AIG reveals who we are bailing out

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Confused? We all are. Read this to learn what Financial Derivatives are.

Severe valuation losses on the super senior multi-sector credit default swap portfolio of AIG Financial Products Corp. (AIGFP) triggered collateral provisions in the swap contracts, creating a liquidity crisis for AIG in September 2008. The Federal Reserve Bank of New York (FRBNY) provided an emergency $85 billion loan to AIG to meet short-term cash needs. The aid received by AIG helped avoid severe financial disruptions by providing liquidity to important financial institutions and municipalities.

Using funds from the emergency loan, financial counterparties listed on Attachment A (all attachments are posted online at http://www.aig.com/Related-Resources_385_136430.html ) received a total of $22.4 billion in collateral relating to CDS transactions from AIGFP between September 16, 2008 and December 31, 2008. This amount represents funds provided to such counterparties after the date on which AIG began receiving government assistance. The counterparties received additional collateral from AIG prior to September 16, 2008.

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Lawyer Accused of Stealing Millions

Image via WikipediaNYTimes.com: "Federal authorities have been tracking what they describe as a brazen swindle of some of New York’s savviest investors by one of New York’s more accomplished lawyers. Mr. Dreier has been charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan.

In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions.

In recent days, Dreier L.L.P., the Park Avenue law firm that Mr. Dreier founded, has been plunged into chaos. At least $35 million in escrow that was to have been held by the firm seems to be missing, the authorities say, and nearly all of its 250 lawyers are now looking for work."

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Morgan Stanley Ups Stake in Struggling General Growth

Image by Getty ImagesMorgan Stanley has become the second investor to take a large stake in General Growth Properties Inc., the struggling mall operator headquartered in Chicago. Morgan Stanley bought more than 13.6 million shares, upping its stake in the company from 3 percent to 5.1 percent.

General Growth’s stock price closed yesterday at 94 cents. At mid-morning today, it had risen to $1.35. Last month, Pershing Square Capital Management, a New York City-based hedge fund managed by William Ackman, bought just over 20 million shares or a 7.5 percent stake in GGP.

The Morgan Stanley move followed an agreement, reported Monday by CPN, between General Growth and a six-lender consortium to extend the maturity date for $900 million in mortgage loans on two of three General Growth malls in Las Vegas. In an attempt to raise cash, the mall operator has put both of those properties, the Fashion Show and Palazzo malls, up for sale, along with a third Las Vegas center, Grand Canal Shoppes. General Growth owes approximately $27 billion, a debt load created to finance acquisitions, including its $12.6 billion acquisition of the Rouse Co. in 2004.

See article: Morgan Stanley Ups Stake in Struggling General Growth

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Recession’s Grip Forces U.S. to Flood World With More Dollars

Bloomberg.com: Exclusive: "Nov. 24 (Bloomberg) -- The world needs more dollars. The United States is preparing to provide them.

In an all-out assault on capitalism’s worst crisis since the Great Depression, the U.S. is taking on the role of both lender and borrower of last resort for the global economy.

The Federal Reserve, which has already pumped out hundreds of billions of dollars, might formally adopt a policy of flooding the world financial system with even more money. The Treasury, on course to borrow some $1.5 trillion this fiscal year, may tap global capital markets for even more to finance a fiscal stimulus package of as much as $700 billion and provide additional bailout money for banks.

“You want to do everything you can when you’re facing the threat of a deflationary breakdown of the economy,” says Michael Feroli, a former Fed official who is now an economist at JPMorgan Chase & Co. in New York."

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Is Laissez-faire dead?

Image by jetzenpolis via FlickrSome strong words. Read full article here: Are sovereign investment funds the new economic model?

"The Western financial system, as we know it, is dead. Not tarnished or cracked. Dead. With its demise go the Anglo laissez-faire financial mechanisms of the Reagan-Thatcher-Kohl era that have held sway for nearly three decades. The American subset, affectionately referred to as “the cowboy experiment,” run by self-centered eccentrics, is at the root of this collapse. After all, New York, not London, had been the creator of new financial products, strategies and entities. We were the innovators. Leverage was the tool. And greed was the measure of success."

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• Your Taxpayer Money As Capital For Self-Serving Ends

Bloomberg.com: Exclusive

Bloomberg.com: Exclusive: "Lenders, reeling from an almost 20 percent decline in loan prices, are punishing borrowers in jeopardy of breaking their loan agreements as the economy teeters on recession. As many as 135 companies are in danger of breaching targets set by their banks, S&P says. Sam Zell's Tribune Corp. and Leon Black's Realogy Corp. may soon trip their covenants, according to Moody's Investors Service, which like S&P is based in New York.

``We would use an opportunity of a company violating a covenant as an opportunity to strengthen our hand, particularly in a deal where the spread is too thin or original terms were too generous,'' said Scott Page, head of the bank loan group at Eaton Vance Corp. The Boston-based firm oversees about $156 billion."

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• The Iceland Crisis in Headlines, Plus One Graph

Bloomberg.com: Exclusive

Bloomberg.com: Exclusive: "Oct. 3 (Bloomberg) -- When Sheila Bair took over as head of the U.S. Federal Deposit Insurance Corp. in 2006, the agency was probably better known for the ``FDIC'' logo on the doors of the nation's banks than for anything it did.

Now Bair is at the center of the financial crisis, speeding the takeover of failing banks and pressing the mortgage industry to ease loan terms. And she's vaulted from the leadership of a once-sleepy regulator into the league of Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, winning praise from Democrats and Republicans.

``She has more power because of the situation on the ground,'' said Senator Charles Schumer, a New York Democrat. ``No one is going to put handcuffs on her.''

``She's going to be Treasury secretary someday,'' said Tim Adams, a former department undersecretary under President George W. Bush who worked with Bair when she was an assistant secretary.

In just the last week, Bair, 54, invoked never-before-used authority to avert a financial-system breakdown by brokering a deal for Citigroup Inc.'s to buy Wachovia Corp.'s banking operations. She seized Washington Mutual Inc. and sold it to JPMorgan Chase & Co. and convinced the Senate to temporarily increase the FDIC's insurance of individual bank deposits -- a move Paulson opposed."

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