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To: Crimson Ghost who wrote (3638)	11/9/2008 9:28:11 PM
From: No Mo Mo	Read Replies (1) \| Respond to of 3906

Old Yeller likes the news, too. kitco.com Gonna be (another!) wild week.

To: Crimson Ghost who wrote (3638)	11/10/2008 2:11:36 PM
From: LTK007	Respond to of 3906

AIG bail-out getting insane now--but they can't escape now. Hey what if U.S.Taxpayers take a 150billion losss on this--where is this going??? Like is the TOO BIG TO FAIL policy and like putting on a Hangman's Noose and just hope the TrapDoor doesn't swing to open????? AIG Gets Expanded Bailout, Posts $24.5 Billion Loss (Update4) By Hugh Son, Craig Torres, and Erik Holm Nov. 10 (Bloomberg) -- American International Group Inc. got a $150 billion government rescue package, almost doubling the initial bailout of less than two months ago as the insurer burns through cash at a record rate. AIG will get lower interest rates and $40 billion of new capital from the government to help ease the impact of four straight quarterly deficits, including a $24.5 billion third- quarter loss posted today by the New York-based company. Taxpayers will take on the extra risk to give Chief Executive Officer Edward Liddy more time to salvage AIG. The insurer, which needed U.S. help to escape bankruptcy in September, has posted about $43 billion in quarterly losses tied to home mortgages. Liddy's plan to repay the original $85 billion loan by selling units stalled as plunging financial markets cut into their value and hobbled potential buyers. ``It was obvious to me from Day One that the terms of that arrangement were really quite punitive in terms of the interest rate and the commitment fee and the shortness of it,'' Liddy said today in a Bloomberg Television interview. ``I started really about a week after I got here trying to renegotiate.'' AIG advanced 22 cents, or 10 percent, to $2.33 at 12:39 p.m. in New York Stock Exchange composite trading. A year ago the shares sold for more than $56. The first rescue plan wasn't sustainable, Liddy said during a conference call today. AIG's third-quarter loss equaled $9.05 a share and compared with profit of $3.09 billion, or $1.19, a year earlier, AIG said in a statement. Losses in the past year erased profit from 14 previous quarters dating back to 2004. Affordable Terms To improve AIG's chances of repaying its debts, the U.S. will reduce the $85 billion loan to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, the Federal Reserve said today in a separate statement. The move extends the government's reach into the financial system amid the worst economic crisis in 75 years. The U.S. seized control of Fannie Mae and Freddie Mac, lenders that guarantee or own about 40 percent of the $12 trillion in U.S. mortgages, in September. The next month, Treasury Secretary Henry Paulson unveiled a $250 billion program to recapitalize banks. ``This action was necessary to maintain the stability of our financial system,'' Neel Kashkari, the interim assistant secretary who heads the Treasury's office overseeing the bailout, said today at a Securities Industry and Financial Markets Association conference in New York. The new AIG package includes a freeze on the bonus pool for 70 top executives and imposed limits on severance benefits, the Treasury said in its statement. Lawmakers had said failing companies getting taxpayer bailouts shouldn't be using the money for multimillion-dollar pay packages. Securities Lending The U.S. reversed its opposition to a bailout of AIG when the Fed concluded that ripple effects from the insurer's failure could bring down more financial firms. The original $85 billion loan was disclosed on Sept. 16, a day after investment bank Lehman Brothers Holdings Inc. was allowed to collapse. AIG got an additional $37.8 billion credit line on Oct. 8 to shore up its securities-lending program and then another $20.9 billion on Oct. 30 under the Fed commercial paper program designed to unlock short-term debt markets. The revised rescue may fix two AIG operations that are draining cash because of the collapse of subprime mortgage markets. In the first, the U.S. will provide as much as $30 billion to help buy the underlying assets of credit-default swaps that AIG sold to investors, including banks. AIG will contribute $5 billion and bear the risk of the first $5 billion in losses, the Fed said. Credit-Default Swaps The insurer guaranteed about $372 billion of fixed-income investments as of Sept. 30, compared with $441 billion three months earlier. AIG booked more than $7 billion in writedowns during the quarter on the value of the swaps. The New York Fed also will lend as much as $22.5 billion to a new limited-liability company to fund the purchase of residential mortgage-backed securities from AIG's U.S. securities-lending collateral portfolio. AIG will make a $1 billion subordinated loan to the new entity and bear the risk for the first $1 billion of any losses, the Fed said. The securities lending operation and the previous $37.8 billion credit line from the Fed will be shut down, AIG said. Securities lending accounted for $11.7 billion, or about two-thirds, of the $18.3 billion in impaired investments in the third quarter, AIG said. `Breathing Room' The interest rate on the $60 billion credit line will be reduced to the three-month London interbank offered rate plus 3 percentage points, from a previous spread of 8.5 percentage points in the original rescue plan, the Fed said. AIG's assets continue to secure the loan. ``This gives AIG much more breathing room,'' said Robert Haines, an analyst at CreditSights Inc. ``Now they have the time and flexibility to sell assets for closer to their intrinsic value rather than fire-sale prices.'' The news is a ``big positive'' for bondholders, he said. AIG will still have access to the $20.9 billion commercial paper program, which has about $5.6 billion left unused, the insurer said. The company renewed doubt about its prospects today by saying in a federal filing that it might not survive. The Treasury will buy the newly issued preferred shares from the insurer using the agency's $700 billion Troubled Asset Relief Program, a financial rescue package that Congress passed in early October. The company agreed to turn over a 79.9 percent stake to the U.S. in exchange for the initial loan in September. `Nimble Competitor' ``This plan contributes to stabilizing the financial system and provides the opportunity for the public to realize gains on its AIG investment in the future,'' Liddy said in a statement. ``These measures will also put AIG on track to emerge as a nimble competitor with good long-term growth prospects.'' The Fed's loan rates to the special facilities may subsidize AIG. For example, if AIG packaged the assets into a vehicle and sold asset-backed commercial paper against them, the best rate it could obtain from the Fed's Commercial Paper Funding Facility for 90-day notes would be 3.53 percent. The Fed's AIG securities facilities will be financed at 2.54 percent based on today's one- month London Interbank offered rate. ``It seems like a good deal for AIG,'' said Mark Spindel, chief portfolio manager at Potomac River Capital LLC, a Washington investment firm. Writedowns The biggest insurers in North America posted more than $120 billion in writedowns and unrealized losses linked to the collapse of the mortgage market from the start of 2007, with AIG representing about half that total. The company has units that insure, originate and invest in home loans. Liddy, 62, plans to sell life insurance operations in the U.S., Europe and Japan, along with the firm's reinsurer, airplane lessor, consumer finance unit and asset manager. The former CEO of Allstate Corp. was appointed by the U.S. as a condition of AIG's bailout. Liddy said he expects to announce ``several'' unit sales in the fourth quarter. To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Craig Torres in Washington at ctorres3@bloomberg.net; Erik Holm in New York at eholm2@bloomberg.net. Last Updated: November 10, 2008 13:04 EST

To: Crimson Ghost who wrote (3638)	11/11/2008 2:02:59 AM
From: LTK007	Respond to of 3906

Faber sees Bankruptcy for U.S. Swiss Finance Guru sees bankruptcy for the U.S Swiss financial guru Marc Faber tells swissinfo he sees hard times ahead for the world's stock exchanges and even state bankruptcy for the United States. He also believes that stock exchanges will stay at low levels for a long time. Faber, otherwise known as Dr Doom for his contrarian views on the economy, has lived in Asia for the past 35 years. He is a jack-of-all-trades: investment adviser, financier, best-selling author and the compiler of a monthly economic publication called The Gloom Boom and Doom Report. Faber sits on various boards of directors and investment committees. ****************************************************** swissinfo: You prophesied the stock market crash of 1987 and the Asia crisis and became a celebrity as a result. Did you see this crisis coming too? Marc Faber: It was quite clear we had a credit bubble. I had been warning about that for years and not only in the mortgage sector. But what surprised even me was that [US insurer] AIG would almost disappear and that UBS shares would fall under $17.20. swissinfo: How did it come to such a situation? M.F.: A credit bubble has been growing for 25 years. We've seen, in particular over the past seven years, an unbelievable credit growth, which fuelled economic development. Then there were structural changes in the economy, for example the sinking saving ratios that have had an effect on consumption and growth rates. The situation worsened in 2001 in the United States when the central bank lowered the interest rate from 6.5 per cent to an unheard of one per cent in 2003. This ultra-expansive monetary policy led to a credit growth that was five times higher than growth of the economy.</b. A bubble growth and later the crash were the logical consequences. swissinfo: Have we reached rock bottom? M.F.: I think we're near it. But I also think we'll stick at this low point for a long time. Anyone who thinks that everything will soon be rosy again is naive. It's quite possible that worldwide stock exchanges will experience a similar development to that witnessed in Japan over the past two decades [the Nikkei index has fallen from 39,000 points to under 8,000]. Japan also shows that the large amount of money injected to stimulate the markets didn't have the desired effect – but it did produce huge holes in the state coffers. swissinfo: You are known for swimming against the tide of conventional wisdom. But you are right in line with the prevailing pessimism. M.F.: Not quite. I'm even more pessimistic than most (laughs). Look at it like this, between 1980 and 2007 people saved from their capital gains and not their income, as their income was spent. That was fine while property and shares increased in value every year. Today these people are highly indebted and are only beginning to save more by putting the brake on their consumption. That's how every economy goes to the dogs – with or without injection of capital by governments. With the best of wills, I do not see a single catalyst that could lead to a new bull market in the world. At the moment, everything has gone down the drain. swissinfo: How does the present crisis differ from previous ones? M.F.: In the past few years everything went up – shares, commodities, consumer goods, real estate values, art and even bonds. Such a combination is extremely unusual. We saw the biggest investment bubble in the history of humanity.The current situation is possibly worse than the global economic crisis of 1929. And that is thanks to Alan Greenspan and Ben Bernanke [the former and current US Federal Reserve Board chairmen]. These two gentlemen must account for massive errors. swissinfo: Governments are offering guarantees and are pumping thousands of billions into the markets. Is that a mistake? M.F.: Yes. The losses are there and someone has to bear them. There are two possibilities. Banks go under and the stakeholders are left with nothing, as is the case with Lehman Brothers, or governments pump money into the financial system so that the incompetent financial clowns in Bahnhofstrasse [Zurich's financial centre] and Wall Street can continue to eat in fancy restaurants. I am clearly in favour of the first because the consequences of these state interventions are massive budget deficits. To finance these, governments have to acquire money. For that they have to borrow money, which makes state debt and interest payments soar. US economists have come to the conclusion from the trends that there will be a US state bankruptcy. swissinfo: Do you share that view? M.F.: One hundred per cent.** The US government will in future have new debts of at least $1,000 billion (SFr1,165 billion). That's on top of the current state debt of $10,000 billion. And that doesn't take into account state programmes to stimulate the economy. The government will have no other choice than to print money, which in the long term will lead to inflation. swissinfo: How do you see the near future? M.F.: More positively. The markets are totally undervalued so I reckon on a short-term recovery of easily 20 to 30 per cent.( He is making no specific statement here.Aaargh:)--max) swissinfo: When? M.F.: In the next two to three weeks. swissinfo: That's not exactly very much in view of the massive losses. M.F.: No. If you drop a tennis ball with only a little air in it, it doesn't bounce very high! swissinfo: Are you calling into question the concept of making money from shares? M.F.: No. The idea is still valid but you have to be realistic. Adjusted for inflation and with a long-term perspective you could earn on average three per cent with US shares. The long-term promises of eight per cent made by bankers and pseudo investment advisers to lure their customers are absolute rubbish. swissinfo: It looked for a long time as though Switzerland would get away with just a black eye. What is your view? M.F.: The export industry will be extremely hard hit. People in Switzerland will have to accustom themselves to bankruptcies, particularly in the machine industry.