under.

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Originally Posted by rebgirl420

Yeah I heard Kraft took the place of that one company that went under.

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Kraft is now listed on the Dow Jones industrial average, replacing AIG.

Business Feed Article | Business | guardian.co.uk

Yeah I seen that on the news.

Good stuff.

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.

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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.

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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.