AIG Rules!!!!

First off, I was hoping to enlighten you with some more uplifting news, but then I found out who got the taxpayers' billions at AIG (and they aren't even trying to cover it up anymore (sorta) because with no outraged taxpayers hitting the streets or even beating pans (like they did in Iceland to expose and depose the corrupt politicians), it seems safe to go ahead and face the glare of TV lights for a few seconds before they leave for their island villas).

The Wall Street Journal reported on Friday that about $50 billion of more than $173 billion that the U.S. government has poured into American International Group Inc since last fall has been paid to at least two dozen U.S. and foreign financial institutions. The newspaper reported that some of the banks paid by AIG since the insurer started getting taxpayer funds were: Goldman Sachs Group Inc, Deutsche Bank AG, Merrill Lynch, Societe Generale, Calyon, Barclays Plc, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group. Morgan Stanley and Goldman Sachs declined to comment when contacted by Reuters. Bank of America, Calyon, and Wells Fargo, which has absorbed Wachovia, could not be reached for comment. The U.S. Federal Reserve has refused to publicize a list of AIG's derivative counterparties and what they have been paid since the bailout, riling the U.S. Senate Banking Committee. Federal Reserve Vice Chairman Donald Kohn testified before that committee on Thursday that revealing names risked jeopardizing AIG's continuing business. Kohn said there were millions of counterparties around the globe, including pension funds and U.S. households. He said the intention was not to protect AIG or its counterparties, but to prevent the spread of AIG's infection.

Hey, that's good enough for me (and the rest of the US suckers too I'll bet (they are sooooo hoping)). But then I saw "that Goldman Sachs and Deutsche Bank each got about $6 billion in payments between the middle of September and December last year" and that we were finally embracing the cause of worldwide peace (in our time!).

Once the world's largest insurer, AIG has been described by the United States as being too extensively intertwined with the global financial system to be allowed to fail. The Federal Reserve first rode to AIG's rescue in September with an $85 billion credit line after losses from toxic investments, many of which were mortgage related, and collateral demands from banks, left AIG staring down bankruptcy. Late last year, the rescue packaged was increased to $150 billion. The bailout was overhauled again a week ago to offer the insurer an additional $30 billion in equity. AIG was first bailed out shortly after investment bank Lehman Brothers was allowed to fail and brokerage Merrill Lynch sold itself to Bank of America Corp. Bankruptcy for AIG would have led to complications and losses for financial institutions around the world doing business with the company and policy holders that AIG insured against losses. Representative Paul Kanjorski told Reuters on Thursday that he had been informed that a large number of AIG's counterparties were European. "That's why we could not allow AIG to fail as we allowed Lehman to fail, because that would have precipitated the failure of the European banking system," said Kanjorski, a Democrat from Pennsylvania who chairs the House Insurance Subcommittee. As part of its business, AIG insured counterparties on mortgage-backed securities and other assets. The collapse of the U.S. subprime mortgage market, which triggered a global financial crisis, left the insurer and some of its policy holders facing possible ruin as the value of assets declined. U.S. regulators failed to recognize how much risk AIG was piling on in credit-default swaps, and by the time they understood, they had no choice but to pour in billions of public dollars, Kohn and other officials told the Senate panel. Senators were outraged by the lack of details about where the bailout money has gone.

At least they are outraged.

"It's like taking insurance on your neighbor's house and even maybe contributing to blowing it up," he said at a panel sponsored by New York University's Stern School of Business. U.S. lawmakers have said they are running out of patience with regulators' refusal to identify AIG's counterparties.

So much for a relaxing Sunday. Suzan ________________________________

Woes Afflicting Mortgage Giants Raise Loan Rates

It seems to me that articles like this one are not being promoted by the MSM as they should be. (Wonder why?) I think anyone would agree that it's just a good self-defense policy to at least start reading about the economic catastrophes (especially in the housing market) that have befallen us in the U.S., but the guy who's getting ready to lose his house already knows this. It's the ones who will suffer the consequences of the increased loan rates who may not quite recognize the efficacy of such yet. Unfortunately, I can't help thinking that when you read deeply enough into these reports you might start to believe that it all sounds like funny-money shuffling (and the clamor of the money printing plants echoes in the background). (Emphasis marks are mine.) And don't forget the concurrent catastrophe afflicting banks that has only made itself clear to the people residing at the bottom of the pyramid with the recent write-downs from Wachovia, Washington Mutual and Bank of America (and the many others upcoming). Read about it here. My vote for best two paragraphs go to the following:

Kenneth D. Lewis, the chief executive of Bank of America, insisted this week that the industry was turning the corner, after his company reported a mere 41 percent drop in profit. Many investors seem to see signs of hope in red ink that once would have shocked them. But it has now been a year since the credit crisis erupted, and, so far, the optimists have been proven wrong time and again. Skeptics say it could take years for banks to recover from the worst financial crisis since the Depression. And even when things do improve, the pessimists maintain, banks’ profits will be a fraction of what they were before.

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Woes Afflicting Mortgage Giants Raise Loan Rates By Vikas Bajaj July 23, 2008 Mortgage rates are rising because of the troubles at the loan finance giants Fannie Mae and Freddie Mac, threatening to deal another blow to the faltering housing market. Even as policy makers rushed to support the two companies, home loan rates approached their highest levels in five years. The average interest rate for 30-year fixed-rate mortgages rose to 6.71 percent on Tuesday, from 6.44 percent on Friday, according to HSH Associates, a publisher of consumer rates. The average rate for so-called jumbo loans, which cannot be sold to Fannie Mae and Freddie Mac, was 7.8 percent, the highest since December 2000. Loan rates are rising because of concern in the financial markets about the future of Fannie Mae and Freddie Mac, which own or guarantee nearly half of the nation’s $12 trillion mortgage market. The federal government has proposed a rescue, and has urged Congress to approve it quickly. But bond investors, worried that the companies may not be as big a support to the market as they have been, are driving up interest rates on securities backed by home loans. That added cost is being passed on to consumers through the mortgage markets. For a $400,000 loan, the increase in 30-year rates in the last few days would add $71 to a monthly bill, or $852 a year. The rise in rates is of greatest concern for homeowners whose mortgages required them to pay only the interest on their loans for the first few years. If such borrowers are unable to refinance into lower-cost loans, many of them will face the prospect of having to pay both interest and principal at higher, adjustable rates. For borrowers with a $400,000 loan, such a jump could send their monthly payments to $2,338 from $1,417, estimates Louis S. Barnes, a mortgage broker at Boulder West Financial in Boulder, Colo. While mortgage rates approached these levels earlier this year and in 2007 during times of stress in the financial markets, the latest move adds urgency to the government’s efforts to restore confidence in Fannie Mae and Freddie Mac. Lawmakers are expected to vote this week on a measure that would give the Treasury Department authority to lend more money to the companies and buy shares in them if they falter. The uncertainty surrounding the two companies is the latest in a series of pressures bearing down on the housing market and the broader economy. Higher interest rates make it harder and more expensive to refinance existing debts and to buy homes. “When we get to rate levels like this, the market just shuts down,” Mr. Barnes said. While mortgage rates remain relatively low by historical standards, they are higher than what homeowners and the economy became accustomed to during the recent housing boom. Lending standards have also tightened significantly in the last 12 months, and many popular loans are no longer available. A government report based on data on Fannie Mae and Freddie Mac loans said on Tuesday that home prices fell 4.8 percent in May from a year earlier. That compared to a 4.6 percent decline in April. Other home price indexes that track a broader set of loans show much bigger declines. Worries about Fannie Mae and Freddie Mac have led to weaker demand for securities backed by home mortgages, analysts say. Inflation, which tends to send bond prices down and bond rates up, is another concern. In a securities filing released on Friday, Freddie Mac suggested that it might have to pare or slow the growth of its mortgage portfolio to bolster its capital. Freddie and Fannie together own about $1.5 trillion in mortgage securities and home loans, and they guarantee an additional $3.7 trillion in securities held by other investors. The companies had a combined net worth of $55 billion as of March. Analysts and critics say the companies need significantly more capital to cushion the blow of growing losses on the more-risky mortgages made during the boom. Important players in the mortgage market for decades, the two companies have become even more vital in the last year as several large lenders have gone out of business and investors have lost confidence in mortgage securities that are not backed by the government, or by Fannie or Freddie. This year, the regulator overseeing the companies gave them more leeway to use their capital and the companies responded by increasing their portfolios. Freddie’s holdings grew 6.9 percent in the first five months of the year from the end of 2007; Fannie’s portfolio increased 1.8 percent. But now it appears the companies, particularly Freddie Mac, might have to slow their purchases of mortgage securities. In its filing, Freddie Mac said it aims to increase its portfolio by a total of 10 percent in 2008. A spokeswoman for Fannie Mae declined to comment on its plans. “That’s one of the ways in which the agencies can increase capital, by slowing down their purchases,” said Derrick Wulf, a bond portfolio manager at Dwight Asset Management. “I don’t think the market expects a dramatic slowdown in purchases but there clearly is uncertainty about that.” Mortgage rates have been driven up in part by a rise in the yield on Treasury notes and bonds. On Tuesday, bond prices, which move in the opposite direction of the yields, slumped after the president of the Federal Reserve Bank of Philadelphia, Charles I. Plosser, said the central bank might need to raise interest rates to combat inflation “sooner rather than later.” Some analysts say the rise in mortgage rates can be explained by technical factors in the bond market that are forcing mortgage companies and banks to sell securities to manage their portfolios. These analysts add that at current prices the mortgage securities guaranteed by Fannie and Freddie should be attractive to investors. Mortgage bonds backed by Fannie Mae, for instance, are trading at a 2.1 percentage point premium to the 10-year Treasury note, up from 1.8 points on July 14. “I don’t see how anyone could argue that the fundamentals of mortgages are not attractive,” said Matthew J. Jozoff, an analyst at JPMorgan. In March, for instance, mortgage rates surged after some big investors were forced to sell billions in mortgage bonds. But rates fell back slowly in the spring after the selling pressure eased and other investors, including Freddie Mac and Fannie Mae, made big purchases. This time, the coming Congressional vote on the Treasury plan to support the companies could help allay investors’ fears, said W. Scott Simon, a managing director at Pimco Advisors, the giant bond fund firm, which owns mortgage securities. “It will go a long way toward reviving demand.”

Suzan _____________________________________