Tuesday, October 27, 2009

Tuesday Morning

US stocks are up about a third of a percent this morning, clawing back some of yesterday's sizable losses. Tech stocks and the oil majors are leading the DJIA higher, while financials Bank of America and JPMorgan are lagging.

While AIG was attempting to get clients to accept 40cents on the dollar for Credit Default Swaps it was on the hook for, Geither and the government boys insisted that they be paid out in full. Using taxpayer money. Not cool.
Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

Turning Japanese? The US economy may be following their lead in propping up zombie banks that don't even use taxpayer largess to lend to new customers.
With the U.S. government stepping in to keep markets from clearing, today's U.S. economy in many ways resembles the post-bubble Japanese economy of the 1990s. Ultra-loose monetary policy and low demand for credit, combined with high unemployment and consumer deleveraging, could lead to a prolonged slump.

Maurice Greenberg, former leader of AIG, is poaching talent from the taxpayer bailed-out firm. If he competes well enough to push AIG into the abyss, the govt response will be interesting.

Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.

“Basically, he’s just starting ‘A.I.G. Two’ and raiding people out of ‘A.I.G. One,’ ” said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda

“To me, it’s just going to be a matter of time before the valuation of what he’s building is greater than the valuation of A.I.G.,” said Andrew J. Barile, an insurance consultant in Rancho Santa Fe, Calif.

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