Warrior General Games

Originally posted by zollins5
I'd like to take this one Z. There are a lot of mixed feelings here Z. A lot of politicians are frightened that the auto industry may not use the money properly. If they choose not to, it may fall back on them, and there goes the next election. The middle class may be a little mislead on this as well. The idea that the industry will be bailed out is giving a lot of people false hope. There are many factories shutting down, and there will be more following. The thing to remember is that eventhough the industry has more money to try and maintain itself, the majority of the middle class americans do not have the money to purchase new vehicles. Thus, Supply and Demand is no longer being met by either side. I do feel however that the bailout is warrented, IMHO. The country will eventually take a turn for the good. If we do this without having american manufacturers around, more and more money/jobs will go overseas, the rich get richer, the poor get poorer, and eventually we are right back here again. Thank.....you.........

True?

Living in Detroit, I am of course, a huge supporter of the car industry. It's all we got, we don't even have a professional football team. tear. Many can't get cars because they can't get a loan because the banks ARE being tight...but I do agree with the many that say the American car industry has shot themselves in the foot by concentrating on SUVs and putting out very average other cars. But look how can we be stingy with 20 billion for the biggest production company in the world when we throw well over a 100 billion at AIG? and there are no questions? Where was the big public hearing for the banks? But people take a straight shot at the Unions...who are not innocent but neither are they AIG.

Now can we play game 1! I'm hunkering to get my butt whooped!

Originally posted by adonaghy7
Living in Detroit, I am of course, a huge supporter of the car industry. It's all we got, we don't even have a professional football team. tear. Many can't get cars because they can't get a loan because the banks ARE being tight...but I do agree with the many that say the American car industry has shot themselves in the foot by concentrating on SUVs and putting out very average other cars. But look how can we be stingy with 20 billion for the biggest production company in the world when we throw well over a 100 billion at AIG? and there are no questions? Where was the big public hearing for the banks? But people take a straight shot at the Unions...who are not innocent but neither are they AIG.

Now can we play game 1! I'm hunkering to get my butt whooped!

Coming from the finance industry, I can't defend the integrity of AIG, but I can attest to the fact that the financial bailout was ugly but grudgingly necessary.

It's clear that the executives at AIG did not commit due diligence in determining the quality of their investments (and really most of the financial giants didn't do this either, except maybe Goldman). However, because of the incestuous nature of the financial industry, if AIG was allowed to fail, EVERYONE would have failed. Everyone. The reason for this is the Credit Default Swap: http://en.wikipedia.org/wiki/Credit_default_swap . I worked the back office at THE industry's bond giant, and processed TONS of these trades daily. In a nutshell, it's essentially a trade where one side is betting that another company will experience a "credit event" (credit ratings get downgraded, debt default, bankruptcy, etc); they pay a premium and will receive the face value of the trade should that credit event occur. All the major international financial giants traded this security with each other constantly, creating a highly interlocked web of CDS trades that spanned the globe. Why would they do this? Several reasons:

- Unregulated security, vs things like stocks and bonds
- No money is exchanged; essentially an "IOU" contract
- Low priority at banks and financial institutions since no money is actually exchanged
- Low transaction costs since no money is actually exchanged
- Portfolio managers traded these constantly to tweak their portfolios(because of above reasons)
- No financial institution actually BELIEVED that their massive counterparties would fail; we clearly just saw this is not true

Basically, if a company the size of AIG failed, the web of CDS trades likely would have triggered a global chain reaction where financial giants are all calling in TRILLIONS of dollars in debt all at once. At around mid-September, the value of CDS contracts in the market was estimated at $62 trillion dollars. For comparison, the gross world product is at about $54 trillion; note this is the total output of the entire WORLD. If AIG failed, it could have created an extremely scary financial future that frankly I'm not sure how the world would recover from.

Bernie Maddoff...scum