Tuaspring is loss making and burning cash everyday. This is a free of charge at the economy. Don’t think the govt will bail it out unless the purchase price is 20%. If they are doing, how to answer to taxpayers? 1B purchasing a close to bankrupt company. All investments or risks. Can only just pray some China or Arab tycoon come in.
The episode is relevant to the near future, because Geithner is now Obama’s Treasury Secretary and responsible for preventing another taxpayer bailout. In the first fall months of 2008, mayhem swept through global financial marketplaces. On Monday morning It engulfed AIG, September 15. Lehman Brothers experienced just failed. Panicky credit markets were seizing up. American International Group, the largest insurance provider in the world, was hemorrhaging capital, sinking toward bankruptcy rapidly. At the brand new York Fed Geithner had the problem covered, roughly he thought. Geithner informed top executives of Wall Street’s most significant financial houses-Jamie Dimon of JPMorgan Chase and Lloyd Blankfein of Goldman Sachs-that the banking industry, not the Federal Reserve, must intensify and do the rescue.
75 billion, they approximated. In Washington, Treasury Secretary Henry Paulson held his distance, while fighting other bonfires. Paulson assured reporters the conference underway at the brand new York Fed experienced nothing to do with a authorities bailout for AIG. “What’s taking place in NY is a private-sector work,” Paulson said. After midnight Sometime, the bankers called to say, sorry, they were not interested.
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There would be no private-sector recovery. According to Thomas Baxter, general counsel at the brand-new York Fed, the notification came on Tuesday morning, not from the principal executives of JPMorgan and Goldman but from a personal bankruptcy lawyer, Marshall Huebner, advising JPMorgan on AIG’s problems. THE BRAND NEW York Fed immediately hired him as its own lawyer and proceeded to do what the bankers had refused to do-bail out AIG. JPMorgan and Goldman offered no open public explanation for rejecting Geithner’s proposal. The general public wasn’t ever told the banks were asked to do their part.
Nor did Federal Reserve officials argue with your choice or try to apply persuasive stresses. It did not put the squeeze on to encourage the bankers they need to accept some kind of sacrifice in the eye of writing the pain. Nor do Geithner threaten to pursue an alternative strategy that could have pressured the banks to discuss the terms. This is considered unthinkable, though the central bank or investment company has employed each one of these tools on previous occasions.
” Baxter fudged. “Well, I began by saying there was nothing typical about the problems,” he replied. He spoke in circles and never responded to the question. If the bankers refused to participate, the Fed had to go fast to stanch the bleeding. AIG faced another downgrade from credit-rating agencies (the same agencies that had given triple-A blessings to mortgage securities). 12 billion to AIG.
12 billion. This was only the beginning. The AIG procedure became a gigantic spigot for circuitously distributing open public money to private banking interests. As the brand new York Fed pumped more money into AIG, the insurance giant pumped it right out the door to fulfill the demands from counterparties like Goldman Sachs. 13 billion from this backdoor public assistance. The Fed didn’t stop AIG’s hemorrhage.
It began funding it, with no questions asked. The Fed has always insisted this financial daisy string was not designed to pump more capital into the leading banking institutions. “This is not about the banking institutions,” an older vice president of the New York Fed informed the New York Times. If not, then why do the Federal Reserve work so hard to keep their titles secret?
Fed lawyers labored for weeks to avoid disclosure of the beneficiaries. Ranking Federal Reserve governors coldly declined as “inappropriate” the repeated Congressional needs to learn the brands. If it wasn’t about helping those banks, why did the Fed not pause to reconsider its initial decision and create a less expensive approach? It became instead the paymaster for AIG’s failed derivative contracts-conducting business as typical in the midst of a national emergency.