Patterico's Pontifications

9/15/2008

Treasury’s Decision To Not Bail Out Lehman Bros Was A Message To The Broader Market To Get Their House In Order

Filed under: General — WLS @ 11:30 pm



[Posted by WLS]

Not sure where I saw it earlier today, but one of the most plausible explanations I saw for the decision to not rescue Lehman Brothers over the weekend was the fact that AIG turned down a buyout from a venture capital firm because the buyout would have resulted in a change of management.

After Bear Stearns and Fannie Mae/Freddie Mac were rescued, the Treasury and the Fed wanted the Street to understand that not everyone was “too big to fail.” Merrill Lynch got the message and took Bank of America’s stock in exchange for the protection of its balance sheet.

AIG didn’t get the message — though they may view their options a little more soberly today than they did yesterday.

Fannie Mae and Freddie Mac were too big to fail because of the broad implications for the secondary mortgage market — the crippling complications of the shutdown of that market would have created a host of failures among institutions holding paper acquired from Fannie Mae and Freddie Mac.

The bail out of Bear Stearns was a product of the fact that Bear held a tremendous amount of counter-party swap liability. Without a white knight, all those parties on the other end of those transactions would have lost billions. And, there was a great Vanity Fair article a couple months ago that made a very strong case that Bear Stearns was actually taken down by a huge speculative short-selling of its shares, combined with a rumor campaign against it which caused its lenders to pull back on their commitments, which then led to its customers withdrawing their capital, thereby crippling its ability to do business when there was no real fundamental problem with its balance sheet.

The key question is how many more Bank of Americas are out there.

— WLS

103 Responses to “Treasury’s Decision To Not Bail Out Lehman Bros Was A Message To The Broader Market To Get Their House In Order”

  1. I keep wondering why they aren’t dismembered a little bit first. Say you did a “Ma Bell to Baby Bells” on AIG. AIG’s a pretty hefty bite. But a fifth of AIG might well be bought up more easily by several companies.

    It gets tougher and tougher to a have a “free market” as you get closer and closer to monopolies. You’re also making something else “too big to fail”. I don’t want to be bailing out Bank of America, for instance. It would have sucked before this weekend, and now it would really suck.

    But if your standard practice in this sort of crap is to take the company, fire the entire home office, and break the company at some lower level, executives will pay attention. For some companies it might be regional breakups, for others it might be topical, whatever.

    It’s a problem when any private company can’t feel risk. When you’re Freddie and Fanny and your money is backed by the government, it’s easy to loan money you can’t back up. When you’re Lehman, you’re just feeling too big to fail.

    Well, maybe companies don’t need to get quite that flipping big then.

    Al (b624ac)

  2. The key question is how many more Bank of Americas are out there.

    That’s easy. I Googled it, and there’s four within a five mile radius.

    Apogee (366e8b)

  3. Remember: It’s Bush’s fault!

    Another Drew (0c2530)

  4. WLS – I haven’t read enough to understand where AIG’s liquidity issues were or even if they disclosed them. I think they were trying to play it close to the vest so people wouldn’t take positions against them. AIG has tremendous liquidity in the investment portfolios of its insurance companies. The problem in an insurance holding company structure is that the liquidity is not always in the spot that it is needed and moving funds out of the regulated entities is sometimes easier said than done. Rather than potentially committing to selling the company in stages at a discount to private equity buyers, AIG seems to have hit on the obvious solution of intercompany loans from the regulated entities to the holding company. Whether that is sufficient to weather the storm remains to be seen.

    I agree that allowing Lehman to fail sends the signal that the government is not willing to remove all moral hazard from poor management decisions by automatically bailing companies out. I haven’t seen the final figures, but did the Bear Stearns takeover by J.P. Morgan actually cost the government any money?

    daleyrocks (d9ec17)

  5. The downgrade threatened by S&P would have been damaging to some, but not all of AIG’s businesses. A.M. Best would have had to have followed to affect the pure insurance related products.

    daleyrocks (d9ec17)

  6. I’d bet a grand that there is not one single taxpayer, mortgage payer that will not be foreclosed upon since the massive govt funded “rescue mission” was launched!

    EVERY SINGLE FORECLOSURE WILL CONTINUE UPON EVERY SINGLE CITIZEN FAMILY!

    Every yes vote should be singled out, labeled, and removed from office!

    FLUSH CONGRESS! They are the EVIL amongst us.

    TC (f398ed)

  7. Yeah!!! EVERY SINGLE CITIZEN FAMILY!

    Whatever the hell that is.

    Icy Truth (31efee)

  8. There are a bunch of BoAs out there: Sovereign Fund of Abu Dhabi, Saudi Arabia, Kuwait, UAE, PRC and on and on.

    This is the true end game, whether JOe Sixpack sees it or not. Who do you think will help fund our entitlements in a decade?

    Once the oil is gone, what will the Arabs have? Since they are being smart, they will have significant USA holdings.

    Ed (f35a20)

  9. Good article on why some banks need to be allowed to close
    here

    The tricky part is explaining that some pruning is a good thing for the economy. Tendency is to have the running count “x banks closed today”.

    voiceofreason2 (c802e8)

  10. #8 IT,

    Meaning that despite the pledge of billions to massive banks, that should be well able to fend for themselves, but wouldn’t, the persons/families will continue to be displaced and thrown out of their homes!

    This is a bailout of big business’s own failures to due their lack of due diligence! They did not do so and therefore they are going to pay a price for such.

    NAW, it’s taxpayer that’s going to pay for it! FUCK mismanagement and the heads of these organizations are STILL going to reap massive personal rewards for their efforts!

    This is nothing but a repeat from the REA days, or the days of massive farm land redistribution to the likes of the super farms, like AGM and others.

    Yes some were stupid, and I’d bet most just unlucky suckers. But the reality is, bankers/lenders of all sorts convinced many they could carry much more debt than they actually could. Though legal, its cost is just beginning to be felt.

    Remember REA? That was was when the feds finally figured out that lending institutions had gotten outta hand, and bailed that industry out! Most properties were sold for as much a 25 cents on the dollar! The only thing that has changed is the date. At at least then, somebody, with cash, could take advantage and did.

    Oh and just by chance if you think I may have been pointing comments at ILLEGALS in my phrasing? Fine! They can go home with the same they brought here! I do not care about illegals concerns, they have a homeland that can take care of them.

    TC (f398ed)

  11. The downgrade threatened by S&P would have been damaging to some, but not all of AIG’s businesses.

    The part of AIG’s business that’s affected – the finance side – is what is problematic. There’s no crisis right now in retail insurance, so that appears neither affected nor germane.

    jpe (bd88bc)

  12. TC: you realize that persons/families will continue to be displaced and thrown out of their homes

    because they don’t pay?

    Lord Nazh (ce25e3)

  13. AIG was big in subprime mortgages. So was Lehman. They bet wrong. The Bush admin. is also sending a message that it is not going to bail out companies who were simply greedy and jumped into subprime at the peak of the boom. Lehman went so far as to hire a bunch of people from Ameriquest after it failed. They were greedy and stupid.

    The next big failure is going to be GMAC. It isn’t publicly traded, or else it would have been out of business months ago.

    rockmom (e42807)

  14. While there are a lot of problems, I am inclined to think that the solution is firing (without parachutes of any kind) upper management (presidents, vice-presidents, boards of directors) and salary and benefit cuts for middle management (anyone “over” a hundred people, let’s say.)

    htom (412a17)

  15. “Stearns.”

    Indeed. I have fixed that and done some other minor edits of WLS’s post.

    WLS, could you check your e-mail? I sent you something a couple of days ago.

    Patterico (cc3b34)

  16. Quote of the Day:

    These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.

    Rep. Barney Frank (D), five years ago, in response to Bush Administration proposal for greater regulation of Fannie Mae and Freddie Mac.

    http://www.usnews.com/blogs/sam-dealey/2008/09/10/barney-franks-fannie-and-freddie-muddle.html

    Joe (8102a5)

  17. “Affordable housing” is much of what is behind this crisis. Congress has been pushing, and even threatening, big banks to lend, lend, lend so people who can’t afford their own homes will still be able to buy. Secondly, loose money was part of the Bush strategy to pull out of the 2000 bubble collapse. Those things have their own momentum. The expression is “snatching the punchbowl away just as the party is getting good.” Nobody did that.

    I’ve talked to a couple of people this week about the banks and one pointed out that Bank of America, when it bought Countrywide, acquired the retail chain but not the liabilities. That was a smart bet that things would get better and B of A would be in position in the retail mortgage business. They may have paid too much for Merrill Lynch, though. The price was a 70% premium on the stock price.

    The Congress is the culprit in most of this but, by great good fortune, the Democrats who were behind this can claim it was those guys on the other side. Maybe it will work. It takes decades to get into this much trouble. This is S&L crisis, round two. Not every voter has a memory that long.

    Mike K (2cf494)

  18. The other point I have read is that this is the end of all those exotic derivatives. It turns out that, finally, the physics PhDs who created them, didn’t understand them either. Financial market profits will never again be as high. It’s a little like the Orange County bankruptcy in 1994. High wire acts only last so long.

    Mike K (2cf494)

  19. “The key question is how many more Bank of Americas are out there.”

    Let’s all hope none.

    Bank of America has recklessly way overpaid for two bankrupt companies destroying their own shareholder’s wealth.

    The liabilities they have taken on will need to be paid in due time. And it won’t be pretty. Bank of America shareholders are pissed as they should be.

    jharp (f4bed7)

  20. “I’ve talked to a couple of people this week about the banks and one pointed out that Bank of America, when it bought Countrywide, acquired the retail chain but not the liabilities.”

    Link? I do not believe this to be accurate.

    jharp (f4bed7)

  21. jharpy stating he does not believe something to be accurate is giggle-inducing.

    JD (41e64f)

  22. Yeah, jharp, why don’t you provide the link to prove me wrong. You’re the expert. My friend is not online to link to. He is just an expert investor, as I’m sure you are, too.

    Here is the link on bank profits and the crisis.

    Mike K (2cf494)

  23. “I’ve talked to a couple of people this week about the banks and one pointed out that Bank of America, when it bought Countrywide, acquired the retail chain but not the liabilities.”

    Link? I do not believe this to be accurate.

    “Yeah, jharp, why don’t you provide the link to prove me wrong.”

    So I guess you’ve got nothing. Just as I thought.

    jharp (f4bed7)

  24. I think the question of whether BofA is picking up the Countrywide debt is still somewhat in the air but the old Countrywide debt is only trading a little behind BofA debt. The ratings agencies (bless ’em) have upgraded the old Countrywide bonds.

    Merrill Lynch was not bankrupt.

    spongeworthy (9b4e06)

  25. “Merrill Lynch was not bankrupt.”

    Technically true. But in fact they would have been shortly without the BAC rescue.

    Their shareholders equity last quarter got halved. Pretty awesome performance, huh?

    And God only knows what other garbage is on their balance sheet.

    I should have been more clear. Merrill had one foot in the grave and the other on a banana peel.

    jharp (f4bed7)

  26. Morgan Stanley is looking good today.

    From a high of $89 18 months ago down to $26 today.

    But what’s another $65 billion in lost retirement savings. Move along. Nothing to see here.

    jharp (f4bed7)

  27. And I might as well mention. Morgan’s CEO, John Mack only earned $9 million for destroying $63 billion in shareholder wealth.

    Is this a great country or what?

    jharp (f4bed7)

  28. jharp, you are now officially incoherent. Why does John Mack deserve your opprobrium when his company is still standing? How do you figure he destroyed all that wealth when all his competitors with the exception of Goldman are in far worse condition?

    And you are bloviating about Merrill. “In fact…they would have been (bankrupt)”? You don’t know the first thing about their financial condition. And they were not rescued. They were purchased in a stock swap. Stop embarassing yourself.

    spongeworthy (9b4e06)

  29. This is a company [Lehman Brothers] which had on its board, or so we are told, the ultimate snake oil salesman, James Hansen, the self-same company having ambitions of becoming “the primary brokerage for emission permits”.

    Somehow, it is entirely fitting that a company which was looking to exploit the smoke and mirrors business of carbon trading should crash and burn.

    Lehman Brothers .. died because of AGW .. who knew ?

    Are government employees allowed to sit on private sector boards ?

    Neo (cba5df)

  30. AIG is failing because it is so heavily invested in junk Fannie/Freddie stocks.

    Folks, this is one reason our health insurance and auto insurance premiums are so high. They are using our premiums to buy risky stocks, not pay claims. Let them fail!

    Patricia (ee5c9d)

  31. “Why does John Mack deserve your opprobrium when his company is still standing?”

    Because the shareholders lost $63 billion under his leadership.

    News flash. The idea is make money. You can do nothing and break even.

    jharp (f4bed7)

  32. @7: I have no sympathy for anybody who signed up for a no-doc, IO, NINJA, or ARM mortgage without bothering to understand the terms of the contract, -especially- when there were perfectly good conventional money-down 6% fixed-rate mortgages available. Hell, I had 8.5% interest on my 1987 WaMu 30-year fixed-rate mortgage, and paid it off in eleven years, with only a median income. There’s plenty of blame to go around in this debt blizzard, and irresponsible borrowers are NOT exempt from that blame!

    gp (72be5d)

  33. This is just the Enron, writ new. They sold paper rather than product, and all of a sudden the paper wasn’t worth anything.

    The male Dana (3e4784)

  34. “Treasury’s Decision To Not Bail Out Lehman Bros Was A Message To The Broader Market To Get Their House In Order”

    Just curious, WLS. How do you propose they “get their house in order”?

    I don’t think you understand the gravity of the poison on the balance sheets of these companies.

    And just who do you think is going to buy this junk? The party is over. The cat is out of the bag. The securities they have been peddling are worth a fraction of what they report on their balance sheets.

    jharp (f4bed7)

  35. “Merrill Lynch was not bankrupt.”

    Technically true.

    They were or were not. There is no technically about it.

    Folks, this is one reason our health insurance and auto insurance premiums are so high. They are using our premiums to buy risky stocks, not pay claims.

    You have offered no evidence that they are doing so. If they are doing that, they deserve all of the fines, penalties, and market punishment that they get. I suspect they are not, in fact, doing what you claim.

    The idea is make money. You can do nothing and break even.

    jharpy is one of those that thinks stock price is the indicator of whether or not someone is making money. That kind of thinking leads to disasterous results. News flash. A company can make money, and still have their stock price go down, harpy.

    JD (41e64f)

  36. “jharpy is one of those that thinks stock price is the indicator of whether or not someone is making money.”

    And you came to this conclusion how?

    The fiduciary duty of the board and CEO is to maximize shareholder wealth.

    The share price has a lot to do with shareholder wealth.

    Get it.

    jharp (f4bed7)

  37. So, is it more important to earn a real profit, or to maximize stock prices?

    JD (41e64f)

  38. I fear that someday someone like jharpy will have actual power. The thought, it is chilling.

    JD (41e64f)

  39. He doesn’t need any more power, JD – because as we all know, Harpy has the following:

    – a successful business in international consulting (or something, it’s never been definitively identified just what the business entails);

    – a degree in both accounting and finance;

    – extensive knowledge of what “the world community” thinks about the US (due to his aforementioned worldwide business travels);

    – an extended family that’s doing terrific in monetary terms, even though economically things are (in his words) horrendous at present.

    Why would he want anything more at this point, when he’s got everything that a mere mortal could wish? But to hear him tell it, things have already gone to hell in a handbasket, although he’s doing swimmingly, of course.

    It’s obvious that Harpy’s a right – wing mole.

    Dmac (e639cc)

  40. Well not all of us are doing so well

    KatAttack (edae44)

  41. The idea is make money.

    Morgan Stanley made 3.2 billion last year.

    The securities they have been peddling are worth a fraction of what they report on their balance sheets.

    Wrong yet again. The assets are undervalued on their balance sheets. They are being forced to mark to a market that has no liquidity. It is nearly universally understood that the mortgage-backed bonds they hold are undervalued.

    You really ought to shut up. You don’t have a clue what you’re talking about.

    spongeworthy (9b4e06)

  42. “Wrong yet again. The assets are undervalued on their balance sheets. They are being forced to mark to a market that has no liquidity.”

    Good one.

    The assets are undervalued yet no one will buy them.

    News flash. The value of something is what someone is willing to pay for it.

    jharp (f4bed7)

  43. So, is it more important to earn a real profit, or to maximize stock prices?

    Comment by JD — 9/16/2008 @ 10:07 am

    The duty of the board and CEO is to maximize shareholder wealth.

    You really ought to sign up for some accounting and finance classes. It really isn’t that tough of a concept.

    jharp (f4bed7)

  44. The idea is make money.

    Morgan Stanley made 3.2 billion last year.

    Comment by spongeworthy — 9/16/2008 @ 11:16 am

    Take a look at what they did to their balance sheet over the same time frame. And the share price.

    “You really ought to shut up. You don’t have a clue what you’re talking about.”

    And you have the audacity to make such a claim with the idiocy you put forth.

    The company lost $65 billion of it’s market cap for God’s sake.

    jharp (f4bed7)

  45. So, is it more important to earn a real profit, or to maximize stock prices?

    Comment by JD — 9/16/2008 @ 10:07 am

    The duty of the board and CEO is to maximize shareholder wealth.

    ……

    Comment by jharp — 9/16/2008 @ 11:24 am

    Which part of the wealth? Income, equity or a Wall Street pipe-dream? That was JD’s question, genius.

    nk (189a81)

  46. We saw what happened, when income and debt to asset ratio are ignored in favor of high share prices, in Enron.

    nk (189a81)

  47. The following is a Public Service Announcement, concerning the proper translation/summation for Harpy’s comments on the economy:

    Idiots like you…
    Hope you’re happy you idiots…
    Why don’t you read some far – left articles linked here…
    Why don’t you take some economic or finance courses…
    I am an international businessman…
    My family and all of my relatives are quite wealthy…
    Corrupt CEO’s entirely Bush’s fault…
    Economy entirely Bush’s fault…
    Phil Graham’s the Son of Satan…
    Thank you for your time – you may resume your normal daily activities.

    Dmac (e639cc)

  48. Dude, you are way out of your league here.

    The value of something is what someone is willing to pay for it.

    Or the discounted value of its future cash flow. These assets are valued at nothing or next to nothing when nobody expects there will be no recovery.

    spongeworthy (9b4e06)

  49. Pitcher: Should I throw this guy a low fast ball or a curve?

    jharp catching: The duty of a pitcher is to strike out the batter.

    nk (189a81)

  50. Hey, nk. You are correct. Your trollish buddy does seem like more of a catcher than a pitcher.

    Eric Blair (2708f4)

  51. I think Harpy just likes coming on here to fling his poo around – cannot take him seriously.

    Dmac (e639cc)

  52. Funniest comment of the thread, NK. Kudos.

    Dmac (e639cc)

  53. Eric,

    I have a certain theory about the BDSers and astroturfers, but I try to refrain from going there out of respect for other people I do not want to tar with the same brush. And, of course, not muddying up this site.

    nk (189a81)

  54. nk,

    “Income, equity”

    Wealth is comprised of both. And it varies on which is best.

    Seriously. Sign up for some accounting and finance classes. It is not that difficult.

    jharp (f4bed7)

  55. “We saw what happened, when income and debt to asset ratio are ignored in favor of high share prices, in Enron.”

    What in the heck are you talking about?

    Enron was an out and out fraud.

    Or would like to take a stab at explaining you utter nonsensical post?

    Can’t wait to hear it.

    jharp (f4bed7)

  56. jharp,

    Your Obamaesque generalities are not worth anything other than mockery. Email your handler for better talking points.

    nk (189a81)

  57. Dude, you are way out of your league here.

    The value of something is what someone is willing to pay for it.

    Or the discounted value of its future cash flow. These assets are valued at nothing or next to nothing when nobody expects there will be no recovery.

    Comment by spongeworthy — 9/16/2008 @ 12:16 pm

    No dude it is you who has little to no understanding of finance and accounting.

    The discounted value of it’s future “earnings” are what matters. It’s true. Or in other words the discounted value of future earnings is what someone is willing to pay for such asset. Which is the “value” of the asset.

    And you are correct the assets are valued at nothing or next to nothing.

    That, my friend, is exactly the problem.

    Who do you suppose is responsible for the acquisition of the worthless assets?

    jharp (f4bed7)

  58. jharp,

    Your Obamaesque generalities are not worth anything other than mockery. Email your handler for better talking points.

    Comment by nk — 9/16/2008 @ 12:40 pm

    Just as I thought. You post nonsense. I call you on it.

    And you run away from the question.

    jharp (f4bed7)

  59. For the sake of the sane here:

    You want either

    1. Income, if that’s how you pay for your food and rent now; or
    2. Equity, if that’s how you’re planning to retire twenty years from now.

    You don’t want a share price which is based on “what the buyer wants to pay for it” unless you’re investing only with your Las Vegas money.

    nk (189a81)

  60. nk – That was precisely what I was trying to get jharpy to address, but to no avail.

    JD (41e64f)

  61. JD,

    jharp is … [nothing Patterico will allow me to say].

    nk (189a81)

  62. Which is more important, jharpy? Maximization of stock price, or actually earning money?

    JD (41e64f)

  63. …. a barking twatwaffle, nk.

    JD (41e64f)

  64. You’re beyond hope. The fact that nobody’s making a market in the securities does not mean they are worthless, it means they are illiquid. Because they are illiquid, they must be marked to market which is virtually nothing.

    The reason nobody is quoting a market is because it is going to be cheaper to buy them in a bankruptcy liquidation. And then at some point they will be marked back up and loads of money will be made. If you don’t know this you are simply not paying attention and need to shut up until you’re up to speed.

    spongeworthy (9b4e06)

  65. spongeworthy – It is either aggressivley ignorant, or willfully obtuse. Neither is conducive to rational discussion.

    JD (41e64f)

  66. Boy, the trolls are out today. Lots of financial experts.

    I have a simple test. The lefties are blaming the Gramm deregulation bill for the meltdown. OK. Who was the House co-sponsor of that bill? His name is on it.

    Leach, founder of Republicans for Obama.

    What is the name of the only Senator to vote against it ? The only one !

    McCain.

    Biden is bragging that he voted against it but that is another Kerry “I voted for it before I voted against it” stories. The conference report is the final vote.

    Mike K (f89cb3)

  67. …. a barking twatwaffle, nk.

    I like twats. They could be said to be my favoritest thing. How about loonwaffles, instead? In my hunting days, loons were invader birds (non-native) that could be shot for target practice during hunting season. 😉

    nk (189a81)

  68. jharp — “get their house in order” means recognize the lost value of your company based on your own conduct, and look for a solution in the market, not at the Fed. AIG turned down private equity money because the investors wanted AIG’s current management out. AIG wants to be saved on its own terms.

    Too bad.

    As I recall, AIG turned down a $9 billion cash offer on Sunday because its market capitalization on Friday was $12 billion.

    Well, $9 billion is looking pretty good today because its share price is down way over 50% since then.

    Great job on behalf of the shareholders — but hey, management still has their jobs.

    WLS (26b1e5)

  69. For the sake of the sane here:

    You want either

    1. Income, if that’s how you pay for your food and rent now; or
    2. Equity, if that’s how you’re planning to retire twenty years from now.

    You don’t want a share price which is based on “what the buyer wants to pay for it” unless you’re investing only with your Las Vegas money.

    Comment by nk — 9/16/2008 @ 12:44 pm

    nk – That was precisely what I was trying to get jharpy to address, but to no avail.

    Comment by JD — 9/16/2008 @ 12:47 pm

    Which is more important, jharpy? Maximization of stock price, or actually earning money?

    Comment by JD — 9/16/2008 @ 12:50 pm

    You gents really don’t get it do you?

    The job of the board and the CEO and everyone else who works there is to maximized shareholder wealth.

    Might be through dividends or share price, both can be very effective. But the value of any company is it’s future earnings.

    It depends on the nature of the business.

    Really, please, for the sake of your families and for the sake of all Americans, go take a simple accounting and finance class. It really is not that difficult to understand.

    jharp (f4bed7)

  70. Well, $9 billion is looking pretty good today because its share price is down way over 50% since then.

    Great job on behalf of the shareholders — but hey, management still has their jobs.

    WLS – I’ll bet management had a lot better information than the market about whether it was a good idea to turn that lowball offer down. Time will tell, won’t it.

    daleyrocks (d9ec17)

  71. “You’re beyond hope. The fact that nobody’s making a market in the securities does not mean they are worthless, it means they are illiquid. Because they are illiquid, they must be marked to market which is virtually nothing.”

    It is you that is beyond hope. I’ve actually been in business. Can you say the same.

    Try that one at the bank. Dear Mr. Banker, I have all of these assets that are worth a lot but nobody will buy them because they are illiquid. Nevertheless I’d like to use them as collatoral to borrow x number of dollars.

    Or, sorry Mr. Banker, I can’t pay my mortgage this month but I have all of these valuable illiquid assets that I can give you instead.

    It is you that has no clue.

    If no one is willing to buy them they are worthless.

    Sign up for accounting and finance class with the others here. You’ll be better off for it.

    “The reason nobody is quoting a market is because it is going to be cheaper to buy them in a bankruptcy liquidation.”

    So maybe that’s what they are worth then. After bankruptcy.

    I try to be nice but you haven’t a clue as to what you opine on.

    Comment by spongeworthy — 9/16/2008 @ 12:52 pm

    jharp (f4bed7)

  72. Well, $9 billion is looking pretty good today because its share price is down way over 50% since then.Great job on behalf of the shareholders — but hey, management still has their jobs.

    WLS – I’ll bet management had a lot better information than the market about whether it was a good idea to turn that lowball offer down. Time will tell, won’t it.

    Comment by daleyrocks — 9/16/2008 @ 3:28 pm

    Hey, guys.

    Based on the close today the company is worth 10 billion.

    And who offered 9 billion?

    daleyrocks,

    You have no more of an idea on what AIG is worth than you have an idea of how to build a nuclear warhead.

    Good God. Throwing nonsense out there like that doesn’t do anyone any good.

    jharp (f4bed7)

  73. jharp must not be old enough to remember the .com kerfluffel, where there were companies who had only a business plan, made no product, but had huge stock numbers; and then, the bubble burst, and there was nothing.

    The inflation of share prices is a short-term gain that works to boost the bonuses of the top execs, but does not neccessarily generate a stable business model. Conversly, companies that look to long-term growth and stability, rarely have stock that attracts the go-go fund managers who can generate tremendous share price increases that reward churning.

    Another Drew (1b62fd)

  74. Good God. Throwing nonsense out there like that doesn’t do anyone any good.

    jharp – What good do you think you are doing with your hysterics? You look at point in time stock prices and fall apart. You assume that companies can somehow control their own stock price or that the government can control the overall level of the stock market. You, sir, continue to prove you are blithering idiot every day you comment here.

    daleyrocks (d9ec17)

  75. “You have no more of an idea on what AIG is worth than you have an idea of how to build a nuclear warhead.”

    jharp – Can you break out some religious bigotry next. I like it when you do that.

    daleyrocks (d9ec17)

  76. Keep it up jharp. Someone has to school the kool aid drinkers of the world.

    Oiram (983921)

  77. Ah, the blind (#77) leading the blind (#73).

    Another Drew (1b62fd)

  78. #78 Hehehe…….That’s pretty clever Another Drew.

    Oiram (983921)

  79. You gents really don’t get it do you?

    What a charmer. Does he/she think everyone here who doesn’t agree with him/her rolled off the turnip truck yesterday ??

    Note he/she said “I was in business.” Sorry that didn’t work out.

    As far as AIG is concerned, does the name Spitzer ring a bell ?

    This is chiefly a political scandal and most of the politicians have a D after their name. When Spitzer forced Greenberg out, he started the clock running on this scandal.

    Mike K (6d4fc3)

  80. AD – Oiram sometimes gives the semblance of a willingness to learn. jharp just shrieks. There is a difference.

    daleyrocks (d9ec17)

  81. The thing is these brokerage houses have been investing in Al Gore carbon trading and T boone Pickens windmill schemes. Let Lehman Brothers be a warning to all the fraudsters and hucksters out there pushing the global warming clap trap.
    Serves them right for trying to con the public. Good riddance to bad rubbish.

    Lubos Motl details the intimate relationship between Lehman and the climate change hucksters

    papertiger (202292)

  82. Mike K – Spitzer did like to litigate through the press as opposed to the court room and he his force a lot of concessions from targets that way. Nevertheless, Marsh, Aon, AIG and others were rigging the system on certain insurance bids and contracts and they were caught red handed. AIG was also cooking the books in a number of areas, which led to a huge restatement in 2005 and Greenberg’s ouster along with the CFO. The company has been trying to find its bearings ever since.

    daleyrocks (d9ec17)

  83. #81, Thanks Daley. There’s a compliment in there somewhere. I do try to learn.

    Peace Brothers

    Oiram (983921)

  84. I’m sorry to say that the feds decided to bail out AIG today. That is a serious mistake. Fannie-Freddie were too big to fail but AIG should have been cut loose.

    Dailey, I respect your opinion but there are others. 5 think the other theory is that Greenberg set the strategy and should have been left alone to stand or fall. He alone knew the plan. I think the same applies to Conrad Black whose company tanked after he was forced out.

    Mike K (2cf494)

  85. I said.

    You gents really don’t get it do you?

    You said.

    “What a charmer. Does he/she think everyone here who doesn’t agree with him/her rolled off the turnip truck yesterday ?”

    “Note he/she said “I was in business.” Sorry that didn’t work out.”

    Comment by Mike K — 9/16/2008 @ 4:13 pm

    I’ve tried to be civil but when someone out and out lies and quotes something I did not say I feel compelled to lay it all out.

    You are a liar and a jackass.

    Please feel welcome to defend yourself, Mike K.

    And for the record I have been in business and I am still in business. About 26 years now.

    jharp (f4bed7)

  86. AIG piled up net losses totaling $18.5 billion in the past three quarters on writedowns tied to the collapse of the U.S. subprime mortgage market. The insurer has units that originate, guarantee and invest in home loans.

    From Bloomberg.

    Patricia (ee5c9d)

  87. jharp, try to find a new insult. “Jackass” is getting old, and my donkey does not like your sense of familiarity. He has higher standards.

    SPQR (26be8b)

  88. If after 26 years in business, what the government does is not irrelevant to you, you are not a very good businessman.

    nk (189a81)

  89. Mike K – I don’t like the fed bailout of AIG either. It appears they assessed the potential ripple effect of a bankruptcy as too great.

    I don’t understand your Greenberg points. If Greenberg was responsible for helping to cook the books, manipulate the stock, and lose credibility with regulators are you arguing he should have been left in place?

    daleyrocks (d9ec17)

  90. I’m looking forward to jharp, using his 26 years of business experience, explaining why it is that if its the evil Republican deregulation that is causing the financial crisis, that banks in the United Kingdom are on the brink of failure too.

    Banks like Halifax Bank of Scotland currently rumored to be in trouble, Northern Rock in the UK last year.

    Its a Labor government, not a Republican in sight … unless you wander through Belfast.

    SPQR (26be8b)

  91. daleyrocks, I think the “argument” is that the government already intervened in AIG to its detriment, forcing out someone who ran AIG better than current management. Greenberg still has some fans on Wall Street.

    SPQR (26be8b)

  92. If after 26 years in business, what the government does is not irrelevant to you, you are not a very good businessman.

    Comment by nk — 9/16/2008 @ 7:25 pm

    Honest to God, Mr nk, what in the hell are you talking about?

    “not irrelevant” Do you mean what the government does is relevant to me? Yeah, it is, somewhat.

    So what is your point. I’d go as far as to say as what the government does is relevant to every single American.

    And I happen to be a pretty good businessman. I make a nice living, do what I want pretty much every day, and have plenty of time to debate you nitwits to try to make our country a better place.

    Please share with me your business success.

    jharp (f4bed7)

  93. SPQR – Thanks. Greenberg does have a lot of fans and he did a hell of job with the company for a long time. Most people either don’t know or don’t believe he was playing with a stacked deck.

    daleyrocks (d9ec17)

  94. All,
    Let’s call the AIG supposed bailout exactly what it is. I think it is something we all can agree on.

    It is a taxpayer bailout. Not a fed bailout.

    And more than likely not a bailout for the shareholders(retirement savings of middle class americans), as they have already lost their asses.

    It is for the holders of the debt.

    And just who do you think that might be?

    jharp (f4bed7)

  95. SPQR – A couple of GeneralRe execs and a former AIG reinsurance guy (I believe) were convicted of fraud earlier this year on a reinsurance deal initiated by Hank to make his balance sheet reserve levels look better. Pure window dressing as opposed to risk transfer. His hand was in a lot of stuff like that.

    daleyrocks (d9ec17)

  96. daleyrocks, didn’t say I was a fan of Greenberg. Just that there are people who think he ran AIG better than current management and blame Spitzer.

    And who can resist blaming Spitzer?

    SPQR (26be8b)

  97. I think it is something we all can agree on.

    jharp – Why don’t you read the rationale for the transaction put out by the Fed and try again. Few people here appear to agree with what you say.

    daleyrocks (d9ec17)

  98. SPQR – I was just explaining my position. I wasn’t trying to pin anything on you. Sorry if it came across that way.

    daleyrocks (d9ec17)

  99. “jharp – Why don’t you read the rationale for the transaction put out by the Fed and try again. Few people here appear to agree with what you say”

    Do you disagree that it is a taxpayer bailout?

    Or that fact that the shareholders have already lost their asses?

    jharp (f4bed7)

  100. jharp, are you still unable to read your own comments? Evidently so, since you can’t tell that daleyrocks was responding to something you had written.

    SPQR (26be8b)

  101. Continental Illinois anyone?

    daleyrocks (d9ec17)

  102. #

    “jharp – Why don’t you read the rationale for the transaction put out by the Fed and try again. Few people here appear to agree with what you say”

    Do you disagree that it is a taxpayer bailout?

    Or that fact that the shareholders have already lost their asses?

    Comment by jharp — 9/16/2008 @ 8:26 pm
    #

    jharp, are you still unable to read your own comments? Evidently so, since you can’t tell that daleyrocks was responding to something you had written.

    Comment by SPQR — 9/16/2008 @ 8:28 pm

    Yes, I can.

    Si what don’t you field my question.

    Just what is it that most here disagree with according to daleyrocks?

    It isn’t a taxpayer bailout?

    The shareholders have already lost their asses?

    Which one is it, smart guy?

    jharp (f4bed7)


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