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 Wednesday, March 18, 2009

The New F***ing Citibank

By Paul Hsieh @ 12:05 PM

Today's video: "The New F***ing Citibank"



Probably NSFW due to repeated use of F-bombs. (Via Radley Balko.)

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 Comments

Wednesday, March 18, 2009 at 11:52:50 mst
Comment ID: #1
Name: brian0918
E-mail: my handle, through gmail

Oh, that was brilliant.

Wednesday, March 18, 2009 at 15:56:15 mst
Comment ID: #2
Name: Dan G.

Bravo! Encore! (the video, not the nationalization)

Wednesday, March 18, 2009 at 19:52:56 mst
Comment ID: #3
Name: KPO'M
E-mail: ka84796(at)comcast.net

On a related nationalized note, the Lex column in Tuesday's FT did a pretty good job breaking out the $170 billion that went to AIG. $12.1 billion went to municipalities. $43.7 billion went to counterparties on swaps that were collateralized by securities. Had AIG failed, these swaps would have been settled in the collateral, at losses far less than $43.7 billion.

Interestingly, $22.4 billion was posted as collateral on CDS written against some "toxic assets" known as collateralized debt obligations. Another $27.1 billion was used to buy up collateralized debt obligations for a vehicle set up by the Federal Reserve back in November. The FT's take is that this is two sides of the same bailout. As the value of banks' toxic assets declined, the value of their CDS with AIG increased. These banks required AIG to post additional collateral to secure the credit default swaps. With the $22.4 and $27.1 billion moves, the government essentially made those counterparties whole. The odd thing is that the actual defaults on the underlying collateral is very low.

Essentially, the vast majority of these payments are to make counterparties whole, even though the underlying losses were substantially less than the amount of the payoffs. Clearly here the government expects to get most of this money back as the underlying assets recover in value. Ostensibly this was done to avoid the "systemic risk" of a meltdown or a freezing up of the capital markets. However, in my view, it's just more proof that the Bush and later Obama governments blew the "meltdown" completely out of proportion as part of a power grab. Basically, AIG could have unwound the vast majority of these agreements in an orderly bankruptcy with some significant losses to the counterparties, but nothing approaching complete collapse.

Thursday, March 19, 2009 at 9:16:13 mst
Comment ID: #4
Name: elmas
E-mail: bernus(at)yahoo.com

this is f***ing awesome!!!

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