Until this week, it would have been unheard of for the government to bail out an insurance company. Oh, how times have changed….
The government is about to do just that.
Regulators know with Bear Stearns and Lehman (who filed bankruptcy on Friday) going under the financial world does not end. If AIG was to go under? Well, the damages are far reaching and, in some ways, no one really wants to even crunch the numbers.
The deal? The government will lend AIG $85 billion dollars and receive a 79.9% equity stake.
The upside, if there is one, is the government finally has a chance to find alternative methods (other than direct taxing) to pay down the deficit. Once AIG turns the corner and starts making money, so will the government (much like Fannie Mae and Freddie Mac). The downside is that I highly suspect this will be nowhere near the amount of money that AIG ends up needing.
In the meantime, I am going to see if I can start a company, get overwhelmed with greed, make millions, then have the government come bail me out!
Fine, I suppose this is where you look for some witty insights to my mind. A "bio" of sorts. Here is the deal... I ride motorcycles, smoke cigars, golf, kayak, fly, race my car through the mountains, write (a lot), and travel extensively. I am almost old enough not to care what other people think about me...almost. ~Godfadr
And where exactly is the government going to get all this money to bail them out? They claim to not have the funds for schools and healthcare programs, so WHERE is this money coming from?
I have my own doubts about the constitutionality of the federal reserve.
And IF the fed res really IS a government agency then I can assure you it will be US taxpayers bearing the burden of this bailout.
The FED, from my understanding is a private organization, which is supposed to fall under the oversight of Congress…sort of a public/private co-op.
The Fed prints off money as they see fit, or when asked to by Congress, which is then loaned to congress, which means debt is incurred with interest, payable by you and me. And if money is borrowed from out of country (see: China), the same thing happens as an end result….bigger debts and deficits, drawing down the value of the dollar making it even further down the road that the actual repayment can, if ever will, be made.
Given Godfather’s second half assessment in this ost, I’ll have to pause to think things over, but generally, I’d say (besides the fact that the gov’t forced the issue in the first place is a really stupid @#$%@#%$ deal) let them fail….rebuild from scratch, maybe actually learn a lesson or two, rather than providing bandaids to the sucking chest wound that our economy is turning into.
Godfather Added: I would have been inclined to let them fail if that was the result. Much like continually bailing out a child I am not sure they will ever learn.
Definition of “Socialism” as defined by dictionary.com
1. Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.
2. The stage in Marxist-Leninist theory intermediate between capitalism and communism, in which collective ownership of the economy under the dictatorship of the proletariat has not yet been successfully achieved.
This boys and girls scares the hell out of me. Where in our constitution is the government given any rights of ownership of companies.
Fear of an economic downturn will be overwelming emotion that will drive our turn to socialism.
Jay, you are VERY correct and it is a point that may be missed on a lot of people.
A government bailout is one thing (the lending of money), once “ownership” is involved you have turned the corner.
And THIS is just the beginning folks! I heard yesterday on CNN that Washington Mutual may be asking for a bailout next as they are in trouble.
Is anyone else seeing a pattern here or is it just me being overly paranoid?
Unfortunately I agree with the Godfather that the dumbed down masses won’t “get it”.
WaMu might be going down??? hmmm, any chance they’ll lose my credit record with them??? LOL
There is alot of blame to go around here.
1. Government
a. not providing proper oversight
b. not warning me this was coming
c. encouraging risky loan practices
2. Banking institutions
a. didn’t save a huge kitty during “good times”
b. didn’t tell gov’t “hey, bad idea here”
c. encouraged risky loans
3. Consumers
a. didn’t investigate before taking loan
b. cried fowl when loan started going bad
I’ve told this story before, but when I got my first home loan (very exciting)I was encouraged by the bank to purchase a home almost 3 times the cost of that which we chose. Which would have included us in this next round of foreclosures. Thank God we used some judgement.
You have to pay the piper. All these bail out’s are doing is delaying the inevitable.
Actually, what I realized is that yesterday WaMu shares were dropping and they got nervous, so there was a question about if they would be next.
There is lots of blame to go around, I agree, and I have little sympathy for those who took mortgages they really couldn’t afford.
Jay you and your wife were indeed very smart to realize what the bank was doing and to stick to what you knew you could handle.
A bank trying to convince you to take a house that was more than you could afford should be a red flag to anyone with a sense of responsibility. As should any of those sub-prime mortgages. Unfortunately, too many have been convinced that if you are not in debt, and don’t have a mortgage that your worth as a human being is somehow diminished.
My sister tried to get me involved in a “scheme” to help people get mortgages. While it seemed a good idea, something about it just never felt right to me and I’m glad I didn’t do it and glad I talked her out of it also.
The old saying: if it sounds too good to be true, chances are it is………………has just been proven here.
Everyone has some good comments. Too bad it won’t do any good!
This has been the plan since at least the Roosevelt days. Notice how gradually it has slipped in! Notice how some of our older folks have warned us this was coming, and many of us pooh-poohed their predictions.
Godfather Added: Yeah, when we were young we all thought we knew better!