Goldman and JPM can access the federal reserve window. Posting collateral drawing down, but AIG can't because they are an insurance company. Today the Fed said they will take any kind of collateral. So Goldman, JP Morgan post investment grade bonds and stocks and borrow money from the Fed, who in turn loans the money to AIG. So in essence the fed is providing the money for AIG ... But they can say we didn't put tax payer money at work. We loaned the money to JPM and Goldman. Gives AIG 13 months to figure things out or Goldman and JPM take them over.
and another thing. the inheriting thing is a ridiculous argument. so, what did bush inherit in 1989? what did clinton inherit in 93? it's amazing - republican's policies only come into effect when a democrat is in office. convenient.
let me guess, 9-11 was clintons fault, but wtc 1993 wasn't bush's?
9-11 was 7 years ago, it has nothing to do with whats going on right now. and the difference between this and the dotcom bubble is people got insanely rich from it, not poor.
a bunch of startups going down and a bunch of 150 year old banks going down, big difference right there.
this whole mess is a direct result of the incompetance and corruption in this administration, taking bribes from lending institutions like mccain did in 1989 in the s&l scandal. the regulators need to start regulating.
this never would have happened under clinton, and i say that as a fact because - the margin requirements during clinton's tenure would not have allowed it.
and AIG can shuffle assets among subsidiaries so as to post collateral that is acceptable to gs, jpm and other consortium members.
maybe that can work
it better - fast - and announced in the am tomorrow before open
It is not clear whether they have the right to do this. If they pledge collateral and still go bankupt, GS will get their collateral and the senior bondholders could sue, saying that AIG had no right to make a loan that is more senior to the senior notes. That is the senior note holder may have to vote on it before the loan happens. That is a non-starter given the time constraints.
A better idea would be to allow proforma earnings and reflect all these silly writedowns as one time events and not make the entries. Second,they could do away with all this mark to market accounting and carry this stuff at historical cost less amortization.
This will not work. A good idea though. The issues is that AIG is an insurance company. If one of the big firms invest in any insurance company (more than 25%) I believe, they will have to register as a bank. This is what is holding back Goldman, etc.
Pardon the grammar it is late here.
AIG goes it alone - no borrowing - stall CDS payment process - slow play this hand and give the "aIg" finger to Moody's and S&P and FED. Tell WS to back off and threaten to shut core cooling valves and create China Syndrome.
Great plan, if u understood the PR this afternoon you could have read it 7 hours earlier instead of coming up with it all on your own--Press release at 4pm today "The Fed urges JP and GS to raise the money for AIG"-- (by doing as u state-- borrow from the Fed discount window whatever they need and then give it to AIG so it remains a "private bailout").
When the Fed winks and tells you to do it, gives you the $ to do it, and you get to draft your own favorable terms to AIG (i.e. scalp 'em)--the loan will get done. Quick, cheap, fast way to raise $75B. I went long 5000 @ $5.50 and will be sleeping great tonight.