How is the Recession treating you?

[justatransgirl]

Hey, some great comments!

I tend to agree with you Nauty lady. I feel the media has fanned the flames - and now the fire is red hot and blazing.

I tend to check the overall economy by how many new cars I see on the road. I know it's not scientific. But lately I see very few, even in ritzy Newport Beach - where in good times "everyone" it seems has a new Mercedes. (Which is leased and two payments behind, while the owner figures out a new stock swindle...)

And didn't anybody in American business go to bible school and study the part about putting wheat away for a famine? Why are all these companies that have made billions over the years crying? Where is their fall back money?

Oh. I forgot they gave it all to the CEO's.

LOL,
TS Jamie

[jjhill]

I been bless to get promoted twice during it, but I'm not making nearly as much as I would if it wasn't a recession.

But for those of yall less lucky, keep ya head up. In the words of Pac
"Even tho we're broke for the moment we'll be balling again"

[Shining Star]

"AIG promised to pay loans that went bad. They essentially did the same thing dumb homeowners did; promise to pay more than they could afford."

No, that is not what happened with AIG.

AIG is an insurance company and it issued "credit default swaps" on many types of investments, including mortgages.

A credit default swap is just what the name implies, someone, in this case AIG, issued insurance to pay against the value of something (in most cases mortgages), should the holder of said instrument default (not pay).

The whole thing is sort of like the insurance credit card companies try to get card holders to take out. Such insurance promises to l pay off their balance (under certian circumstances), if the card holder cannot.

Banks, brokerage firms and others that made or held mortgages and other loans took out credit default swaps to cover their bases should payments not be made.

With AIG as mortgages, credit cards and other loans began going into default, they were bound by contract to pay out insurance claims.

All insurance companies work pretty much the same way. They take in funds via premiums and either invest or otherwise hold enough funds in reserves to pay out claims. When the number of claims begins to exceed funds, that is when problems begin.

The later is what is happening to AIG. The credit default market is about one to two trillion dollars (or more), and AIG simply does not have the funds. To prevent what would normally occur, that is bankruptcy, the United States government is loaning/back stopping AIG so it can unwind it's business in a orderly fashion.

Aside from the credit default swap business, AIG other products, and such are actually doing quite well.

[flabbybody]

AIG got away with selling billions of dollars worth of credit default swaps because the product didn't have the word insurance in it and thereby avoided the vast Federal and New York State regulations that protect consumers from insurance fraud. AIG was fully aware they didn't have nearly enough cash to sustain even a small uptick in foreclosure rates let alone a spiraling crash in property values.

They used legalese bullshit to disguise these contracts from insurance regulations. These people were fully aware of the fraud they were perpertrating but none are in jail. Maybe the worse part of today's crisis is how its exposed the US justice system for the scam that it is. If you're a wealthy, white, so-called educated person you can commit just about any crime with no chance of prison

[Oli]

Not billions Flabby, Trillions!

[flabbybody]

mind boggling

[russtafa]

some people should of been hung ,drawn,and qautered for this as a lession to others not to get to greedy and id happly do the job

[russtafa]

some people should of been hung ,drawn,and qautered for this as a lession to others not to get to greedy and id happly do the job

[MrF]

For those technically inclined but nonexpert in finance -- I can recommend a book called "The Trillion Dollar Meltdown" by Charles Morris, which explains succinctly what went wrong, including all the clever financial tricks like CDOs, credit default swaps, etc. The author also recommends some specific regulatory reform. Fascinating stuff.

A revised edition was published in Feb, entitled "The Two Trillion Dollar Meltdown". So, it went up a factor of two in a year ! I'm guessing next year it will be 5 trillion.

Question: Is massive government deficit spending the way out ? Without being political, I'd say no. Looks more like a death spiral. Hope I'm wrong.

[BrendaQG]

some people should of been hung ,drawn,and qautered for this as a lession to others not to get to greedy and id happly do the job

Do you know what the wisest lawgiver did with such people. Those who comitted such egregious or repeated theft as a way of life got their right hand chopped off. Would that this would happen to Bernie Madeoff (that's not a error, that should be his real name he made off with Billions.).