Steve Posted March 2, 2009 Report Share Posted March 2, 2009 Okay, I have a general question for the esteemed thread. We've had a few months since the initial bailout and the sky is falling scenario from the previous regime..er..ah...administration. Was it 'much ado about nothing' or did some of these firms like AIG really needed to bailed out? What would have happened if they were allowed to fend for themselves and go into bankruptcy if that was the case? Would we have faced economic armageddon? I'm beginning to wonder frankly. Money for the people or to build up infrastructure, etc. I can understand if not agree with all of it. Money for the banks and other financial firms, well...I'm not so sure about. What say ye one and all? Link to comment Share on other sites More sharing options...
chuckwoww Posted March 2, 2009 Report Share Posted March 2, 2009 I think it's the funny money Steve. Swaps and derivatives. It's like everybody has been pretending they don't exist. Link to comment Share on other sites More sharing options...
Weird Posted March 2, 2009 Report Share Posted March 2, 2009 Let's give the banks our money so we can borrow from them.. weee! Link to comment Share on other sites More sharing options...
shygye Posted March 2, 2009 Report Share Posted March 2, 2009 Okay, I have a general question for the esteemed thread. We've had a few months since the initial bailout and the sky is falling scenario from the previous regime..er..ah...administration. Was it 'much ado about nothing' or did some of these firms like AIG really needed to bailed out? What would have happened if they were allowed to fend for themselves and go into bankruptcy if that was the case? Would we have faced economic armageddon? I'm beginning to wonder frankly. Money for the people or to build up infrastructure, etc. I can understand if not agree with all of it. Money for the banks and other financial firms, well...I'm not so sure about. What say ye one and all? The fear was the bond market would collapse because part of AIG's biz is insuring bonds. If the banks go under then where will small businesses get loans to finance inventory? Their suppliers won't be able to help because they wouldn't be able to get loans either. All life is suffering. Link to comment Share on other sites More sharing options...
chuckwoww Posted March 2, 2009 Report Share Posted March 2, 2009 It looks like 'Joey' Cassano is going to get the blame. Not that it helps much... http://www.guardian.co.uk/business/2009/mar/02/mayfair-office-brought-down-aig Link to comment Share on other sites More sharing options...
HeartThais Posted March 2, 2009 Report Share Posted March 2, 2009 Was it 'much ado about nothing' or did some of these firms like AIG really needed to bailed out? What would have happened if they were allowed to fend for themselves and go into bankruptcy if that was the case? Would we have faced economic armageddon? Not sure really. The problem is that they wrote a lot of credit default swaps. The mechanics of CDS is that AIG receives periodic premiums in exchange for protection in case of a default event. However, on a daily basis both sides of a CDS calculate a present value and transfer the net changes so that there isn't a single huge payment at the actual default event. Banks that have bought CDS from AIG have booked profits on the CDS. If AIG goes under, those CDS that AIG wrote get marked down to zero and a lot of banks take huge losses. Since the CDS market isn't transparent, if AIG goes under, a lot of banks would be wondering which of their business partners might go under due to those losses. We had a glimpse of what happens when a major counterparty in financial transactions goes under (Lehman) and it wasn't pretty. Personally, I think we should just let AIG go under and then deal with the aftermath. All this guessing about exposure and stability is just making things a prolonged death. Lehman was ugly but we survived. Link to comment Share on other sites More sharing options...
Steve Posted March 2, 2009 Report Share Posted March 2, 2009 Okay, right now it seems a bit quiet with regards to financial instutions. I kept hearing 'it will get worse, this is just the tip of the iceberg'. It may be anyone's guess but has the worst of it happened or are there some firms out there that are 'vital' to the economy that are teetering? I recall reading about these CDSs and the other intricate financial instruments out there. Hard to get ones head around some of it. I also wonder if there have been any steps taken to make these things illegal or they can still do it but it will probably occur when the economy comes back. I don't know if there should be regs against these things or not or they should be limited or whatever. It does make me wonder if the same thing can happen again in the future once the economy comes back and memories get old. Link to comment Share on other sites More sharing options...
expat Posted March 3, 2009 Report Share Posted March 3, 2009 If you believe anyone, you are fooling yourself. Some say gold is good, some say gold will crash. Some say treasuries and cash are good, some say they will crash. Some people say buy in now at the bottom of the market, some say it will go down to 3,000. What have I done? I've bought some physical gold--I want something to hold onto in case the shit *really* hits the fan. I've got some gold funds. I've bought oil (an etf, look it up) when it hit about $35 (I figure if it goes up, I'll be happy every time I fill up at a too-high price). I have most money in cash. I'm just as confused as everyone. Link to comment Share on other sites More sharing options...
Faustian Posted March 3, 2009 Report Share Posted March 3, 2009 Wise advice expat.... CS, of course it will happen again. Greed is a powerful force. Nothing to do with memories, people will be looking for the next opportunity already. Things will only change if this a prolonged downturn/depression. Link to comment Share on other sites More sharing options...
Bangkoktraveler Posted March 3, 2009 Report Share Posted March 3, 2009 I figure the stock market is going to bottom at 4000 or less. If it does, it means a lot of wealth just plained disappeared. Link to comment Share on other sites More sharing options...
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