Tuesday, November 11, 2008

Financial crisis misc.

1. The October 25th "Great quotes..." entry pointed out the hollowness of the Treasury's commitment to "transparency." Now Bloomberg reports that "... The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral ..."

2. George Soros opines on what caused the crisis and what to do about it...

3. The Treasury continued its track record of "bait and switch." Originally it took a 79.9% percent ownership stake (?) in AIG in return for a 2-year USD 85 billion line of credit, interest rate at 3-month LIBOR plus 8.5 percent. When AIG blew through that amount a further USD 38 million was added, for a total of USD 123 billion. . Now the Treasury will convert this USD 123 billion package to a USD 150 billion package - a USD 60 billion loan (with the term increased from 2 to 5 years, and the interest reduced to 3-month LIBOR plus 3 percent...), plus USD 40 billion from the TARP, plus an additional USD 50 billion into two special investment vehicles... Originally, this was portrayed as a gain to the taxpayer... Now that the term has been extended and the interest rate has been reduced, supposedly the taxpayer might still come out ahead if the credit default swaps, etc. purchased at a discount and put into the special investment vehicles regain their value!

Regulatory Announcement
A.I.G. May Get More in Bailout
AIG gets revised $150bn state bail-out
U.S. Throws New Lifeline to AIG, Scrapping Original Rescue Deal

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