The magnitude of the bailout demanded, rather than proposed by Treasury Secretary Henry Paulson, is astonishing. Take AIG, American International Group, an insurance company worth over a trillion dollars. Paulson says it will cost $85 billion to save AIG.
Is AIG an American company? Now headquartered in New York, it was founded in Shanghai, China in 1919, by an American.
Is AIG in trouble? AIG paid a dividend on Sept. 3, although further dividends are suspended, according to Investment News. The dividend should not be a surprise since AIG has earned $6.2 billion this year. A major subsidiary, Transatlantic Holdings, also gave out a dividend, payable on Sept. 18, noticeably higher than its previous dividend.
On Sept. 16, the U.S. Treasury acquired warrants to buy 80 percent of AIG stock. On Sept. 18, AIG announced that it was plowing more money into its Nigerian operation, Blue Financial Services.
Does AIG need help or does it just have plenty of money to hire lobbyists? How did AIG become so large that it cannot be allowed to fail? It happened by repeated acquisitions of smaller companies. American General, AG, acquired 12 major companies, all insurance and financial, between 1945 and 2001.
In 2001, AIG acquired American General. Since 1990, AIG has also acquired International Lease Finance, 21st Century, HSB Group, Matrix Direct, and insurance interests from General Electric. It also acquired California-based Sun America for $18 billion.
That list only hits the high points. In August, AIG acquired an 18 percent interest in a Chinese company. In June, AIG acquired Ascot. In 2007, AIG spent billions of yen to buy two extremely prestigious office buildings in Japan. In May of 2007, AIG outbid Equity Consortiums to buy the largest phone company in Bulgaria. In 2006, AIG bought Travel Guard International.
AIG is suing seven former executives, including the ex- CEO for $20 billion in misappropriated stock. This information is available from standard business sources.
Classical economics, the supply and demand theory, depends on large numbers of suppliers and large numbers of consumers. The modern economy has large numbers of consumers but mergers and acquisitions have greatly cut down on the number of suppliers. The result is a great concentration of economic power in the hands of CEOs accountable to no one.
Likewise, classical economics assumes that consumers understand the products they buy. When farmers grow corn, there is little doubt that consumers know what corn is and what you can do with it. Do consumers understand insurance policies issued by companies like AIG?
The possibility of forcing U.S. taxpayers to bail out AIG raises grave questions. AIG has operations in over a 100 countries. If it is so important to bail out AIG, are other governments going to contribute? U.S. taxpayers have limits.
What can we learn from past federal takeovers of private companies? In 1971, Congress voted to bail out the Penn Central railroad. The public was told that Penn Central was too important to fail. Critics pointed out that the holding company that owned Penn Central also owned $7 billion in real estate. Why couldn’t the company sell some real estate and modernize the railroad?
The same question applies to AIG. Even if we accept that AIG is in trouble, which is not obvious, it has subsidiaries and properties all over the world. If AIG needs money, it can sell some of them. I’m sure the creditors can wait for these sales to take place.
In the early 1980s, the federal government bailed out Chrysler. In retrospect, this bailout was a success. It rescued an American company and prevented further concentration of the auto industry. My associates at the time included business executives and presidents of small firms. They argued vehemently that Chrysler executives should get no raises or bonuses until the loan was repaid.
Treasury Secretary Henry Paulson is a former CEO of Goldman Sachs, one of the remaining investment firms. While turmoil in the financial markets is a problem for all of us, Paulson does not see these events the way ordinary citizens do. If a trillion dollar bailout package is put into place, average taxpayers will have to pay it off eventually. The longer it takes to retire this debt, the more it will cost Main Street taxpayers.
Financial turmoil is costing Americans but I have seen no calculation that shows that the projected bailout will save most Americans more than it costs them.
How long do we have to make the decision? Years ago an older man with experience in business taught me to be wary of anyone who wants an instant decision. It can be a sign of a con man. Do Republicans understand that they will have to choose between their beloved tax cuts and a trillion dollar bailout? Surely we cannot do both.
Dale L. Gillis lives in Sebring
MORE FROM THIS CHANNELTOPICS IN THIS ARTICLE
treasury secretary henry paulson • henry paulson • travel guard international • american international group • insurance interests • u s treasury • shanghai china • transatlantic holdings • prestigious office • lease finance • sun america • business sources • chinese company • aig • consortiums • investment news • american general • bailout • smaller companies •
Voice your opinion by posting a comment.
1 purely motivated by greed
2 the idiots 3red handed
AROUND SOUTH MISSISSIPPI
The owner of an engineering firm hoped to make up to $1.5 million over three months by adjusting Hurricane Katrina claims for State Farm, borrowing $150,000 and establishing a line of credit with State Farm Bank to set up shop on the Mississippi Coast in September 2005, according to records filed late Tuesday in federal court.
Because of the arrangement, Forensic Analysis & Engineering Corp. was beholden to State Farm, which wanted to minimize its Hurricane Katrina losses for wind damage, the lawsuit says. Another vendor that adjusted Katrina claims, the independent adjusting firm E.A. Renfroe & Co. Inc., at times owed 80 percent of its income to State Farm, the court records say.
A team of policyholders’
Subject Posted By Posted On
insurance commisioner wudc
I read with much anticipation the exchange between “dum-dum” and “the idiots.” All name calling and hostility aside, I was, in fact, interested in some details from “dum-dum” of his contention that an AIG downfall would result in worldwide financial calamity.
Also, since much of AIG’s operation still seems to be functioning rather well, it would appear to me that capital would find its way to those well-managed subisidiaries in some form or fashion. In other words, a reorganization or liquidation of what is now AIG does not necessarily have to result in the calamitous outcome foreseen by “dum-dum.”
You must think of the counterparty in these contracts. Thats who is getting the bulk of this $150B loan/bailout.
Back in the day GS + MS (on this side of the pond) and big european banks like UBS + RBS were big players in the collateral bond market. They were making big fees packaging the loans and selling them off. In what they assumed were no risk deals as they bought CDS contracts thru AIG to protect these packages.
Here lies the problem.
Should GS + MS and the host of other European banks be paid for their CDS placed thru AIG?
Of course Paulson thinks so. And he is using tax dollars to create a large guarantee association for these CDS with no dollar cap in the name of AIG.
I think “NO”. There should be caps for these counterparties on the amount they take of US taxpayer provided funds.
Of course this would require AIG to be in receivership which is what they are but under some treasury disguise.
AIG has no intentions of recovering. They would have to give up their greed and higher standard of living in order to do so, for which they have no intentions of doing (in fact they are still laughing at us). They will not be able to turn their profits around nor do they care. They continue to mislead the public. Come on folks they are cancelling the employee pension plans and letting them cash in while they can (with the bail out money). They do not plan on staying in business. This bail out is simply to placate for a short time and keep at bay those who will lose and getting more money for the big CEOs and high paid administrators. They want to make certain that they get all the money the can before they say, “time has run out”. In my opinion the ones calling the shots at AIG are masters of extortion and in the end will simply say, “there was nothing we could do”.
I just didn’t realize that polishing a turd became an art and that there are a lot of high price turd polishers out there.
WAKE UP PEOPLE. THE INSURANCE INDUSTRY IS BROKEN AND IT IS NOT GOING TO BE FIXED UNTIL IT COLLAPSES WITHIN 4 years. DOESN’T ANYONE REALIZE THAT IT IS WHAT WE SPEND ON INSURANCE THAT DRIVES OUR ECONOMY. IT DICTATES TO WHAT OUR BUSINESSES CAN AFFORD TO DO OR NOT DO, THE SAME FOR INDIVIDUALS.
Sara Palin wanted to know why the cost of living is so much higher in Alaska. Well, I would like to know too and I would start at the cost of insurance (auto, home health, disability, work comp, business, etc etc) for the average family, small and large business.
Getting this information will then lead you to why everything else is so damn high.
What is Insurance? FEAR, that’s what it is. FEAR that has been marketed to folks the fear of this or the fear of that. Insurance. When are we going to stop being afraid and stand up, take control.
The industry doesn’t have to be socialized but it will be because of pride. Pride and the inability to analyze and understand what simply needs to be done.
Insurance is not FEAR, it’s more of “odds.” The odds are, you won’t need insurance. However, there still exists a chance that you WILL need it, maybe you’ll get in an accident or get sued for professional negligence, etc. You’re completely free to go uninsured if you want, but I wouldn’t advise it…
While I agree with you that the $150 billion is (most likely) gone, what is your solution? How would you fix the insurance industry, if in fact it’s completely broken?
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The magnitude of the bailout demanded, rather than proposed by Treasury Secretary Henry Paulson, is astonishing. Take AIG, American International Group, an insurance company worth over a trillion dollars. Paulson says it will cost $85 billion to save AIG.
Is AIG an American company? Now headquartered in New York, it was founded in Shanghai, China in 1919, by an American.
Is AIG in trouble? AIG paid a dividend on Sept. 3, although further dividends are suspended, according to Investment News. The dividend should not be a surprise since AIG has earned $6.2 billion this year. A major subsidiary, Transatlantic Holdings, also gave out a dividend, payable on Sept. 18, noticeably higher than its previous dividend.
On Sept. 16, the U.S. Treasury acquired warrants to buy 80 percent of AIG stock. On Sept. 18, AIG announced that it was plowing more money into its Nigerian operation, Blue Financial Services.
Does AIG need help or does it just have plenty of money to hire lobbyists? How did AIG become so large that it cannot be allowed to fail? It happened by repeated acquisitions of smaller companies. American General, AG, acquired 12 major companies, all insurance and financial, between 1945 and 2001.
In 2001, AIG acquired American General. Since 1990, AIG has also acquired International Lease Finance, 21st Century, HSB Group, Matrix Direct, and insurance interests from General Electric. It also acquired California-based Sun America for $18 billion.
That list only hits the high points. In August, AIG acquired an 18 percent interest in a Chinese company. In June, AIG acquired Ascot. In 2007, AIG spent billions of yen to buy two extremely prestigious office buildings in Japan. In May of 2007, AIG outbid Equity Consortiums to buy the largest phone company in Bulgaria. In 2006, AIG bought Travel Guard International.
AIG is suing seven former executives, including the ex- CEO for $20 billion in misappropriated stock. This information is available from standard business sources.
Classical economics, the supply and demand theory, depends on large numbers of suppliers and large numbers of consumers. The modern economy has large numbers of consumers but mergers and acquisitions have greatly cut down on the number of suppliers. The result is a great concentration of economic power in the hands of CEOs accountable to no one.
Likewise, classical economics assumes that consumers understand the products they buy. When farmers grow corn, there is little doubt that consumers know what corn is and what you can do with it. Do consumers understand insurance policies issued by companies like AIG?
The possibility of forcing U.S. taxpayers to bail out AIG raises grave questions. AIG has operations in over a 100 countries. If it is so important to bail out AIG, are other governments going to contribute? U.S. taxpayers have limits.
What can we learn from past federal takeovers of private companies? In 1971, Congress voted to bail out the Penn Central railroad. The public was told that Penn Central was too important to fail. Critics pointed out that the holding company that owned Penn Central also owned $7 billion in real estate. Why couldn’t the company sell some real estate and modernize the railroad?
The same question applies to AIG. Even if we accept that AIG is in trouble, which is not obvious, it has subsidiaries and properties all over the world. If AIG needs money, it can sell some of them. I’m sure the creditors can wait for these sales to take place.
In the early 1980s, the federal government bailed out Chrysler. In retrospect, this bailout was a success. It rescued an American company and prevented further concentration of the auto industry. My associates at the time included business executives and presidents of small firms. They argued vehemently that Chrysler executives should get no raises or bonuses until the loan was repaid.
Treasury Secretary Henry Paulson is a former CEO of Goldman Sachs, one of the remaining investment firms. While turmoil in the financial markets is a problem for all of us, Paulson does not see these events the way ordinary citizens do. If a trillion dollar bailout package is put into place, average taxpayers will have to pay it off eventually. The longer it takes to retire this debt, the more it will cost Main Street taxpayers.
Financial turmoil is costing Americans but I have seen no calculation that shows that the projected bailout will save most Americans more than it costs them.
How long do we have to make the decision? Years ago an older man with experience in business taught me to be wary of anyone who wants an instant decision. It can be a sign of a con man. Do Republicans understand that they will have to choose between their beloved tax cuts and a trillion dollar bailout? Surely we cannot do both.
Dale L. Gillis lives in Sebring
MORE FROM THIS CHANNELTOPICS IN THIS ARTICLE
treasury secretary henry paulson • henry paulson • travel guard international • american international group • insurance interests • u s treasury • shanghai china • transatlantic holdings • prestigious office • lease finance • sun america • business sources • chinese company • aig • consortiums • investment news • american general • bailout • smaller companies •
Voice your opinion by posting a comment.
1 purely motivated by greed
2 the idiots 3red handed
AROUND SOUTH MISSISSIPPI
The owner of an engineering firm hoped to make up to $1.5 million over three months by adjusting Hurricane Katrina claims for State Farm, borrowing $150,000 and establishing a line of credit with State Farm Bank to set up shop on the Mississippi Coast in September 2005, according to records filed late Tuesday in federal court.
Because of the arrangement, Forensic Analysis & Engineering Corp. was beholden to State Farm, which wanted to minimize its Hurricane Katrina losses for wind damage, the lawsuit says. Another vendor that adjusted Katrina claims, the independent adjusting firm E.A. Renfroe & Co. Inc., at times owed 80 percent of its income to State Farm, the court records say.
A team of policyholders’
Subject Posted By Posted On
insurance commisioner wudc
I read with much anticipation the exchange between “dum-dum” and “the idiots.” All name calling and hostility aside, I was, in fact, interested in some details from “dum-dum” of his contention that an AIG downfall would result in worldwide financial calamity.
Also, since much of AIG’s operation still seems to be functioning rather well, it would appear to me that capital would find its way to those well-managed subisidiaries in some form or fashion. In other words, a reorganization or liquidation of what is now AIG does not necessarily have to result in the calamitous outcome foreseen by “dum-dum.”
Get my mind right, “dum-dum.” I’m all ears.
You must think of the counterparty in these contracts. Thats who is getting the bulk of this $150B loan/bailout.
Back in the day GS + MS (on this side of the pond) and big european banks like UBS + RBS were big players in the collateral bond market. They were making big fees packaging the loans and selling them off. In what they assumed were no risk deals as they bought CDS contracts thru AIG to protect these packages.
Here lies the problem.
Should GS + MS and the host of other European banks be paid for their CDS placed thru AIG?
Of course Paulson thinks so. And he is using tax dollars to create a large guarantee association for these CDS with no dollar cap in the name of AIG.
I think “NO”. There should be caps for these counterparties on the amount they take of US taxpayer provided funds.
Of course this would require AIG to be in receivership which is what they are but under some treasury disguise.
The $150 Billion is gone, say good bye.
AIG has no intentions of recovering. They would have to give up their greed and higher standard of living in order to do so, for which they have no intentions of doing (in fact they are still laughing at us). They will not be able to turn their profits around nor do they care. They continue to mislead the public. Come on folks they are cancelling the employee pension plans and letting them cash in while they can (with the bail out money). They do not plan on staying in business. This bail out is simply to placate for a short time and keep at bay those who will lose and getting more money for the big CEOs and high paid administrators. They want to make certain that they get all the money the can before they say, “time has run out”. In my opinion the ones calling the shots at AIG are masters of extortion and in the end will simply say, “there was nothing we could do”.
I just didn’t realize that polishing a turd became an art and that there are a lot of high price turd polishers out there.
WAKE UP PEOPLE. THE INSURANCE INDUSTRY IS BROKEN AND IT IS NOT GOING TO BE FIXED UNTIL IT COLLAPSES WITHIN 4 years. DOESN’T ANYONE REALIZE THAT IT IS WHAT WE SPEND ON INSURANCE THAT DRIVES OUR ECONOMY. IT DICTATES TO WHAT OUR BUSINESSES CAN AFFORD TO DO OR NOT DO, THE SAME FOR INDIVIDUALS.
Sara Palin wanted to know why the cost of living is so much higher in Alaska. Well, I would like to know too and I would start at the cost of insurance (auto, home health, disability, work comp, business, etc etc) for the average family, small and large business.
Getting this information will then lead you to why everything else is so damn high.
What is Insurance? FEAR, that’s what it is. FEAR that has been marketed to folks the fear of this or the fear of that. Insurance. When are we going to stop being afraid and stand up, take control.
The industry doesn’t have to be socialized but it will be because of pride. Pride and the inability to analyze and understand what simply needs to be done.
Insurance is not FEAR, it’s more of “odds.” The odds are, you won’t need insurance. However, there still exists a chance that you WILL need it, maybe you’ll get in an accident or get sued for professional negligence, etc. You’re completely free to go uninsured if you want, but I wouldn’t advise it…
While I agree with you that the $150 billion is (most likely) gone, what is your solution? How would you fix the insurance industry, if in fact it’s completely broken?