* * * * HARD CORE REAL ESTATE TALK * * * *
HEY FOLKS! WE DON'T CARE ABOUT LITTLE MONEY. WE CARE ABOUT THE BIG MONEY.
IT'S LIKE WATCHING A TABLE OF DOMINOES FALL.
BIG MONEY. I've been trying to figure out how AIG could have had it's hands in the American tax payers' pockets to the tune of $170,000,000,000. That's a lot of money. Then I realized this morning that, in addition to the retention bonuses that AIG is paying to it's employees ("the best and the brightest"), AIG must also be paying out $Billions to the banks to cover their losses when a Collateralized Debt Obligation defaults.
These CCOs are often Mortgage Backed Securities purchased by Wall Street traders and as mortgages default, it's like dominoes, the American home owner defaults on his mortgage and the bank forecloses, the MBS that included securities with which that mortgage was bundled defaults and, next domino, the Credit Default Swap or the CDO which is insured by AIG defaults.
This CDS is insured by AIG and was NOT REGULATED BY ANY ENTITY. AIG insured Trillions, about $45,000,000,000,000 that, $45 Trillion Dollars of Mortgage Default Swaps that are now in default or will be.
HOW ARE THE BANKS DOUBLE DIPPING?
They have collected a cumulative $500,000,000,000 in cash bailout ("handout") money from the trifecta of the Department of the Treasury, the Federal Reserve and the U.S. Congress. All signed off by the President of the United States. Invented by the then Secretary of the Treasury, Henry Paulson, Chairman of the Board of Governor Benjamin Bernanke, the TARP program was run through Congress and signed off by the President as the only way to save the country from a complete financial collapse, which, interestingly enough, in some opinions happened anyway.
IN THE MEAN TIME, while the government is handing out about $500Billion of the $750Billion authorization, the investment banks that invented the Credit Default Swaps, the Collateralized Debt Obligations and the Mortgage Backed Securities that were defaulting left and right were collecting $Billions from AIG which insured these transactions, all of which were unregulated.
The investment banks such as Bear Stearns, Merrill Lynch, etc., that brokered the instruments that failed have been acquired by the commercial banks such as, JP Morgan Chase and Bank of America. Bank of America has received about $45Billion from the tax payers and JP Morgan has received about $25Billion although they say they didn't want it.
THE BIG QUESTION. Are the banks collecting $Billions from TARP AND $Billions from AIG pursuant to their credit default swap insurance coverage????
AIG is receiving a lot of bad press these days for giving their employees, derivative traders, bonuses? My question is also, is AIG also paying the banks benefits under their insurance policies for credit default swaps.
LITTLE MONEY. The $135,000,000 in bonuses is little money when compared to the $170,000,000,000 we've handed out to AIG.