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1. [verwijderd] 12 oktober 2008 07:27

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   AIG's crucial role in the banking collapse
   
   Oct 09, 2008
   
   Something very strange is happening in the financial markets. And I can show you what it is and what it means...
   
   If September didn't give you enough to worry about, consider what will happen to real estate prices as unemployment grows steadily over the next several months. As bad as things are now, they'll get much worse.
   
   They'll get worse for the obvious reason: because more people will default on their mortgages. But they'll also remain depressed for far longer than anyone expects, for a reason most people will never understand.
   
   What follows is one of the real secrets to September's stock market collapse. Once you understand what really happened last month, the events to come will be much clearer to you...
   
   Every great bull market has similar characteristics. The speculation must – at the beginning – start with a reasonably good idea. Using long-term mortgages to pay for homes is a good idea, with a few important caveats.
   
   Some of these limitations are obvious to any intelligent observer... like the need for a substantial down-payment, the verification of income, an independent appraisal, etc. But human nature dictates that, given enough time and the right incentives, any endeavour will be corrupted. This is one of the two critical elements of a bubble. What was once a good idea becomes a farce. You already know all the stories of how this happened in the housing market, where loans were eventually given without fixed rates, without income verification, without down-payments, and without legitimate appraisals.
   
   As bad as these practices were, they would not have created a global financial panic without the second, more critical element. For things to get really out of control, the farce must evolve further... into fraud.
   
   And this is where AIG comes into the story.
   
   Around the world, banks must comply with what are known as Basel II regulations. These regulations determine how much capital a bank must maintain in reserve. The rules are based on the quality of the bank's loan book. The riskier the loans a bank owns, the more capital it must keep in reserve. Bank managers naturally seek to employ as much leverage as they can, especially when interest rates are low, to maximise profits. AIG appeared to offer banks a way to get around the Basel rules, via unregulated insurance contracts, known as credit default swaps.
   
   Here's how it worked: Say you're a major European bank... You have a surplus of deposits, because in Europe people actually still bother to save money. You're looking for something to maximise the spread between what you must pay for deposits and what you're able to earn lending. You want it to be safe and reliable, but also pay the highest possible annual interest. You know you could buy a portfolio of high-yielding subprime mortgages. But doing so will limit the amount of leverage you can employ, which will limit returns.
   
   So rather than rule out having any high-yielding securities in your portfolio, you simply call up the friendly AIG broker you met at a conference in London last year.
   
   "What would it cost me to insure this subprime security?" you inquire. The broker, who is selling a five-year policy (but who will be paid a bonus annually), says, "Not too much." After all, the historical loss rates on American mortgages is close to zilch.
   
   Using incredibly sophisticated computer models, he agrees to guarantee the subprime security you're buying against default for five years for say, 2% of face value.
   
   Although AIG's credit default swaps were really insurance contracts, they weren't regulated. That meant AIG didn't have to put up any capital as collateral on its swaps, as long as it maintained a triple-A credit rating. There was no real capital cost to selling these swaps; there was no limit. And thanks to what's called 'mark-to-market' accounting, AIG could book the profit from a five-year credit default swap as soon as the contract was sold, based on the expected default rate.
   
   Whatever the computer said AIG was likely to make on the deal, the accountants would write down as actual profit. The broker who sold the swap would be paid a bonus at the end of the first year – long before the actual profit on the contract was made.
   
   With this structure in place, the European bank was able to assure its regulators it was holding only triple-A credits, instead of a bunch of subprime 'toxic waste.' The bank could leverage itself to the full extent allowable under Basel II. AIG could book hundreds of millions in 'profit' each year, without having to pony up billions in collateral.
   
   It was a fraud. AIG never [had] any capital to back up the insurance it sold. And the profits it booked never materialised. The default rate on mortgage securities underwritten in 2005, 2006, and 2007 turned out to be multiples higher than expected. And they continue to increase. In some cases, the securities the banks claimed were triple A have ended up being worth less than $0.15 on the dollar.
   
   Even so, it all worked for years. Banks leveraged deposits to the hilt. Wall Street packaged and sold dumb mortgages as securities. And AIG sold credit default swaps without bothering to collateralise the risk. An enormous amount of capital was created out of thin air and tossed into global real estate markets.
   
   On September 15, all of the major credit-rating agencies downgraded AIG – the world's largest insurance company. At issue were the soaring losses in its credit default swaps. The first big write-off came in the fourth quarter of 2007, when AIG reported an $11 billion charge. It was able to raise capital once, to repair the damage. But the losses kept growing. The moment the downgrade came, AIG was forced to come up with tens of billions of additional collateral, immediately. This was on top of the billions it owed to its trading partners. It didn't have the money. The world's largest insurance company was bankrupt.
   
   The dominoes fell over immediately. Lehman Brothers failed on the same day. Merrill was sold to Bank of America. The Fed stepped in and agreed to lend AIG $85 billion to facilitate an orderly sell off of its assets in exchange for essentially all the company's equity.
   
   Most people never understood how AIG was the linchpin to the entire system. And there's one more secret yet to come out...
   
   AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.
   
   I'd wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.
   
   The collapse of the credit default swap market also meant the investment banks – all of them – had no way to borrow money, because no one would insure their obligations.
   
   To fund their daily operations, they've become totally reliant on the Federal Reserve, which has allowed them to formally become commercial banks. To date, banks, insurance firms, and investment banks have bor
2. [verwijderd] 12 oktober 2008 07:48

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   vallende messen, of een vallende granaat met een erg kort lontje las ik ergens...
   
   FDIC has increased their "troubled banks" list from 117 to 300+ for 2009..
3. [verwijderd] 12 oktober 2008 08:34

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   Pershing Square's Ackman Is Excited About AIG
   
   More News related to AIG
   Investors With Losses in Large Concentrated Positions Should Consider Their Legal Options, Announces The Securities Law Firm of Klayman & Toskes
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   Investors Suffering Stock Market Losses as a Result of Holding Over-Concentrated Positions May Have Claims Against Their Brokers; The Law Firm of Stein, Rosenberg & Stein, P.A. is Investigating
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   October 6, 2008 4:23 PM EDT
   At the Value Investing Congress, Bill Ackman told us why he made a small investment in AIG (NYSE: AIG). Ackman made this investment in AIG in the past couple of weeks. He made the investment after the government struck its deal and AIG's shares outstanding skyrocketed. He said the government got a great deal with its investment in AIG.
   
   As we reported earlier, AIG is Ackman's first investment in the financial services sector in five years. Ackman said AIG's Book Value is almost $6 per share, AIG is currently trading at $3.90. The Book Value has been adjusted for the mark to market losses and the government dilution.
   
   Ackman says if you pay $3.80 and AIG goes for more than book, then you have a decent return. However, Pershing Square's Bill Ackman said where it gets really exciting is if AIG sells assets, and pays back the government quicker. Ackman thinks the government could make a concession and perhaps reduce its AIG warrants from say 80% to 15% to 20%. Ackman joked that with the 80% the government got, Hank Paulson should be running a hedge fund, not the treasury. Mr. Ackman said a lot of investors (working class owned it through pensions) were hurt with the AIG deal. But, by the government reducing its warrents, taxpayers could get paid back, shareholders get paid and money will move further down the line.
   
   Ackman says AIG is interesting and a very good risk/reward. Finally, Ackman said he thinks AIG's CEO is thinking about AIG the right way.
   
4. 2008drama 13 oktober 2008 23:31

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   quote:

   2008drama schreef:

   [quote=op en top]
   Bos roept eerst dat de financials het goed doen.
   dat gold ook voor Fortis.
   Dan koopt die zich in voor 49% en herhaalt dat de zaak operationeel goed draait.
   2 dagen later neemt die ,noodgedwongen, de hele boel over. Weer en nu met meerdere specialisten
   wordt herhaald , de banken-verzekeraars in Nedl. doen het goed de koersen staan in geen verhouding tot de echte waarde.
   
   Nou ben ik benieuwd wat die dan gaat betalen aan de Fortis aandeelhouders.
   
   grt
   PS ik ben voorstander van bijv. 7 euro, met als optie dat je dan tegen die 7 euro weer opnieuw mee mag doen als de staat haar aandelen weer verkoopt.
   Simpel, je doet een paar jaar niet mee maar houd wel je rechten.
   
   [/quote] Dramae schaamt zich kapot, maar gaat maandag oor ee3n rebound, althans ik gaat nooit we naar het zzzzzzzzoudn InG 8 euro, in your wet dream. en een attitude. maandag is goed. De hele markt gaat uit van 250 vrijdag . NO way!! het gaat niet gebeuren!! s NOOI!!!
   
   I put the monEY where my money is. DURFINVEST waar ben je!!De belgische ekant (liesbeth)
   
   Drame says, het is klaar a;s klara... punt we gaan niet lager!!
   
   

   kindereh en dronkeh manneh... sprekeh de waarheid..
   
   nu nog lam worden en ik ga het ooit begrijpen!