Author Topic: So long AIG, and thanks for $22.7b in profits from the bailout  (Read 5547 times)

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So long AIG, and thanks for $22.7b in profits from the bailout
« on: December 11, 2012, 04:44:20 PM »

Offline Interceptor

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Making the rounds today, in bailout circles, is the news that the Treasury is officially out of AIG. Treasury made $22.7b profit on the $182.3 bailout investment. It's worth pointing out here that conventional wisdom during the meltdown, was that we'd be unable recover all of the money, never mind actually turn a profit on it.

Fun fact: $22.7b is enough to run the entire Legislative branch for the last four years, plus some leftover money for arts and crafts appropriations. So I guess that they kind of paid their way with that one.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #1 on: December 11, 2012, 04:47:16 PM »

Offline indeedproceed

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Well that's fantastic news!

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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #2 on: December 11, 2012, 04:56:57 PM »

Online hpantazo

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Wow, how is this not headline news on most sites? This is impressive!

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #3 on: December 11, 2012, 05:22:27 PM »

Offline Cman

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$22B in profits is nothing to sneeze at, but I believe the Treasury will likely lose money on its investment in GM. The goal of these bailouts was not to make money, but to prevent the economy from entering free-fall. On that note, mission accomplished. The fact that losses were minimized (if not altogether avoided) is nice gravy.
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #4 on: December 11, 2012, 05:33:45 PM »

Offline Interceptor

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I believe that if you're only looking at TARP (and not at the Fannie/Freddie bailout, which is similar but separate), Treasury has probably squeaked into the positive column at this point, despite the situation with GM, because of the combined profits from other ventures.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #5 on: December 11, 2012, 06:06:16 PM »

Offline Celtics4ever

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Quote
Wow, how is this not headline news on most sites? This is impressive!

And Fox told me the Stimulus failed, shame on them...

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #6 on: December 11, 2012, 06:47:46 PM »

Online D.o.s.

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Quote
Wow, how is this not headline news on most sites? This is impressive!

And Fox told me the Stimulus failed, shame on them...

Keep those earmuffs on, these are just more of those "facts" liberals throw out to befuddle the believers!
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We'll shoot some golf and shoot some dope

Quote
Can't read the entire thread but cone people.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #7 on: December 12, 2012, 09:57:31 AM »

Offline Brendan

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The point of the stimulus was to help the economy.

The point of TARP was to unwind these assets in a "safe" fashion.  I still believe that just allowing AIG to hit bankruptcy would have been the smart move. Bankruptcy court has the power to deal with a situation like this, where one division had all the risk, but regulations prevented the corporate parent from using other assets to make good.

The biggest outcome of the AIG bailout is that the European banks with rein from AIG were bailed out. End of the day is this was a huge wealth transfer from American tax payers to Europeans at the time.

In terms of "making money off the deal" - I'm guessing that's a gross number. I'm guessing it's not so rosy when you net it all out. And of course let's measure the aggregate performance of all bailouts as an investment if we want to take this approach. Either way to me even a good performance on return only mitigates the overall stupidity of bailouts: we now have an implicit promise to other institutions that if they are too big to fail, they can take unsmart risk and know the tax payers have their back.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #8 on: December 12, 2012, 10:49:06 AM »

Online foulweatherfan

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Quote
Wow, how is this not headline news on most sites? This is impressive!

And Fox told me the Stimulus failed, shame on them...

Keep those earmuffs on, these are just more of those "facts" liberals throw out to befuddle the believers!

This wasn't part of the stimulus, it was part of the TARP bailout I believe. 

Still great news; the bailouts sucked any way you slice them, but being able to pull some profit out cushions the blow a bit.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #9 on: December 12, 2012, 10:52:50 AM »

Offline BballTim

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$22B in profits is nothing to sneeze at, but I believe the Treasury will likely lose money on its investment in GM. The goal of these bailouts was not to make money, but to prevent the economy from entering free-fall. On that note, mission accomplished. The fact that losses were minimized (if not altogether avoided) is nice gravy.

  I wonder whether the talk of making and losing money is based on money that the gov gave to the companies, or whether it includes the tax breaks these companies got.

  Still, getting money back is a good thing.

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #10 on: December 12, 2012, 11:04:45 AM »

Offline Cman

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The point of the stimulus was to help the economy.

The point of TARP was to unwind these assets in a "safe" fashion.  I still believe that just allowing AIG to hit bankruptcy would have been the smart move. Bankruptcy court has the power to deal with a situation like this,


Not sure I buy this.

Yes, the point of ARRA was to stimulate the economy, but TARP was designed to help the economy too, just in a very different way.  TARP bought up all the bad assets, basically guaranteeing that large companies wouldn't go bankrupt in the process. The government basically stepped in and provided a backstop.  Absent that, there would have been much greater uncertainty and the economy would have likely done much much worse.

So, TARP helps stop the economy from free-fall, ARRA helps rebuild the economy.  Both "help" the economy. That's how I see it anyway.
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #11 on: December 12, 2012, 11:13:28 AM »

Offline Brendan

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The point of the stimulus was to help the economy.

The point of TARP was to unwind these assets in a "safe" fashion.  I still believe that just allowing AIG to hit bankruptcy would have been the smart move. Bankruptcy court has the power to deal with a situation like this,


Not sure I buy this.

Yes, the point of ARRA was to stimulate the economy, but TARP was designed to help the economy too, just in a very different way.  TARP bought up all the bad assets, basically guaranteeing that large companies wouldn't go bankrupt in the process. The government basically stepped in and provided a backstop.  Absent that, there would have been much greater uncertainty and the economy would have likely done much much worse.

So, TARP helps stop the economy from free-fall, ARRA helps rebuild the economy.  Both "help" the economy. That's how I see it anyway.
Yes I think you are right.

Someone said:
Quote
Wow, how is this not headline news on most sites? This is impressive!

And Fox told me the Stimulus failed, shame on them...
My response was more about conflating Stimulus (which did fail) and TARP. Which I think has basically achieved its goal (unwind the huge companies while avoiding bankruptcy / unordered failure of the companies) - making money off TARP is at most a side benefit. I still feel the goal of TARP was setup against a straw man. Bankruptcy is an ordered way for companies to either be reorganized or liquidated. Bankruptcy courts have wide latitude in dealing with these proceses.

"AIG would have gone bankrupt" just doesn't scare me as much as some people I guess. Or more importantly "the gov't is bailing out AIG scares me more." If AIG had gone bankrupt, it's likely that the big losers would have been European banks (going from memory here). My understanding is they had one division (out of many) that had all the contracts to insure the losses in housing derived assets. The biggest losers if these failed were not US ibanks, but European banks. No reason the US needed to bail those banks out. (Again going by memory from the time, might not have it 100%.)

Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #12 on: December 12, 2012, 11:17:38 AM »

Offline nickagneta

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The point of the stimulus was to help the economy.

The point of TARP was to unwind these assets in a "safe" fashion.  I still believe that just allowing AIG to hit bankruptcy would have been the smart move. Bankruptcy court has the power to deal with a situation like this, where one division had all the risk, but regulations prevented the corporate parent from using other assets to make good.

The biggest outcome of the AIG bailout is that the European banks with rein from AIG were bailed out. End of the day is this was a huge wealth transfer from American tax payers to Europeans at the time.

In terms of "making money off the deal" - I'm guessing that's a gross number. I'm guessing it's not so rosy when you net it all out. And of course let's measure the aggregate performance of all bailouts as an investment if we want to take this approach. Either way to me even a good performance on return only mitigates the overall stupidity of bailouts: we now have an implicit promise to other institutions that if they are too big to fail, they can take unsmart risk and know the tax payers have their back.
I completely agree with just about everything here. TP.
« Last Edit: December 12, 2012, 11:30:19 AM by nickagneta »
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #13 on: December 12, 2012, 11:19:08 AM »

Offline nickagneta

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EDIT: Duplicate
« Last Edit: December 12, 2012, 11:30:00 AM by nickagneta »
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Re: So long AIG, and thanks for $22.7b in profits from the bailout
« Reply #14 on: December 12, 2012, 11:28:56 AM »

Offline the_Bird

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The point of the stimulus was to help the economy.

The point of TARP was to unwind these assets in a "safe" fashion.  I still believe that just allowing AIG to hit bankruptcy would have been the smart move. Bankruptcy court has the power to deal with a situation like this,


Not sure I buy this.

Yes, the point of ARRA was to stimulate the economy, but TARP was designed to help the economy too, just in a very different way.  TARP bought up all the bad assets, basically guaranteeing that large companies wouldn't go bankrupt in the process. The government basically stepped in and provided a backstop.  Absent that, there would have been much greater uncertainty and the economy would have likely done much much worse.

So, TARP helps stop the economy from free-fall, ARRA helps rebuild the economy.  Both "help" the economy. That's how I see it anyway.
Yes I think you are right.

Someone said:
Quote
Wow, how is this not headline news on most sites? This is impressive!

And Fox told me the Stimulus failed, shame on them...
My response was more about conflating Stimulus (which did fail) and TARP. Which I think has basically achieved its goal (unwind the huge companies while avoiding bankruptcy / unordered failure of the companies) - making money off TARP is at most a side benefit. I still feel the goal of TARP was setup against a straw man. Bankruptcy is an ordered way for companies to either be reorganized or liquidated. Bankruptcy courts have wide latitude in dealing with these proceses.

"AIG would have gone bankrupt" just doesn't scare me as much as some people I guess. Or more importantly "the gov't is bailing out AIG scares me more." If AIG had gone bankrupt, it's likely that the big losers would have been European banks (going from memory here). My understanding is they had one division (out of many) that had all the contracts to insure the losses in housing derived assets. The biggest losers if these failed were not US ibanks, but European banks. No reason the US needed to bail those banks out. (Again going by memory from the time, might not have it 100%.)

It wouldn't have been isolated to the European banks, though.  If they failed, the next shoe to drop was probably going to be Goldman Sachs.  Bailouts suck, suck, suck, suck, SUCK, which is why I wish they'd blow the [dang] banks up into smaller pieces now that things have stabilized, but the *world* financial markets couldn't have handled an AIG failure at that moment.

 

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