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Old 10-02-2008, 09:53 PM   #21
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I have a few "issues" with all the talk going on about how the little guy is innocent in all this. Let me vent a little here.

Stephen, truly, this is a complex economic issue that really can't be simplified down to ordinary folks bearing the cost of bailing out bankrupt corporates and people responsible ending up w/fat pension, etc. As a matter of fact its all the "ordinary folks" who are driving this train right off a cliff. And what is "bearing the cost" when the economy is like the ocean tides--remember the phrase that "a rising tide floats all boats?" well, we're in it together and we should get out of it together, IMHO.
Thanks for the wealth of information. Irrespective of this I feel that I, as an ordinary person, am having to carry the can for this. Why? because I was brought up by honest parents who believed in only buying what they could afford. They scrimped and saved for years until they could pay cash for their house. I did the same and never borrowed money, lived within my means and after years of hard work and saving was able to buy my own home and a boat. Now I find the value of my assets sinking due to the incompetence of so called experts who encouraged people who were not finance-savvy to borrow more than they could afford. Experts who neglected to explain why such words as negative equity even exist in the English language.

Now, as I mentioned, the value of my property is decreasing so I am paying, albeit in part, for this debarcle. I am, also through my taxes, probably going to face the prospect of financing bail-out plans for banks and mortgage houses too. And whilst I and others of my ilk are paying for other people's mistakes and incompetence, the top dogs in the finanance world, who had salaries far in excess of mine whilst they were committing their errors, are likely to be leaving their posts in shame but with golden handshakes which will far exceed any pension I will get.

Do not missunderstand me. I am not complaining about my lot in life. I am very satisfied with what I have achieved but I am extremely critical of the system and above all of the practice of rewarding those who have committed grave errors of judgement and exhibited proffessional incompetence whilst the man on the street, who fell offer for these confidence tricksters, now bears the costs.

You are correct though in stating that we are all in this togther, only I feel that I was press-ganged. I may have involuntarily taken the king's shilling but I don't have to like it.

Ayee // Stephen
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Old 10-02-2008, 11:51 PM   #22
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Another good read...Highlights of Warren Buffet's interview with Charlie Rose

Buffet repeats over and over that Bailout is a good idea only if we pay market value for the assets...unfortunately we will not be.

Link to video: http://www.charlierose.com/shows/2007/5/28...rom-may-10-2007

HIGHLIGHTS

Made GE investment decision yesterday after getting call in the morning.

Using cash now because good time to do so: others fearful

In my adult lifetime I've never seen people this fearful economically.

8% of bank deposits have been moved in last few weeks...and people are not wrong to be worried.

Weakness being felt at auto retailers, furniture retailers. But will get worse.

Rescue plan: Not perfect, but I'd rather be mostly right than precisely wrong.

$40 billion of Treasuries sold last week at yield of 1/20th of %. That's money shoved under mattress time.

Major institutions all want to deleverage. What seemed so easy to borrow against a year ago now seems like rat poison. Only one who can lever up is US government.

Basically the right things have been done, but no one saw tsunami coming.

Response has been ad hoc, but better that than nothing. And three months ago, Treasury would never have been able to get the power to stop. Now people understand.

What is in trouble here is American economy, not Wall Street. I don't like what's going on, but Wall Street shareholders got creamed. Justice won't be perfect. Can second guess forever, but this is Pearl Harbor. Don't spend weeks and weeks deciding everything--spring into action.

Never seen anything like this in his life.

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Depression is a possibility if this plan doesn't work. We've been in a recession by any definition. $20 trillion of houses, $20 trillion of stocks, both down dramatically. 95% of people worse off. That is bleeding into the real economy. That wave is just starting to hit. If every company keeps trying to deleverage...gets much worse. Unemployment will rise, but question is whether goes to 7% or 10-11%

I worry whether current Paulson plan enough. If you don't react to Pearl Harbor, every day goes by, gets worse.

Paulson best possible Treasury secretary. Right person. Sheila Bair, too (FDIC head). She's moved 8% of deposits in US in last 10 days. Great public servants. Right people to get job done. Need tools. Need money and flex.

NEED TO TIE TO MARKET PRICES. If they do this, they'll make money. I'd take 1% of that. Hedge funds are buying these assets for 15%-20% return. These assets will be worth more money over time. US government has very cheap borrowing costs.

Government will be investing, not spending. I'd love to do it, but just don't have $700 billion.

I don't think it would be crazy to have model on RFC (entity in Depression). Two things needed: 1) liquidity. 2) capital problem with some of the institutions. Feds did that in Depression. Problem today with RFC would be cumbersome process. Right now, commercial paper market drying up. RFC thing makes sense, but what is needed now is liquidity.

Any time I can help, give advice, happy to do that. That's why I'm here tonight.

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Derivatives killed AIG. Very tempting. No capital requirements. I said they were financial weapons of mass destruction, and they have been.

Biggest single cause: tremendous residential real-estate bubble. Human behavior leads to bubbles. Everyone believed prices were going to go up forever. Behaved foolishly. We leveraged up: 20% fall in value of $20 trillion asset. That's $4 trillion. That's a big deal. And it continues.

The good thing: We have household formation in this country. Inventory too big, but we can work it off.

Should people have known better? People should always know better. They don't get smarter about fear/greed. Can't stand to see neighbor getting rich. Three "i's": Innovators, imitators, idiots. Same with silly Internet valuations...went up every day.

With housing, if you think prices go up every year, if don't buy this year, will have to buy it next year. Everyone who has done it has been proven right. And someone willing to lend you money for free? Found money...

It pays off for a while. You can use leverage. You can do lots of smart things, but if you do one wrong thing, wipes you out. Because anything multiplied by zero is zero. Cinderella: At midnights, everyone turns to pumpkin and mice. But no one wants to leave party, and no clocks on the wall saying "almost twelve."

Confidence: Treasuries 1/20th of a %. Not buying because attractive yield. People buying because confident will get money back. Confidence in markets is like oxygen: when have it don't even think about it. When gone, can't think about anything else.

If doesn't work, turn the spigot. You don't want to be too little too late.

If people think it's too little, it's too little.

The one thing you have to is buy assets at market [which the government is not planning to do]. You don't want to have artificial prices being paid.

This country will be living better 10 years from now, 20 years from now. We had Depression, wars, oil shock, etc. All these terrible things, but we had 7 for 1 improvement in standard of living. We have great system. American workers so productive.

Same things happening around the world. Europe banks doing same. Beware of geeks bearing formulas.

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New Administration...

Recession is going to get worse. Things won't turn around in a couple of months. They will turn around. I don't know whether it's 6 months or 2 years. 6 months is best case. If we don't do things we should do, it will be 5 years.

We need to throw the resources at this. If we buy these assets intelligently. [a BIG IF]

I would hand a blank check to Hank Paulson... "Go invest it." I might ask him to put some money of his own up, too.

Trying to invest through 535 people is a tough job. Oversight good, but should be devoted almost entirely to question: Is this being done at market. Don't want government investing foolishly.

RFC: people knew what they were buying.

RTC is different...this was the stuff they inherited when thrifts went bankrupt. This is different. We're buying.

Markets aren't perfect. People go crazy. As long as have markets, will have excesses. Not going to change human animal, and human animal really doesn't get much smarter. People LOVE leverage when it's working.

Mark to market: I believe in it. In 1974-1975, we owned common stocks. We told shareholders what they were worth today. I thought "really worth much more." But not today. You get in a lot of trouble when you start putting fictitious numbers on value. You can explain you think will be worth a lot more, but once start putting phony figures into financial statements, you get in a lot of trouble. People want to make it worse.

I want to tell shareholders of Berkshire what it's all about. I explain in one case where I think figures calculated on our balance sheet is wrong. We do it way SEC wants and I explain. Shareholders can believe or not.

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China, Asia holding American debt...we have been consuming about $2 billion a day of goods/services above what we're producing. We send them paper in exchange. They can do lots with that, including buy our companies. They are going to own something for that. Every day, they own $2 billion more of American assets. I think that's bad.

We've been good on exports. 12% of GDP. That was 5% many years ago. This is not the most pressing problem right now. We are trading away pieces of country, which isn't good. But we are growing.

Dollar? Inflation is a likely consequence. We are in effect making a choice between future inflation and getting off the floor. We are likely to have more inflation in future.

Obama talking about another stimulus program. Do we need? What we need now is liquidity. But if there is another stimulus, should go to lower and middle class. I've never had it so good. Rest of country should get this one. One-fifth of households earn 21,000 a year or less. Imagine living on that. Push out $1,000 a person to those folks, it will get spent. It should come from guys like me.

15% capital gains tax...and no payroll tax on that. I've never had it so good. I think it's terrible for people to say that income from investments should be taxed at lower rate than income from labor. You're going to get the money from someone. So who? Me and you? Or guy who drives taxi getting me here. Over the years, they've taken less and less from a guy like me. Everyone likes to talk about how top 1% pay huge percentage of taxes. $900 billion is payroll taxes--that comes out of people in my office. Payroll tax is one-third of receipts of fed govt. That doesn't come from me.

--------------------------------------------------------------------------------

Inflation/interest rates: For time being, not an issue. Get patient up and walking first. What we're doing will have inflation issues.

Someone needs to explain all this, get the message out. Takes real leadership. Roosevelt didn't print money. He restored confidence. You needed to jumpstart economy. Did not change overnight. Put in FDIC, etc.

Roosevelt: Only thing we have to fear is fear itself: The country works very well. When I was watching house vote, I wasn't afraid, but we are going through a very tough period. I did not think I would see a time when AIG wouldn't be able to write checks. Why even talk about not saving? They were hoping private sector would save it. And private sector tried...but couldn't get handle on problem. Kept getting bigger and bigger.

--------------------------------------------------------------------------------

An ounce of prevention worth a pound of cure. If we delayed it six months, we'd need a ton of cure. It would be crazy not to do this. It will NOT fix economy. Going to see crappy earnings, more unemployment, etc. But if we bottom out at 7% vs. 9% unemployment, that's 3 million people. Just think about that. You don't want to create that. You can't help some increase from this point. I don't want anyone to think that we can.

Once we rescucitate athlete, we can talk about regulation, etc. Can do later. We had good system. But then we went crazy on residential real estate.
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Old 10-03-2008, 08:30 PM   #23
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I tried to leave 4 years ago, but the wife wasn't ready to cross the Pacific, and wouldn't let me single-hand to go. Next year I tried to sell the house, because I knew it couldn't go on forever. She wouldn't let go of the house. So then I went back to work by opening my new business, and the bottom fell out...............sheets hit the fan!....ggggrrrrrrr

As always time will tell!
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Old 10-03-2008, 10:08 PM   #24
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And the news for today!!!! Even though the bailout passed today....

The 157pt sell-off left the Dow down 22.1% for the year and 27.1% from its high on Oct. 9, 2007. The S&P is down 25% for the year and 29.8% from its October 2007 high. The Nasdaq is down 26.6% for the year and 31.9% since Oct. 31, 2007.

Imagine....

A good friend of mine had an offer on his SoCal condo for $485K that his wife decided to turn down because she wanted $495K. He told me yesterday that he couldn't get $320 for it today. FYI, his wife only paid $180K for the place 7 years ago...it's all about greed.
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Old 10-03-2008, 10:42 PM   #25
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All together 52 equity markets globally lost $10.5 trillion dollars so far this year, according to Standard and Poor's today. September alone accounted for $4.1 trillion.

From Citywire: The US stock market, however, was September’s best performer as it only lost 9.29%. The developed markets – excluding the US – saw an overall fall of 14.80%, while emerging markets fell 18.76% – the worst single-month loss for over 10 years in the developing countries.
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Old 10-05-2008, 01:31 AM   #26
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And the news for today!!!! Even though the bailout passed today....

The 157pt sell-off left the Dow down 22.1% for the year and 27.1% from its high on Oct. 9, 2007. The S&P is down 25% for the year and 29.8% from its October 2007 high. The Nasdaq is down 26.6% for the year and 31.9% since Oct. 31, 2007.

Imagine....

A good friend of mine had an offer on his SoCal condo for $485K that his wife decided to turn down because she wanted $495K. He told me yesterday that he couldn't get $320 for it today. FYI, his wife only paid $180K for the place 7 years ago...it's all about greed.
Trim, I agree.

Greed is what is the root cause of ALL these current problems. My grand parents were farmers and they lived a very humble life, they did not play the "Keep up with the Jones'" game that I see happening all over America these days. Buying a new car every 2-3 years or less, cable tv, and all the latest gadgets every "has " to have the day the new models are released. The people that are caught up in this may not realize it but borrowing money is a risk to start with. The consumer has a responsibility to educate him/her self on the possiblity of things not working as they want it to. The signs of this fallout in the economy have been there for over 5 years, you just had to know where to look.
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Old 10-06-2008, 04:01 PM   #27
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Wow...Dow below 10,000 this morning....hold on folks this could be a sharp fall.
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Old 10-06-2008, 07:19 PM   #28
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9600 and falling....
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Old 10-07-2008, 12:36 AM   #29
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9600 and falling....
Whoa-ho...it was quite a day today. Whew. Picking up the pieces I see that maybe, yes, maybe the money in my retirement fund is still there to retire when I'm...ummm. oh...93?

On the other hand, some of my "inverse" funds (ones that go up when the s&p go down, etc, they're doing great. Good thing they're the ones paying for the boat rebuild
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Old 10-07-2008, 12:38 PM   #30
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Whoa-ho...it was quite a day today. Whew...
Though I am loosing a TON is retirement plans, I have had a certain amount of money stashed away in bonds and such to buy my Catamaran, now this market is definitely making it more affordable for me to get what I want not what I can afford. So I guess every cloud has a silver lining

Case in point, I got an email yesterday from Lagoon that they have knocked $59,000 off the price of their 42ft. Still not enough for me to buy one, but they sure are proud of those things ...

A friend of mine owns a Catamaran business and when I went to see him last year he had all his manufacturing slots filled through the 3rd quarter of 2011. I just heard that most of those orders have been canceled and the deposits forfeited and he has barely enough work to keep everyone busy. Hell at least he is working.

the sad thing about all this is that I may be able to buy the Cat I want but I will have to work until 2055 to start cruising ...
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Old 10-07-2008, 08:21 PM   #31
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Dow @ 9458 down 496 on the day.

What is that sound I hear???
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Old 10-07-2008, 09:06 PM   #32
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Dow @ 9458 down 496 on the day.

What is that sound I hear???
Maybe a flushing toilet? Sorry, Head?

Looks like the $750+ billion bailout is working like a charm!?

Leave it to Washington to rush to judgement on a bandaid fix for the American economy! This is a JOKE!

Congradulations former fellow Americans, we are now citizens of the "Socialist Republic of the United States"!

Have a great day!

Back to work on the boat for me...
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Old 10-08-2008, 05:19 AM   #33
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Congradulations former fellow Americans, we are now citizens of the "Socialist Republic of the United States"!
It may well be an improvement on capitalist USA.

I come from what I believe to be a real socialist country, Sweden, where we have predominanty had socialist governments during my lifetime (although we have a right wing, highly tancient government at the moment) and the economy is in good shape - and would be in a far better shape if it was not dragged down by other failing economies. As a small country we have little say in the fate of the global economy.

Maybe our friends accross the Atlantic are confusing socialist with communist? It would not be the first time.

Aye // Stephen
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Old 10-08-2008, 01:31 PM   #34
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It may well be an improvement on capitalist USA.

Maybe our friends across the Atlantic are confusing socialist with communist? It would not be the first time.
I think you have a point there. I have yet to meet a capitalist who refuses to accept his social security benefits when he reaches (62, 65, 70). Yeah, capitalists are that until their own money is involved.

sorry for cynicism.
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Old 10-08-2008, 07:00 PM   #35
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I think you have a point there. I have yet to meet a capitalist who refuses to accept his social security benefits when he reaches (62, 65, 70). Yeah, capitalists are that until their own money is involved.

sorry for cynicism.
Just to make sure that you understand where the social security $ comes from; it comes frome the people whom collect it when they turn 62, 65, 70. That money is thier money! They paid into it thier entire lives, if you don't pay into it , guess what...No Social Security check! I have been paying into my SS since I started working at 16 yrs of age! You better believe that I will want it back when I am old enough to collect it. After all, it's MY $!

I lived in Canada for 9 years as well as Bolivia for 3, I know what socialism does to people, it makes them depend on someone else to get what they need. That's not what America was designed to be like. I take care of my business and don't need any handouts from a single person. I live a very simple life and every check I get a big percentage taken out by the government to pay for the lazy people that hang on my coat tails. It's the irresponsible people in Washington and the greedy people living off credit cards and buying overvalued properties that are the root cause of what is happening. People that sink thier savings into Wall Street and "gamble" with thier retirement money by letting the corrupt CEO's make the decisions for their future who are hurting right now. I am happy to say that my meager existance will not be teribbly affected by this. I guess not being greedy is finally starting to pay off...

I also find it interesting how people love to hate the USA, especially when the American people quit buying imported products and it affects other countries economy's as well. Seems kida hippocritical, America is ok when the American people spend thier money in a forgien country but when America falls on hard times, " We deserve it..." Seems to be what I hear from many people living abroad. Probably people that aren't even citizens of the USA.

There's my "rant" for the day...Heard of any good stocks lately? LOL!
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Old 10-08-2008, 08:12 PM   #36
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What is the difference between socialism and communism? Socialism and communism are alike in that both are systems of production for use based on public ownership of the means of production and centralized planning. Socialism grows directly out of capitalism; it is the first form of the new society. Communism is a further development or "higher stage" of socialism.

From each according to his ability, to each according to his deeds (socialism). From each according to his ability, to each according to his needs (communism).

No, I'm NOT confused.
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Old 10-08-2008, 10:02 PM   #37
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What is the difference between socialism and communism? Come on! Which planet are you on? Communism and socialism are worlds apart. Communism = everything is owned by all, Socialism = ownership is, for the most part, private but there is a communal responsibility.

The USA has dabbled in socialism but, mark well, only dabbled. Capitalism does not appear to be working and when things go wrong one blames other systems, Why? Forget the rhetoric, We get that from everybody but look at what happens in reality. Why is the US falling apart finacially at the moment? Why did those who suffered fron the flooding in New Orleans not get the help they needed? Why are the common people in America who are loosing their homes afetr following the advice of bankes not getting help? And this whilst those who gave the bad advice earend fat sallaries and probably will depart with generous "golden handshakes".

Come on. Get real. The fundamental problem is that the capitalistic system, in order to generate greater profits, encouraged people to spend beyond their means. The responsible ( and yet still capitalisic) system would encourage people to save for what they want but cannot afford today. The global problem was created when the US became the global importer on credit. Do not blame small third world countries for that but blame the US which was writing cheques they did not have the cash to cover.

Remember, it was not I who wrote that you are now citizens of the Soviet Republic of the United States. Nor would I even suggest that you were but what I did say is that Americans, in general, do not know the difference between socialism and communism. Yes, socialism grew from capitalism, but did not endorse capitalism, whereas communism grew from despotism.

However, I am not looking for an argument of the pros and conc of differing ideologies but simply stating that those complaining most bitterly over the fall of the stock market are those who most intensly supported the system. Ironic is it not? The bottom line is that you should not gamble with money you cannot afford to loose.

Aye // Stephen
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Old 10-08-2008, 11:12 PM   #38
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What is the difference between socialism and communism? Come on! Which planet are you on? Communism and socialism are worlds apart. Communism = everything is owned by all, Socialism = ownership is, for the most part, private but there is a communal responsibility .... Stephen
"Why is the US falling apart finacially at the moment? Why did those who suffered fron the flooding in New Orleans not get the help they needed? Why are the common people in America who are loosing their homes afetr following the advice of bankes not getting help? And this whilst those who gave the bad advice earend fat sallaries and probably will depart with generous "golden handshakes"."

Those "poor" people that suffered in New Orleans were there on thier own accord! They were told to leave and decided to stay. Regardless of what you think, those people were there because they were simply to foolish to leave and they paid the price. It is not the governments job to "babysit" fools! What does that have to do with the price of tea in China? I don't know...

The people who are loosing thier homes are people who also made wrong choices! When I buy a property, I buy at a LOW price and sell at a HIGH price. That is how you make money... Those people who bought overvalued properties at a high initial rate that was only going higher deserve to loose "thier" houses! I don't live in a big house because I am smart enough to know that I can't afford it when times get tough...There are not supposed to be any guarantees in this country when it comes to stupid decisions. This "bailout" changes that. Now, fools feel entitled to some sort of compensation for the decisions they make....

I'm not even going to comment any further about the socialist/ communist thing because it will never end, regardless, I know what I'm talking about...Remember, I'm not the fool loosing his house!
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Old 10-08-2008, 11:18 PM   #39
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AIG Taps Fed For Another $38 Billion -- So They Can Go To Another Resort? (AIG)

Joe Weisenthal | Oct 8, 08 4:35 PM

It seems AIG's $440,000 luxury junket hasn't precluded itself from the continued largesse of the taxpayers. Here's the official announcement:

The Federal Reserve Board has authorized the Federal Reserve Bank of New York to borrow securities from certain regulated U.S. insurance subsidiaries of the American International Group (AIG), under section 13(3) of the Federal Reserve Act.

Under this program, the New York Fed will borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral. These securities were previously lent by AIG’s insurance company subsidiaries to third parties.

As expected, drawdowns to date under the existing $85 billion New York Fed loan facility have been used, in part, to settle transactions with counterparties returning these third-party securities to AIG. This new program will allow AIG to replenish liquidity used in settling those transactions, while providing enhanced credit protection to the New York Fed and U.S. taxpayers in the form of a security interest in these securities.

You have to love the language, of course. It's the New York Fed ostensibly borrowing from AIG, not the other way around.

Update: And we're seeing now, the company has yet another resort event planned*. From Bloomberg:

American International Group Inc., castigated by lawmakers for hosting a $440,000 conference days after an $85 billion federal bailout, plans to hold another gathering for brokers next week.The event, at the Ritz-Carlton in California's Half Moon Bay, aims to ``motivate and educate'' about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh. ``These sorts of sales meetings are an essential function,'' he said. ``We have them around the world all the time.''

*In fairness, AIG has to be able to function as a business, even if that means hosting occasional events at high-end locales. These bailouts are doomed to fail if every corporate action will be judged on this level -- and yet, now that they owe their very existence to taxpayers, this harsh light is inevitable.
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Old 10-08-2008, 11:29 PM   #40
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Originally Posted by Trim50 View Post
AIG Taps Fed For Another $38 Billion -- So They Can Go To Another Resort? (AIG)
I can see the line outside the Fed growing as we speak! I suspect the "Big Three" auto manufacturers and the ever troubled Airlines lining up next for a bailout...
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For the truth is that I already know as much about my fate as I need to know. The day will come when I will die. So the only matter of consequence before me is what I will do with my alloted time. I can remain on shore, paralyzed with fear, or I can raise my sails and dip and soar in the breeze.

- RICHARD BODE
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