AIG

[j_b]

Dirty politics aside, they (AIG) might have been legally obligated to pay those bonuses no matter the public thinks. One of the key roles of government is to enforce contracts and uphold legal arguments even if the contact is dumb. All the more reason to let them file chapter 11, all of these contracts would be nill.

 

Autoworkers have contracts too, yet it didn't prevent the people now making these arguments about AIG contracts from saying then that autoworkers should be paid less or be sacked. The double standard is simply mind boggling.

[j_b]

The Big Takeover

The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution

MATT TAIBBI

 

It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

 

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

 

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

 

Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

 

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

 

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

 

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

 

Lots more in the rest of the article

[STP]

Then, there's the dawning realization that those greedy people involved in the derivatives business should have been recognized as a big a threat as any Islamic terrorist in terms of global effect.

 

According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank -- the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:

 

1. Listed credit derivatives stood at USD 548 trillion;

 

2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:

 

a. Interest Rate Derivatives at about USD 393+ trillion;

b. Credit Default Swaps at about USD 58+ trillion;

c. Foreign Exchange Derivatives at about USD 56+ trillion;

d. Commodity Derivatives at about USD 9 trillion;

e. Equity Linked Derivatives at about USD 8.5 trillion; and

f. Unallocated Derivatives at about USD 71+ trillion.

 

What would be the relative positioning of USD 1.144 quadrillion for outstanding derivatives, ie, what is their scale:

 

1. The entire GDP of the US is about USD 14 trillion.

2. The entire US money supply is also about USD 15 trillion.

3. The GDP of the entire world is USD 50 trillion. USD 1,144 trillion is 22 times the GDP of the whole world.

4. The real estate of the entire world is valued at about USD 75 trillion.

5. The world stock and bond markets are valued at about USD 100 trillion.

6. The big banks alone own about USD 140 trillion in derivatives.

7. Bear Stearns had USD 13+ trillion in derivatives and went bankrupt in March. Freddie Mac, Fannie Mae, Lehman Brothers and AIG have all 'collapsed' because of complex securities and derivatives exposures in September.

8. The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.

 

--source: The Size of Derivatives Bubble = $190K Per Person on Planet

 

As the April G20 summit in London approaches, it is worth noting that the trans-national play of derivatives has grown from USD 1.144 Quadrillion to USD 1.405 Quadrillion, ie, +22% worldwide.

The global crisis has wiped a staggering USD 50 trillion off the value of financial assets — currency, equity and bond markets worldwide — last year, according to the Asian Development Bank.

The truth that there are as many as “Eight Bubbles” [ATCA] at play and in the process of bursting together is understood to a greater extent now than in the past. We have gone from being able to “rescue the world” with less than USD 1 trillion in October 2008 to USD 11.6 trillion commitments in the US alone along with a further announcement of USD 1.2 trillion of quantitative easing by the US Fed in March 2009. There is a realisation worldwide including the G7 + BRIC + MISSAT that this is a USD 20 trillion problem and growing. As time goes by, the full extent of the collateral damage from the Quadrillion Play and 8 Bubbles burst is being revealed.

 

The bursting process is taking the form of deleverage on an unprecedented scale. Even 1929 pales in comparison because the industrial production collapse witnessed over five successive years in the 1930s in the US is now taking place in five to six months, most notably in Japan.

 

--source: AIG Bonuses Are A Smoke Screen . . . As Derivatives Bubble Grows 22% To $206K Per-Person-On-Planet!

 

 

[prole]

DERIVATIVES?! Pffft, whatever dude. What's next, black helicopters? Let's focus on bonuses and earmarks instead.

[j_b]

and don't forget to blame the scumballs who mortgaged their homes to meet living expenses.

 

Wow, STP, these are big numbers. It's tempting to capitalize a new bank with bailout money while letting these greedy fools deal with their gambling debts and IOUs.

[tvashtarkatena]

When was the last time you got a blow job? Cuz your not exactly the life of the party.

[j_b]

Live and let live, Tvash. My form of entertainment isn't yours, is anything wrong with that? Try to be "liberal" instead of behaving like a cultural stormtrooper.

[tvashtarkatena]

Pseudo hipster or culural stormtrooper?

 

You decide.

[olyclimber]

so edgy. so arty. life as art. art as life. living on the edge. provoking.

[tvashtarkatena]

1 vote for pseudo hipster.

[j_b]

I am not sure it is possible around here but may be this is where the pseudo part comes in.

[prole]

 

"Puh-leeze."

 

[j_b]

LOL. The word has dynamic meaning and considering the evidence, I assumed Tvash didn't imply that he was either a trendy fashionista or low riding underwear.

[kevbone]

Let em sink is winning!

[prole]

 

 

French strikers hold 3M exec hostage amid talks

By SCOTT SAYARE, Associated Press Writer Scott Sayare, Associated Press Writer 1 hr 3 mins ago

 

PITHIVIERS, France – Striking French workers for U.S. manufacturer 3M held their boss hostage amid labor talks Wednesday at a plant south of Paris, as anger over layoffs and cutbacks mounted around the country.

 

While the situation at the 3M plant outside Pithiviers was calm, worker rage elsewhere boiled over into an angry march on the presidential palace in Paris and a bonfire of tires set alight by Continental AG employees whose auto parts factory was being shut down.

 

While France has a long tradition of labor unrest, the latest wave of hostage-takings, marches and strikes has echoed across Europe, as the global slowdown fans job fears and leaves many workers skeptical of their leaders' ability to solve the crisis.

 

The French division of 3M — a diversified U.S. manufacturer known for Post-It notes and Scotch tape — recently announced layoffs and job transfers among its 2,700 workers at 13 French sites. Among those targeted are 110 of the Pithiviers factory's 235 workers.

 

A few dozen workers at Pithiviers took turns standing guard Wednesday outside factory offices where the director of 3M's French operations, Luc Rousselet, has been holed up since Tuesday. The workers did not threaten any violence and the atmosphere was calm.

 

A few police officers stood outside, while workers inside exchanged jokes and worries about their future amid heaps of empty plastic coffee cups and boxes of cookies.

 

Talks among 3M workers and management resumed Wednesday mediated by a local labor official. Rousselet was not taking part. Workers want better severance packages for those being laid off and better conditions for those keeping their jobs.

 

In France, it is not unheard-of for striking workers to hold company executives as a way of winning concessions from management. The hostages are almost never injured. A similar situation ended peacefully earlier this month at Sony's French facilities.

 

"We don't have any other ammunition" other than hostage-taking, said Laurent Joly, who has worked at the Pithiviers plant for 11 years and is angry that he is being transferred to another French site.

 

"I really have the impression that we no longer exist for these people," Genevieve Camus, who has worked for the plant for 35 years, said of the company's U.S. management.

 

The Maplewood, Minnesota-based 3M is also planning job cuts at facilities in the United States and other developed nations.

 

The 3M workers at Pithiviers have been on strike since Friday. Hamon said Rousselet was blocked from leaving the factory Tuesday after arriving from 3M France headquarters near Paris.

 

Store owners in Pithiviers were shutting down early on Wednesday to support the factory workers.

 

When Rousselet came out of the guarded office to go to the bathroom Wednesday, workers booed him while reporters asked how he was holding up.

 

"Everything's fine," he said.

 

Workers planned to bring Rousselet mussels and french fries for dinner if he was still there Wednesday night.

 

In Paris, an acrid plume of black smoke from burning tires wafted mere blocks from President Nicolas Sarkozy's Elysee Palace. It was a clear signal that French labor unrest over the state of the euro zone's second-largest economy had taken an ugly turn for the worse.

 

Faced with what it calls the collapse of the European auto market, Germany's Continental recently announced plans to close the plant in Clairoix, northeast of Paris, in 2010.

 

"We shouldn't let this company close down, otherwise it means that all these robber bosses can do whatever they want to," said Antonio Da Costa, a union representative.

 

Rising public outrage at employers also surfaced in Scotland.

 

Vandals attacked the home and car of the former head of the Royal Bank of Scotland, smashing windows early Wednesday at the house of the ex-CEO who resigned in disgrace but walked out with an annual pension of about 700,000 pounds ($1.2 million).

 

Three windows were smashed at Fred Goodwin's sandstone Victorian house in one of Edinburgh's wealthy suburbs. The rear window of a black Mercedes S600 car parked in the driveway was also smashed.

 

[STP]

Advertisement?

[video:youtube]zHCG5DXRC8o

[JayB]

Then, there's the dawning realization that those greedy people involved in the derivatives business should have been recognized as a big a threat as any Islamic terrorist in terms of global effect.

 

According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank -- the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion. The main categories of the USD 1.144 Quadrillion derivatives market were the following:

 

1. Listed credit derivatives stood at USD 548 trillion;

 

2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:

 

a. Interest Rate Derivatives at about USD 393+ trillion;

b. Credit Default Swaps at about USD 58+ trillion;

c. Foreign Exchange Derivatives at about USD 56+ trillion;

d. Commodity Derivatives at about USD 9 trillion;

e. Equity Linked Derivatives at about USD 8.5 trillion; and

f. Unallocated Derivatives at about USD 71+ trillion.

 

What would be the relative positioning of USD 1.144 quadrillion for outstanding derivatives, ie, what is their scale:

 

1. The entire GDP of the US is about USD 14 trillion.

2. The entire US money supply is also about USD 15 trillion.

3. The GDP of the entire world is USD 50 trillion. USD 1,144 trillion is 22 times the GDP of the whole world.

4. The real estate of the entire world is valued at about USD 75 trillion.

5. The world stock and bond markets are valued at about USD 100 trillion.

6. The big banks alone own about USD 140 trillion in derivatives.

7. Bear Stearns had USD 13+ trillion in derivatives and went bankrupt in March. Freddie Mac, Fannie Mae, Lehman Brothers and AIG have all 'collapsed' because of complex securities and derivatives exposures in September.

8. The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.

 

--source: The Size of Derivatives Bubble = $190K Per Person on Planet

 

As the April G20 summit in London approaches, it is worth noting that the trans-national play of derivatives has grown from USD 1.144 Quadrillion to USD 1.405 Quadrillion, ie, +22% worldwide.

The global crisis has wiped a staggering USD 50 trillion off the value of financial assets — currency, equity and bond markets worldwide — last year, according to the Asian Development Bank.

The truth that there are as many as “Eight Bubbles” [ATCA] at play and in the process of bursting together is understood to a greater extent now than in the past. We have gone from being able to “rescue the world” with less than USD 1 trillion in October 2008 to USD 11.6 trillion commitments in the US alone along with a further announcement of USD 1.2 trillion of quantitative easing by the US Fed in March 2009. There is a realisation worldwide including the G7 + BRIC + MISSAT that this is a USD 20 trillion problem and growing. As time goes by, the full extent of the collateral damage from the Quadrillion Play and 8 Bubbles burst is being revealed.

 

The bursting process is taking the form of deleverage on an unprecedented scale. Even 1929 pales in comparison because the industrial production collapse witnessed over five successive years in the 1930s in the US is now taking place in five to six months, most notably in Japan.

 

--source: AIG Bonuses Are A Smoke Screen . . . As Derivatives Bubble Grows 22% To $206K Per-Person-On-Planet!

 

 

I suspect that the value you cite represents the total value of all of the stuff that's covered by derivatives contracts, not the amount of the net uncovered losses associated with them.

 

I think it's important to put the numbers in perspective in order for them to be meaningful. Insurance contracts are very similar to derivatives in many respects, and the total value of all homeowner's policies in the US is probably well into the trillions. Big problem if all of the homes in the US were destroyed all at once - not such a big problem if the losses are small relative to the total value of the assets and reinsurance policies backing up the policies.

 

Most derivatives contracts are used by farmers to protect themselves from risks associated with fluctuations in crop prices, by merchants to protect themselves from currency fluctuations, by appliance manufacturers to protect themselves from increases in the price of steel, etc, etc, etc, etc. Someone is exposed to a given risk based on the change in price of something that they buy, sell, or use - and someone else is willing to bear that risk for a price. Again, very much like an insurance contract, and sold on exchanges that make sure that both parties can and do honor their contracts. As with the example of the value of all of the outstanding home owner's policies not meaning much until the houses covered by the policies are actually destroyed, a derivatives contract giving the buyer the right to buy a billion Canadian dollars at a price that's fixed in US dollars doesn't translate into a billion dollar loss that someone's got to pony up for unless the value of the US dollar drops to 0.000000000001 cents per Canadian dollar. Worth considering when pondering the total value of derivatives out there at the moment. What's the actual value of the net-losses sustained by the party that assumed a given risk in a derivative contract, and how large is it relative to their total assets?

 

The only number that matters (in the current crisis) when it comes to derivatives is the dollar value of the liabilities that banks or other institutions that wrote over the counter (non exchange traded) derivative contracts can't honor. E.g. AIG said they'd give the ACME co $1 million dollars if the a pool of assets declined in value - and AIG doesn't have the money. That million dollars is now a number that matters, since the ACME co needs that money or they'll go out of business. Still a big scary number, but nowhere near the total value of all outstanding derivative contracts.

 

Many quadrillions or pentillions of exchange-traded derivatives contracts have been initiated and satisfied and the system used to buy and sell them has worked well for all concerned. The derivatives contracts that are responsible for all of the uncovered losses were sold outside of exchanges. Making that one simple improvement to the rules that govern derivatives and that'd be sufficient to prevent a recurrence of the present crisis. Do that - and revise the rules that govern the origination and securitization of debt - and that's virtually all of the "change" that'd be necessary to keep excessive leverage from derailing the economy again in the future.

 

Having said all of that - it's not surprising that the crisis brought about by excessive leverage have inspired despite calls to re-introduce government price controls and government-run or sanctioned monopolies on wide swaths of the economy in response to the current crisis, and reduce or eliminate restrictions on trade (this is what most of the deregulation efforts from the Carter administration onward actually did).

 

I suspect that what I posted about derivatives is a low-level rehash of a small portion of what you know about derivatives, but I thought it was worth sharing during the current populist - er - "moment."

 

 

 

 

 

 

 

 

 

 

[prole]

Many quadrillions or pentillions of exchange-traded derivatives contracts have been initiated and satisfied and the system used to buy and sell them has worked well for all concerned. The derivatives contracts that are responsible for all of the uncovered losses were sold outside of exchanges. Making that one simple improvement to the rules that govern derivatives and that'd be sufficient to prevent a recurrence of the present crisis. Do that - and revise the rules that govern the origination and securitization of debt - and that's virtually all of the "change" that'd be necessary to keep excessive leverage from derailing the economy again in the future.

 

"Ohhhh, now they tells us!"

 

[JayB]

I'm actually astonished that you aren't, at this very moment, running around downtown Bellingham, grabbing strangers by the shoulders while screaming "Quadrillions! Quadrillions! Quadrillions in Derivatives! Can't you see, don't you understand! Quadriiiiiiiiiiiiiiiiiiillions!!!!!!!"

[prole]

I'm sure Iceland eagerly awaits its stop on your world tour.

[JayB]

I'm coming home to watch the activists in "Anti-hegemonic Counter-Narrative Installations" in the "the temporary autonomous zones of street parties and convergence centres liberated in cities during summit protest" use a combination of interactive tofu sculptures and interpretive dance to illustrate the manner in which futures contracts for US No. 2 yellow corn have the potential to fatally undermine the global anticapitalist movement.

 

Let me know if you'll be dressed as "the organic carrot of indeterminate gender" or the "reconceptualized counter-mascot" in the above.

[STP]

I suspect that the value you cite represents the total value of all of the stuff that's covered by derivatives contracts, not the amount of the net uncovered losses associated with them.Having said all of that - it's not surprising that the crisis brought about by excessive leverage have inspired despite calls to re-introduce government price controls and government-run or sanctioned monopolies on wide swaths of the economy in response to the current crisis, and reduce or eliminate restrictions on trade (this is what most of the deregulation efforts from the Carter administration onward actually did).

 

I suspect that what I posted about derivatives is a low-level rehash of a small portion of what you know about derivatives, but I thought it was worth sharing during the current populist - er - "moment."

 

/

/

/

/

/

/

 

There's nothing you said that I disagree with. You're right I don't understand a lot about derivatives, not many people do. It just seemed that the magnitude of those numbers is something extraordinary in itself. Like, oh, 93 million miles. 93 million is a hellva long ways (relatively) but not for a coronal mass ejection to reach the earth. Anyway, I thought those numbers were interesting.

 

It seems that trust and confidence are more important than those numbers. Do I trust that the experts working on this mess will be able to keep matters under control?

[prole]

It seems that trust and confidence are more important than those numbers. Do I trust that the experts working on this mess will be able to keep matters under control?

 

Boy, let's hope so. We've got to get this thing back on track!

 

[j_b]

Considering the deliberate lack of transparency we will never know how much of these "quadrillions" in derivative contracts can't be honored but we already know that nearly 9 trillions in emergency loans and guarantees were issued by the FED to "troubled" financial institutions in the last 5 month. This is likely only the tip of the iceberg since hedge funds aren't likely to give an inkling of the toxicity of their "assets" as long as there is hope of recooping on some of the loss.

 

At this point attempts at minimizing the financial collapse and the various band-aid prescriptions on a rotting corpse are simply laughable.

[prole]

Considering the deliberate lack of transparency we will never know how much of these "quadrillions" in derivative contracts can't be honored but we already know that nearly 9 trillions in emergency loans and guarantees were issued by the FED to "troubled" financial institutions in the last 5 month. This is likely only the tip of the iceberg since hedge funds aren't likely to give an inkling of the toxicity of their "assets" as long as there is hope of recooping on some of the loss.

 

At this point attempts at minimizing the financial collapse and the various band-aid prescriptions on a rotting corpse are simply laughable.

 

Can't wait to see some of the results of the government's "stress tests". They may need to classify some on national security grounds.