Look Ma! I sold America short and made $3 billion! - PeachParts Mercedes-Benz Forum

cmac2012 · #1 03-25-2009, 03:39 AM

http://www.nypost.com/seven/04082008/business/value_fading_from_trading_105587.htm

What's starting to bother me about the AIG thing is this business of paying off claimants at 100 cents on the dollar. What, those guys are a special class who somehow deserve to be made whole on their risky bets? With the taxpayer often at 50 to 60 cents to the previous dollar on their 401Ks?

I'm wondering if these folks who made massive $$ betting that the sub-prime market was going to collapse actually had any exposure in that market. I mean, credit default swaps are basically fancy insurance policies and if somebody who had no sub-prime debt to insure but did so anyway with AIG, what, is the taxpayer supposed to pay off 100% on that bet?!

Maybe I'm a barely literate hick but short selling in general sorta creeps me out.

LUVMBDiesels · #2 03-25-2009, 05:37 AM

AIG sold insurance specifically to make these people whole if their risky bets did not pay off... It is not the fault of the investors if AIG sold the policies.

AIG bet that these investments would not go south and they would never have to pay off on the policies.

POS · #3 03-25-2009, 09:13 AM

It wasn't rocket science to see that the housing market was going to collapse at some point, but it does take risk to place your bets on WHEN the housing market was going to collapse.

If I was a trader/hedge fund owner and I had the knowledge and ability to bet against the housing market in the middle of 2008, I would have too. Wall Street is gambling, just a lot more complicated.

cmac2012 · #4 03-25-2009, 12:23 PM

All fine and dandy but as I've said before, if we are indeed in the era of 'too big to fail' and the taxpayer is obliged for their own good to come in and bail these characters out, then perhaps some examination of these complex games and questions about whether they are actually of any real good to the country is in order.

I don't really get short selling, the way it's done with stocks. You 'borrow' the stock from a broker and pay for it later, at a specified date? How does the broker have stock sitting about to lend out? Does the broker eat it when someone sells short successfully? Or do they do so many of those deals that on balance they come out ahead? I mean, if like in day trading where most of them lose money, short sellers don't make a wise deal, the broker will come out ahead.

Still, it seems like a lot of time and energy devoted to complex games, in which nothing of value is accomplished.

JollyRoger · #5 03-25-2009, 12:31 PM

The solution is not all that complex. The CDS business was created because there was no regulatory authority thanks to the Gramm-Briley Act, which Geithner is now working on repealing and replacing with a more comprehensive regulatory structure. In a nut shell, AIG was not required to have a loss reserve on this crap they were selling, so the greedy scumbags leveraged it out at a 35-1 ratio, simply because they could get away with it, and a lot of now-unnamed people made off with huge bags of money in the process, probably perfectly legally, and probably knowing full well this would be the result.

We got screwed, and what screwed us is the whole system we have - lobbyists got this bill passed, lobbyists paid off the Congress to keep regulation non-existent, and lobbyists got their share of the loot. Captialism in it's purest form sucks as much as or more then Communism in it's purest form, we are all the victims of what are essentially political far-right radicals who took capitalism to an such an extreme it lead us to the same kind of disaster the Soviets took the Russians to. There is a lesson in that. Obama and company, far from being the "socialist" boogeymen the current crop of right wing shouters claims, is actually bringing the system back to the middle where it belongs.

raymr · #6 03-25-2009, 12:38 PM

The same crafty people that created a business model that works for them but sucks for everyone else, also devised their sweet bonus clause. And yes it is very bothersome to see that kind of exploitation, legal or not.

cmac2012 · #7 03-25-2009, 12:38 PM

Quote:

Originally Posted by JollyRoger

so the greedy scumbags leveraged it out at a 35-1 ratio, simply because they could get away with it, and a lot of now-unnamed people made off with huge bags of money in the process, probably perfectly legally, and probably knowing full well this would be the result.

I'm wondering if it's not time to go after some of those unnamed people and tax the hell out of them. I know that has it's downside and a lot of people will go on about how you can't tax retroactively, etc. etc.

But just because something is not technically prohibited by law, when the spirit of existing law is violated egregiously, maybe there should be a penalty for that.

The integrity of our monetary system has been damaged by this and I submit that characters who get rich off of ill-gotten gain almost always choke on it anyway.

POS · #8 03-25-2009, 10:10 PM

Let's hear it for COMMUNISM! Anyone? Anyone?

cmac2012 · #9 03-25-2009, 10:18 PM

Quote:

Originally Posted by raymr

The same crafty people that created a business model that works for them but sucks for everyone else, also devised their sweet bonus clause. And yes it is very bothersome to see that kind of exploitation, legal or not.

My thoughts exactly. I understand it is a slippery slope to get govt. involved in compensation in private matters but this stuff is almost scamming, legal or otherwise.

cmac2012 · #10 03-25-2009, 10:19 PM

Quote:

Originally Posted by POS

Let's hear it for COMMUNISM! Anyone? Anyone?

Tell your doctor that your reflexes, your knee jerk mechanism, works just fine.

mwood · #11 03-26-2009, 12:10 AM

Quote:

Originally Posted by cmac2012

Tell your doctor that your reflexes, your knee jerk mechanism, works just fine.

So your knee jerk reaction is somehow more appropriate than his knee jerk reaction?

Botnst · #12 03-26-2009, 07:32 AM

Nice moves, guys!

http://www.youtube.com/watch?v=339ixMtHrVk

cscmc1 · #13 03-26-2009, 09:21 AM

I thought maybe this was a thread about George Soros:

http://www.dailymail.co.uk/news/worldnews/article-1164771/Im-having-good-crisis-says-hedge-fund-manager-1billion-world-plunged-recession.html

tankdriver · #14 03-26-2009, 10:05 AM

Quote:

Originally Posted by LUVMBDiesels

AIG sold insurance specifically to make these people whole if their risky bets did not pay off... It is not the fault of the investors if AIG sold the policies.

True.
But, is AIG's takeover because they were too big to fail, a form of bankruptcy? If they had gone bankrupt, they for sure would not be paying 1:1 on the policies, no matter how true LUVMBDiesels statement is. Wall St, SecTreas Paulson, and the President determined AIG too important to let into bankruptcy. So, I think the bailout is akin to bankruptcy in certain ways.

Pooka · #15 03-26-2009, 10:37 AM

Many years ago a big busiiness man type told me that if you have to borrow from a bank borrow BIG. Then, when you fail (and fail you will from carrying too much debt) the bank will not foreclose on you because they will lose too much.

Instead, they will become your partner and help you work out your problems if they ever hope to get paid back. The presidents of banks always know a few people they can call and ask them to do business with you to get you, and them, out of trouble.

AIG seems to have followed this business model.

I knew a fellow that worked for a giant oil company that made a lot of mistakes but never seemed to get in trouble for any of them. He said he did it by always making sure that whatever project he was working on involved at least one big time manager. That way, if the project failed, the manager had the stroke to cover for him. He knew the manager was not going to let anything the manager was involved in get to much of a onee-over.

I am sure the AIG people had a plan for getting out of this mess. It looks like it was: Involve higher-ups that had to make it all turn out right lest they be implicated, and lose so much money that the US would suffer more then they would if they went under.

After all, this has worked for countless other who just did not do it on such a large scale.