In a move that should surprise no one, the FBI, says CNN, has opened an investigation into Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc., and American International Group, the four companies now at the very heart of the proposed $700 billion dollar theft–I mean taxpayer bailout–plan being pushed by Bush and gang in Washington.

This apparently brings to 26 the number of financial insitutions under law enforcement scrutiny just in the past year.

CNN quotes two law enforcement officials as saying the FBI is looking for “potential fraud” by the four giant and now collapsed companies.

Faster, Faster, Faster

Meantime, perhaps the FBI should also take a closer look at why the Bush administration is in such a hurry to ram through the Congress this enormous rip-off of the American taxpayer in order to rescue some fat-cat Wall Street big wigs who drove their companies and the U.S. economy into the ground.

We are being told we must act quickly…yesterday if possible. Don’t ask any questions. Don’t provide oversight. Don’t permit judicial review. Don’t hold hearings. Don’t consult experts. Don’t hold anyone accountable. Just hand the $700 billion over to the very sleeze bags who brought the country to its fiscal knees.

Don’t help people who face forclosures. Don’t limit executive pay for the CEOs of failed companies. Don’t attach amendments to increase unemployment insurance. Don’t change the bankruptcy laws to allow judges to change the terms of a mortgage to help keep someone in their home.

No. Don’t do any of these things. Just fork over the greenbacks. Sign the big check. Shut your mouth. Close your eyes. Plug your ears. And, while you are at it, hold your nose because the stench from this crap will burn through your throat.

Recently, China executed some key industry executives who were responsible for tainted products being exported to other countries, tarnishing China’s still developing reputation.

Maybe China is on to something? The Chinese, after all, brought us citrus fruits, gunpowder, paper, fireworks and now, corporate executions. Isn’t there something to be learned,then, from the Chinese when it comes to dealing with this financial crisis??

If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!

Tags: AIG, fannie, FBI, fraud, freddie, lehman, mortgage-fraud

Who would have thought that a relatively small number of people who couldn’t pay their sub-prime mortages would bring about the end of the American economy as we knew it? The latest development is an extraordinary one. As CNNMoney.com put it: “In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group…” Translation: the government has just loaned AIG $85 billion of YOUR taxpayer dollars.
The feds will, in turn, get a 79.9% chunk of the company. It is apparently hoped that when the company is eventually liquidated, the bailout bucks will be repaid to taxpayers.

Wanna bet!!!

Of course, this now global economic mess was not really the result of some folks going belly up on their subprimes. The real cause is the absolute greed of the investment community which felt itself immune from reality after the virtual protection given it over the past seven years or so by the Bush administration.

And, let us finally put aside this myth that European and Asian nations are smarter about these sorts of things than we are. Turns out they were just as stupid, greedy and, yes, maybe even criminal!

No matter. The bottom line is, we are now the proud owners of a giant insurance company that probably will soon be no more, as well as the mortgage titans Freddi Mac and Fannie Mae.

Getting back to AIG,if you think you had a bad economic year ( and there is a pretty good chance you did) just look at “poor” AIG–it lost some $18 billion in nine months and saw the price of its stock drop more than 91%.

Where do we go from here?

Damned if I know!!! And, I think it is safe to say from the way the past few days have played out, no one else knows,either.

I keep reading how the only thing that will save the day will be the resurrection of the real estate market in this country. But I don’t buy that any more than I believe it was just the real estate debacle that caused this world-wide economic crisis.

A whole bunch of things need to be changed, big time, before the economy settles down and returns to something akin to normal. It is easy, glib even, to point the finger of blame on the subprime lender who was, after all, just trying to put a roof over his/her head and ignore the far bigger and more sinister forces at play here: lenders, speculators, regulators, to name but a few.

And, whether John McCain or Barack Obama captures the presidency, the global economy will not be nursed back to health without these other cancers being aggressively treated.

Tags: AIG, American Insurance Group, Economy, socialism, taxpayer

The snowball that is the US and Global Financial Crisis continued to get larger Tuesday as American International Group (AIG), the nation’s largest insurer came close to collapse. Over the weekend, the Fed failed to provide a $40 Billion bridge loan that the company’s leadership had been pressing for, but late Monday night, the Fed stepped in. In exchange for an 80% ownership stake in the company, the government went against earlier promises and rescued AIG with an $85 Billion loan.

According to CNN:

Officials decided they had to act lest the nation’s largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries. An eventual liquidation of the company is most likely, senior Fed officials said. But with the government loan, the company won’t have to go through a tumultuous fire sale.

The failure of AIG could have caused unprecedented global ripple effects, said Robert Bolton, managing director at Mendon Capital Advisors Corp. AIG is a major player in the market for credit default swaps, which are insurance-like contracts that guarantee against a company defaulting on its debt. Also, it is a huge provider of life insurance, property and casualty insurance and annuities.

“If AIG fails and can’t make good on its obligations, forget it,” Bolton said. “It’s as big a wave as you’re going to see.” AIG has had a very tough year. Rocked by the subprime crisis, the company has lost more than $18 billion in the past nine months and has seen its stock price fall more than 91% so far this year. It already raised $20 billion in fresh capital earlier this year. Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.

According to the International Herald Tribune:

The decision, announced by the Fed only two weeks after the Treasury Department took over the quasi-government mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank’s history. With time running out after AIG failed to get a bank loan to avoid bankruptcy, Treasury Secterary Henry Paulson Jr. and the Fed chairman, Ben Bernanke convened a meeting with House and Senate leaders on Capitol Hill at about 6:30 p.m. Tuesday to explain the rescue plan.

The decision was a remarkable turnabout by the Bush administration and Paulson, who had flatly refused over the weekend to risk taxpayer money to prevent the collapse of Lehman Brothers or the distressed sale of Merrill Lynch to Bank of America. Earlier this year, the government bailed out another investment bank, Bear Stearns, by engineering a sale to JPMorgan Chase that left taxpayers on the hook for up to $29 billion of bad investments by Bear Stearns. The government hoped at the time that this unusual step would both calm markets and lead to a recovery by the financial system. But critics warned at the time that it would only encourage others to seek bailouts, and the eventual costs to the government would be staggering.

Was there any other option for the government? What now? Taxpayers now own Fannie, Freddie, and AIG . . . any guesses as to what’s next?

This week’s news has been the financial equivalent of a 9.5 earthquake on the richter scale . . . unprecedented!

Tags: AIG, American Insurance Group, fed, government bailout, paulson

Update: The Dow ended up closing down 504 points for the day

The past 24 hours have been about as chaotic a time as Wall Street has seen since Black Monday or possibly the Great Depression. Here are a few highlights:

• We’ve seen one of the top investment banks fail to secure a bidder and file for bankruptcy
• We’ve seen Merrill Lynch essentially forced to be acquired by Bank of America for $50 billion in stock
• We’ve seen shares of AIG fall 80% today (World’s Largest Insurer)
• We’ve seen WaMu shares fall down 25% to a market cap close to $3 billion
• With 40 minutes left in trading, the DOW Industrials are down 399 points or 3.5%
• Alan Greenspan called this a once in a century crisis.

With all that going on, what else could be happening?

A Consortium of 10 Banks Has Established a $70 Billion Loan Program to Protect Liquidity

According to the AP:

The ten banks, which include JPMorgan Chase & Co. and Goldman Sachs Group Inc., said they were committing $7 billion each for the pool. The pool would act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs.

The banks said the program will be available to participating banks which can get a cash infusion up to a maximum of one-third of the total size of the pool. The size of the loan program might increase as “other banks are permitted to join.” All participating banks intend to use this facility beginning this week, the statement said.

The banks also include Bank of America Corp., Barclays PLC, Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Merrill Lynch & Co., Morgan Stanley and UBS.

Could this action from the banks help preserve their own future and that of other banks?
Personally, I think it is a great idea and hope that other major banks jump in and help pool funds to build the loan program. It is forward thinking like that which has been absent from the financial institutions for some time. Perhaps the banks can save themselves — we see that Washington failed to save Lehman — seems that there are few other options left.

Any Thoughts?

Tags: AIG, bank of america, finance, lehman, lending, Merrill Lynch, mortgage