AIG gets in trouble–what about everything else?

I caught this article about AIG while perusing headlines the other day. What a good point it makes—what such a comparatively prolonged fuse about AIG execs and their bonuses? Aren’t there more important and impactful things to worry about and to rekindle our economy? I don’t mean say the crazy bonuses to AIG execs are morally just, but take a look around. China, for instance recently announced a major shift in its strategy concerning its investment in the U.S. dollar; in fact it suggested replacing the dollar as the international reserve currency. AIG exec bonuses of $165 million are chump change to the tectonic economic consequences such a change in policy could have for the U.S.

The Feds help AIG--but forgot to attach strings

The Feds help AIG–but forgot to attach strings Continue reading

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The Newest Piece of the Puzzle: PPIP

So, we all remember the government’s implementation of TARP last October. The concern after that, however, was how the government was specifically going to handle the relief of these bad assets rather than simply pumping money into financial institutions. I remembered wondering and being concerned with this as well, and just this past Monday, Treasury Secretary Geithner gave the world (and me) a preliminary answer: the Public-Private Investment Program (PPIP). Continue reading

Freddie Mac what happened?

Would our current economic state be any different if banks had not been handing out mortgages like candy during the Fourth of July parade? It is nothing new to the American people to hear that the mortgage industry is a huge factor in our current economy downward spiral. But would things have been different if there had been more strict rules set in place with who could take out a mortgage and why? You want to be able to say “yes,” but not many can say it with full confidence.
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Daily Show Evisecerates Financial Reporting on TV News

The Daily Show once again proves its worth in video editing skills.  This reminds me of Enron and the analysts.

See vod pod video below.

Or click here.

A Penny for Your Thoughts

Country Wide: 4/5 Accepted!

Country Wide: 4/5 Accepted!

According to the New York Times, the former president of CountryWide Financial, Stanford L. Kurland, is back in the loan business, but this time seemingly profiting off of his screwups. CountryWide Financial (yes, I know Wikipedia) was one of the largest lenders of U.S. mortgages. Many of its loans were to high risk home owners with variable rate interest rates, that began low and then rose. This loans were then securitized and sold to investors. As people began to to default on their loans, investors did not want to own these securtized loans, ultimately leading CountryWide towards bankruptcy. Bank of America ended up buy CountryWide and has plans to rename it to Bank of America Home Loans in April, probably due to the huge reputational risk that the name CountryWide poses ( Lady Macbeth didn’t even wash her hands that fast). In short, the fall of CountryWide and other similar institutions has created large ripples through the economy. Many heads of banks, like Kurland, sold loans to people who probably should have never owned a home to begin with.

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When the wind blows, the house of cards will fall

Regulators say Mr. Madoff himself estimated that $50 billion in personal and institutional wealth from around the world was gone……

Even though Enron was a legitimate business, its finances were all a scam. Many of its financial workarounds were legal, but all had the intention to make assets appear on the balance sheet or debt to disappear off the books. When Enron finally crashed in December 2001, the world was shocked that such a large corporation could fail so quickly. A house of cards can only get so big before a gust wind blows it over. Just like Enron, Bernie Madoff was managing a $50 billion house of cards that fell down hard and fast.

As many who have watched the news over the past months know, Bernie Madoff ran his own investment firm or scam, whatever you would like to call it. Called a Ponzi scheme (after an immigrant con man named Charles Ponzi who ran a similar scam in 1919) , Madoff took money from investors all over the world and promised a fixed return, in some cases as high as 20%. Continue reading

Boo! A bear! And it’s not Halloween

Scary bears from the past

Scary bears from the past

Please don’t kill the messenger.

h/t: Calculated Risk