Re: Eligible life insurers being put on public dole.

[David Farber <dave () farber net>]

Begin forwarded message:

From:
Date: April 8, 2009 6:41:57 PM EDT
To: "dave () farber net" <dave () farber net>
Subject: Re: please anynonimise  [IP] Re:    Eligible life insurers  
being put on public dole.

*** please anonymise ****
The problem is that these defaults are insured several times, through  
multiple cds. Also, not all the feed for derivatives came from  
individual mortages, there were company mortages (á la Canary warf on  
London), personal loans, equity loans on houses etc.

An the massive injections of funds we see prove it was actually a good  
idea, you can get the tax payer to pay for money that was never there  
and will never actually need to be paid. As in:  the sums aig paid  
weren't to reinburse 'insured' amounts, it is just to back a guarantee  
in case they can't pay the notional in case of default of the  
underlying...


On 8 Apr 2009, at 20:38, David Farber <dave () farber net> wrote:

> Begin forwarded message:
>
> From: Jeff Porten <civitan () jeffporten com>
> Date: April 8, 2009 3:18:49 PM EDT
> To: dave () farber net
> Subject: Re: [IP] Re:   Eligible life insurers being put on public  
> dole.
>
> On Apr 8, 2009, at 2:44 PM, David Farber wrote:
>
> > I'm no fan of financial manipulation, but since life insurance
> > companies have a whole lot more normal people as customers than  
> > Lehman
> > Brothers or AIG ever did, I hope we could resist the urge to cut off
> > our noses to spite our faces.
>
> The problem with this line of thinking -- dividing the financial  
> industry into those who service "normal people" and those who don't  
> -- is that just about everyone in the banking industry is quick to  
> claim that everything they do eventually tracks back to normal people.
>
> I don't know about other IPers, but I certainly don't have the  
> training nor the wisdom of Solomon to figure out which is which.  
> Unfortunately, the other thing I lack is a trusted expert, since  
> everyone I'm hearing from seems to have vested interests out the  
> wazoo.
>
> So I'm approaching this from other angles, both of which give me  
> Occam's Razor-type solutions:
>
> 1) since the companies that are failing, or their business models,  
> have been around for decades, clearly their operators did something  
> wrong (on the spectrum of unlucky, incompetent, or malfeasant) which  
> outstripped historical problems. Conclusion: pick some swath of  
> recent financial history, and you can clearly say that it is  
> fundamentally broken. Problem: deciding which swath.
>
> 2) the public interest in the corporations themselves is zero;  
> instead it resides in their customers who may sustain serious  
> financial harm. I'm generally missing the evidence for the near- 
> universal conclusion that the solution, therefore, is to pour  
> buckets of capital into the corporations and hope for the best.
>
> For example: back of the napkin calculation and a quick Google says  
> that there are 21 million mortgages in the US, with an average  
> payment of $1660. 7% of these are past due, according to Reuters  
> today. Past due mortgages and foreclosures are the source of toxic  
> assets, so the cost to prevent toxicity for one month (assuming that  
> everyone who is past due is fully defaulting) = 21M * $1,660 * 0.07  
> = $2,440,200,000. Annualized, that's $50 billion a year. Compare  
> that the trillions that have already been invested and/or promised.
>
> Pardon me for saying so, but the math for our current programs just  
> doesn't work out.
>
> Best,
> Jeff Porten
>
>
>
>
>
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