Treasury sells $4.5 billion in AIG stock

Oh, ya. I forgot Bush nationalized them.

myp said:

I feel like AIG got some public opinion slack because less of the public understood their involvement in the crisis (I think a lot of people still don't know) and the magnitude- which was just absurd. Kind of like how Barclays is benefiting from people not understanding what they did to LIBOR along with other banks.

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Thing is, shit hit the fan under Obama. Everyone knows about TARP and how Chrysler and GM got nationalized. AIG, the smaller banks that failed before the 'Too Big to Fail' banks ran out of money, etc. that Bush nationalized slipped under the radar because nobody realized we were in trouble at the time. The only noteworthy media coverage I remember about AIG was Gen Beck (back when he still worked for CNN).

myp said:

There was plenty of coverage about TARP from what I remember. Too much of it, though was just not understood by the public.

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TARP yes, Chrysler and GM, yes. AIG and the small to midsize banks that failed pre-TARP just got about 2 days worth of news because they just seemed like the typical failures at the time. The only person that made a big deal of any of it was Glenn, it gave him so much material for socialist jokes, he couldn't help himself. lol

David, myp,

So what are the implications for the lastest event (the sale)?

Is this a good sale, and the taxpayer is getting a good price?

If the AIG stock is viable, why would the government sell, instead of continuing to pull a good ROI? OR, is the ROI so bad, that a sale is warranted?

I simply don't understand.

v/r
Rocco

myp said:

The government isn't in this to make a profit. It never was. Their goal was to keep the company from failing and then get out as fast as possible without putting it at risk of failing again. AIG has been doing okay, so the Treasury figured they could sell another chunk of stock without destroying the market for AIG shares (AIG itself is buying $3B of its own stock back, which also keeps the market stronger). If AIG continues on strong, the Treasury will look to sell again after a while and they'll keep doing it until all their holdings of AIG are gone. They can't sell all at once because that would essentially flood the market with AIG shares and could hurt the company a lot considering how much the government still owns.

The taxpayer made a profit because the stock price is higher right now than what they paid. It wasn't really a goal- just a side effect.

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True but i wish they did try tuning a profit. Going on a nationalizing spree and getting a few billion dollars in dividends every year would really help with the deficit and could fuel spending increases once we balance the budget.

myp, et al,

I get that the US Government is not a profit making venture. But then, the entire idea of the People of the United States, using public funds to bailout the private sector is not inherently a governmental function. That is an insurance function.

myp said:

The government isn't in this to make a profit. It never was. Their goal was to keep the company from failing and then get out as fast as possible without putting it at risk of failing again. AIG has been doing okay, so the Treasury figured they could sell another chunk of stock without destroying the market for AIG shares (AIG itself is buying $3B of its own stock back, which also keeps the market stronger). If AIG continues on strong, the Treasury will look to sell again after a while and they'll keep doing it until all their holdings of AIG are gone. They can't sell all at once because that would essentially flood the market with AIG shares and could hurt the company a lot considering how much the government still owns.

The taxpayer made a profit because the stock price is higher right now than what they paid. It wasn't really a goal- just a side effect.

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(COMMENT)

AIG was saved by the grace of the US Taxpayer. If it had not been for the risk taken with the taxpayers money:

• The company would have failed and all would be lost to every shareholder, and the value of AIG would have become zero.

Instead, the investment made, totally saved AIG, and every shareholder, every Board Member, and senior officer of the company was spared significant losses through the intervention of public funds.

To me, that means that every shareholder, board member, and senior officer, without regard to the repurchase of the stock, owes a debt to the US Taxpayer, over and beyond the mere purchase price of the stock. They owe a percentage of what was saved for them.

One example is, AIG had a $165M bonus payout. If AIG had gone under, that wouldn't have happened. And the story they tell is that these payouts for made for the good of the nation.

No, the AIG employees should be rounded up and prosecuted.

For the life of me, I cannot see why they would put me in the poor house, take everything I own, and penalize my family, --- yet the very people that create an international crisis, --- they use the public's money to bail out --- AND THEN, give them a bonus.

That is collusion and racketeering. You cannot tell me that the politicians are not in the pocket of corrupt big business officials.

Most Respectfully,
R

myp said:

Rocco, it is not that simple. We did not bailout AIG or any of the banks because we didn't want to see the shareholders or the companies fail. The real root of the reason is because the failure of those companies would pose systemic risk. In other words, letting them fail could have started a sort of spiral that meant many other businesses which should not have failed would also.

You see that this was the ultimate goal not only through some of the rhetoric, but by the actions the government and Fed took to make it harder to tell which banks and firms were in trouble and which weren't in as much trouble. In a government that is to some extent expected to be transparent, it is a tough pill to swallow, but one that can be argued for.

It is actually good that we did not put bonus caps, etc. on these firms- doing so would mean the US would be controlling these businesses, which is the last thing our system is about. Instead, the US government took a non-controlling interest in these firms.

Some of the loans programs, etc. came with interest as well and in cases of stock we made money anyway. Holding on to the stock is bad because of the additional risk the government would have to hold.

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This is where we disagree. We should be running these companies for the good of the country. They screwed us over on the bet it would profit them and failed. We saved them and it is our right to dictate to them as a result. A for-profit gov't would increase revenue, reduce the tax burden and drive an economy based on innovation for the sake of innovation rather then profit.

myp, et al,

I understand completely.

myp said:

Rocco, it is not that simple. We did not bailout AIG or any of the banks because we didn't want to see the shareholders or the companies fail. The real root of the reason is because the failure of those companies would pose systemic risk. In other words, letting them fail could have started a sort of spiral that meant many other businesses which should not have failed would also.

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(COMMENT)

If it was not to bailout the shareholders and the companies, then the US Government should have nationalized them, nursed them back to health, thereby preventing them from making the same criminal acts over again.

No, I don't believe the state version of the truth. While the movie (Too Big to Fail) was a very good PR tool for tool, it tries to project the image that the government acted heroically --- instead of covering their ass. If these institution are actually too big to fail, then the Justice Department should be breaking them-up under monopoly principles. But, instead, they actually made them bigger. Now the precedence is set. They can do no wrong, and will never be prosecuted for for creating shady financial products.

Already, several of these banks have begun to fall back into the same track. No, we did the wrong thing and now we are trying to justify why we bailed-out the banks and allowed the exact same leadership to continue on without prosecution or penalty.

No matter how you slice it; the bailout --- as executed, was wrong. The taxpayers of the US should own every one of those banking institutions that would have failed, or the banks that created the crisis conditions. If you are going to use public funds to avert a crisis, there must be a penalty. To allow the banks leadership and "voting" shareholders to go unpenalized is simply unethical.

Morals, values, and ethical practices are not something you suspend, just because the consequences are inconvenient. And to reward a leadership for unethical activity that required a massive bailout is not the standard we want to set.

Most Respectfully,
R

myp, et al,

SIDE NOTE:

(COMMENT)

In 1987, the movie "Wall Street" was made. In it, it had a character named "Gordon Gekko."

Gordon Gekko: said:

The richest one percent of this country owns half our country's wealth, five trillion dollars. One third of that comes from hard work, two thirds comes from inheritance, interest on interest accumulating to widows and idiot sons and what I do, stock and real estate speculation. It's bullshit. You got ninety percent of the American public out there with little or no net worth. I create nothing. I own. We make the rules, pal. The news, war, peace, famine, upheaval, the price per paper clip. We pick that rabbit out of the hat while everybody sits out there wondering how the hell we did it. Now you're not naive enough to think we're living in a democracy, are you buddy? It's the free market. And you're a part of it. You've got that killer instinct. Stick around pal, I've still got a lot to teach you.

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.

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• The "who" is anybody that catches the brass-ring.
  
• The "mantra" is to "maximize the wealth of the shareholder."
  
• The "winner" is the greedy guy that comes out on top with the most power and influence.

But behind it all is the greed for money, which gets you influence, that brings-on the power; that gets you more money, that radiates more influence, and brings more power.

The nation is not run at all. You have to think of it as an environment for the greedy, influential, and powerful. In science, we would call it the fabric of greed. The country runs, not to improve the nation, but as a component for the greedy, influential, and powerful to move, manage and manipulate factors necessary to attain more money. The rest of us are just expendable pawns. Mitt Romney makes millions, not helping to rebuild America and putting people to work --- but by chopping companies and selling it off in pieces (the break-up value). If people (you and me) lose our jobs, our homes our livelihood, it makes no difference to the greedy, influential, and powerful. We are colateral damage - insignificant to and unimportant goal of "maximizing the wealth."

Look at the key factor in the news today:


It is not about loyalty, honesty, integrity, wisdom, ethics and values that runs America. These are all showcase concepts - but the money, that is what is important. In America, the nation is run by the greedy, influential, and powerful that buy Congressmen, Senators, and the Presidency. It's like the propaganda movie that portrays the Administration being heroic and saving the nation using public funds (taxpayer dollars) to bailout the banking and financial industries; then the follow-on stories about the how much they paid the CEO's in bonuses for putting the crisis forward in the name of greed.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being *cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

Read more: http://www.rollingstone.com/politic...learned-from-the-mafia-20120620#ixzz22scbXQ9c

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Do these names sound familiar? These are the guys that were too big to fail. We bailed them out, only to let them loose to do more damage to "America." When you can get the government to do that for you, that is POWER.

It's not a "who" --- but a "what."

Most Respectfully,
R

myp said:

A "for profit" government is fascism.

Changing our current government to look for profits here is a huge conflict of interest (Congress gets every incentive to pass anything that blows up another bubble) and also very risky. I think you are overlooking the risk involved in trading or even holding vs. not holding.

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I know. I was a fascist (not a Nazi) once upon a time. Sometimes my past beliefs rears it's ugly head.

myp said:

They didn't go unpenalized. You have to look at it this way- the ship was sinking, we had to save the evil captain to have a chance at keeping the ship upright even though he was part of the reason the ship started sinking in the first place.

They weren't rewarded.

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I agree that we had to save the ship, and possibly even the evil captain, but to say that they were penalized and unrewarded is a remarkable concept. Are we talking about the same crisis? Large bonuses are not unrewarding in my book, and no prosecution is not penalization, again, at least in my book. I recall that the justification for bonuses was to preserve the quality of management. Oddly, the same 'quality' management that drove the company into toxic investments needs to be rewarded?

Break up the banks that are 'too big to fail'. Re-institute the Glass–Steagall Act. Separate banking from speculation... it is not complicated. Call it socialism if you are stupid, but it allowed us to have free-market prosperity for six decades. And, as a bonus, I no longer have to listen to arrogant AT&T employees.