Here is all the reading you and everyone else needs to do:
1) When companies do not manage themselves well and fall into financial ruin, they go into bankrupcy.
2) There is a well thought out process for bankrupt companies, their assets are sold off to other companies who have a clue and their debts are paid off.
3) The AIG issue was tied to the CDS and other financial investments, not their primary insurance subs. We all agree.
4) The reason the FED doesn’t want them to fail is only because their financial services unit provides the financial backing to so many other companies (i.e. the CDO’s). The government doesn’t care about the insurance operations.
5) They should be forced to pay the piper NOW. Sell off the life insurance and P&C operations (their truly valuable assets). Pay off the loan (i.e. life line) that the FED provided and resolve the oustanding CDO’s they have on their books.
6) The vast majority of the employees in their insurance operations(like you)will be employed by more stable companies who are not being dragged around the press by the hour.
7) If AIG is left as an aircraft leasing company or a dust ball in the street, who really cares, once the financial mess they created is resolved.
8) Now if your name is really Dumb Dubm, there is only one more thing for YOU to read.
9) Get your resume together!
AIG’s underwriting is solid. Their investment side is what caused this.
Liberty’s CEO, if he made those comments, should know better. Besides, everyone knows Liberty takes on Work Comp accounts at a loss, just to leverage P & C business. They hurt the market more by pricing risks below where they need to be than I’ve ever seen AIG do.
Credit default swaps are what got AIG into financial trouble to the point of near bankruptcy. I think we agree on that. What’s the deal w/CDS’s anyway? I was under the impression that the insurance industry did not want them thought of as ‘insurance’ b/c they would have to be regulated. Herein lies the real crime. Unless this is simplistic, had they been regulated, we wouldn’t be in this mess.
CDS’s were deemed exempt from regulation by the Commodity Futures Modernization Act of 2000, signed into law by President Bill Clinton on December 11, 2000. Prior to passage of this legislation, there was concern that credit (and equity) swaps might be ruled invalid because of the Commodity Exchange Act (CEA)which required that all “futures” contracts must be traded on a regulated exchange unless there was some statutory or regulatory exemption. If credit default swaps were found to be subject to the CEA then they could have been unenforceable. What I still don’t understand is why they are not regulated by the SEC.
I’ve think you’ve got the game right, but the players wrong.
The BANKING industry didn’t want CDS agreements thought of as insurance because then they would have to be regulated by the states, who know what they’re doing — usually.
Another reason why CDS’s aren’t insurance is that the people issuing them didn’t require the buyers to have any insurable interest in the underlying asset! This turned the CDS from an insurance policy on a stream of payments into a bet that that stream would dry up. When some of those assets defaulted, CDS’s required payouts of multiple times what the defaulted amounts would have been.
The insurance industry had nothing to do with it. It was the – FEDERALLY REGULATED – banking industry.
In 20/20 hindsight, it’s obvious that AIG’s position was poorly considered.
Negligent is an awful strong word to be throwing around. I don’t know enough of the details to say one way or the other. It seems to me that the duy of care AIG owed was to analyze the risk of the CDS agreements they wrote and to keep the stockholders appraised of such risks via the board of directors. I am not a stockholder in AIG, so I do not know whether this duty was breached or not.
It seems that AIG was looking for extreme profit. They are in the risk management business & should have known better. In my opinion, their actions were purely motivated by greed. It’s the only explanation
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Here is all the reading you and everyone else needs to do:
1) When companies do not manage themselves well and fall into financial ruin, they go into bankrupcy.
2) There is a well thought out process for bankrupt companies, their assets are sold off to other companies who have a clue and their debts are paid off.
3) The AIG issue was tied to the CDS and other financial investments, not their primary insurance subs. We all agree.
4) The reason the FED doesn’t want them to fail is only because their financial services unit provides the financial backing to so many other companies (i.e. the CDO’s). The government doesn’t care about the insurance operations.
5) They should be forced to pay the piper NOW. Sell off the life insurance and P&C operations (their truly valuable assets). Pay off the loan (i.e. life line) that the FED provided and resolve the oustanding CDO’s they have on their books.
6) The vast majority of the employees in their insurance operations(like you)will be employed by more stable companies who are not being dragged around the press by the hour.
7) If AIG is left as an aircraft leasing company or a dust ball in the street, who really cares, once the financial mess they created is resolved.
8) Now if your name is really Dumb Dubm, there is only one more thing for YOU to read.
9) Get your resume together!
…AIG will be toast by the end of the year.
Baloney.
AIG’s underwriting is solid. Their investment side is what caused this.
Liberty’s CEO, if he made those comments, should know better. Besides, everyone knows Liberty takes on Work Comp accounts at a loss, just to leverage P & C business. They hurt the market more by pricing risks below where they need to be than I’ve ever seen AIG do.
Credit default swaps are what got AIG into financial trouble to the point of near bankruptcy. I think we agree on that. What’s the deal w/CDS’s anyway? I was under the impression that the insurance industry did not want them thought of as ‘insurance’ b/c they would have to be regulated. Herein lies the real crime. Unless this is simplistic, had they been regulated, we wouldn’t be in this mess.
Good call Zephyr – I think your argument will likely come up in the old state vs. federal insurance regulation argument that is resurfacing.
CDS’s were deemed exempt from regulation by the Commodity Futures Modernization Act of 2000, signed into law by President Bill Clinton on December 11, 2000. Prior to passage of this legislation, there was concern that credit (and equity) swaps might be ruled invalid because of the Commodity Exchange Act (CEA)which required that all “futures” contracts must be traded on a regulated exchange unless there was some statutory or regulatory exemption. If credit default swaps were found to be subject to the CEA then they could have been unenforceable. What I still don’t understand is why they are not regulated by the SEC.
I’ve think you’ve got the game right, but the players wrong.
The BANKING industry didn’t want CDS agreements thought of as insurance because then they would have to be regulated by the states, who know what they’re doing — usually.
Another reason why CDS’s aren’t insurance is that the people issuing them didn’t require the buyers to have any insurable interest in the underlying asset! This turned the CDS from an insurance policy on a stream of payments into a bet that that stream would dry up. When some of those assets defaulted, CDS’s required payouts of multiple times what the defaulted amounts would have been.
The insurance industry had nothing to do with it. It was the – FEDERALLY REGULATED – banking industry.
Ratemaker, is AIG at fault/negligent relative to their involvement in the CDS market?
In 20/20 hindsight, it’s obvious that AIG’s position was poorly considered.
Negligent is an awful strong word to be throwing around. I don’t know enough of the details to say one way or the other. It seems to me that the duy of care AIG owed was to analyze the risk of the CDS agreements they wrote and to keep the stockholders appraised of such risks via the board of directors. I am not a stockholder in AIG, so I do not know whether this duty was breached or not.
It seems that AIG was looking for extreme profit. They are in the risk management business & should have known better. In my opinion, their actions were purely motivated by greed. It’s the only explanation