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Martinghoul
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March 4th, 2009, 9:39 am

QuoteOriginally posted by: MarineDoes anyone know who is on the other side of AIG's trades?According to their conf call, they have arnd $1trn of cpty risk with just 12 financial institutions (probably not too difficult to figure which ones). You do the math...
 
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hanss
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March 4th, 2009, 8:34 pm

QuoteI am afraid it carries on - Next are the automakers "Once Again" and forgot the regional banks too!!!But automakers are quite natural to have problems when market goes down, automotive industry is procyclical, isn't it? I mean without any Ponzi (now Madoff) game behind that. I would clearly distinguish between industries and finance sector with problematic derivatives, various interdependencies and over-who-knows-what trades.
 
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exneratunrisk
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March 5th, 2009, 7:00 am

A company with "100.000" subsidiaries.If you asked a family head with 100.000 children, how-are-they?-all-well?, what would you expect?
 
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ppauper
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March 5th, 2009, 1:59 pm

Hidden Pension Fiasco May Foment Another $1 Trillion BailoutWith stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.
 
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Traden4Alpha
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March 5th, 2009, 2:10 pm

QuoteOriginally posted by: ppauperHidden Pension Fiasco May Foment Another $1 Trillion BailoutWith stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.Yes, it's a mess. State and local governments handed out pension benefits to civil servants with zero regard to the accumulating liabilities. The governments were is deep trouble when the market was going up. I'd like to think that hyperinflation could get us out of these liabilities, but most of these defined benefit pensions include automatic cost-of-living adjustments so there's no way to monetize the liability.
 
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Vegawizard
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March 5th, 2009, 2:15 pm

Not to mention the fact that many pension funds invested in the CDO's and other toxic waste for a little yield enhancement - as Pension Funds are not subject to Mark to Market accounting, they have not recognised the potential writedown of these "investments" but are still holding them at book value. There is plenty more underfunding to come out of the woodwork over the next 5 - 15 years, besides the dmographics of an aging population.
 
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Traden4Alpha
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March 5th, 2009, 2:46 pm

Add to that the unreported or lag-reported losses in private equity positions. (see http://online.wsj.com/article/SB123621388947635225.html ) This is why defined benefit pensions are so dangerous (and should be outlawed). First, they are like a derivative contract that may have a nicely calculated current expected value but also have an unbounded worst-case future payout WRT the future capacity of the pension provider. Second, defined benefit pensions have the same mismatched incentives as subprime mortgages -- managers, union leaders, and government leaders can readily agree to provide a generous pension because they will suffer no penalties if that pension plan proves unsustainable after 20 years.
 
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Martinghoul
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March 5th, 2009, 2:57 pm

QuoteOriginally posted by: Traden4AlphaAdd to that the unreported or lag-reported losses in private equity positions. (see http://online.wsj.com/article/SB123621388947635225.html ) This is why defined benefit pensions are so dangerous (and should be outlawed). First, they are like a derivative contract that may have a nicely calculated current expected value but also have an unbounded worst-case future payout WRT the future capacity of the pension provider. Second, defined benefit pensions have the same mismatched incentives as subprime mortgages -- managers, union leaders, and government leaders can readily agree to provide a generous pension because they will suffer no penalties if that pension plan proves unsustainable after 20 years.Yep, and when these people can't fund their immediate liabilities, they issue bonds. A pension fund issuing bonds to finance itself, what a friggin' JOKE!
 
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Vegawizard
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March 5th, 2009, 3:22 pm

And when the pensioners go on Pension and the fund cannot pay the pension promised? - then what? Perhaps time to downsize the house in order to extract some equity in order to eat?Hmmm - The property downturn is far from over.I would really be interested in seeing Pension funds' current Mkt Value of assets as of today, and the PV of future liabilities discounted at 2%, after adjusted more realistic mortality rates?
Last edited by Vegawizard on March 4th, 2009, 11:00 pm, edited 1 time in total.
 
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Martinghoul
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March 5th, 2009, 5:51 pm

QuoteOriginally posted by: VegawizardAnd when the pensioners go on Pension and the fund cannot pay the pension promised? - then what? Perhaps time to downsize the house in order to extract some equity in order to eat?Hmmm - The property downturn is far from over.I would really be interested in seeing Pension funds' current Mkt Value of assets as of today, and the PV of future liabilities discounted at 2%, after adjusted more realistic mortality rates?Keep wishing, amico... Even the DNB (the Dutch pension regulator), who, arguably, are the best at this, don't wanna force the issue and make funds mark-to-market. The ASB in the UK doesn't want to rock the boat. This is a Pandora's Box that nobody wants to touch, which only makes it worse.
 
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ppauper
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March 6th, 2009, 2:12 pm

Bill Seeks to Let FDIC Borrow up to $500 Billion
 
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Traden4Alpha
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March 6th, 2009, 3:16 pm

QuoteOriginally posted by: ppauperBill Seeks to Let FDIC Borrow up to $500 BillionAt some point, a great deal of the deposits in U.S. banks are going to end up on the US government's balance sheet. TBill-CD spreads are really high right now. I find it more than a little frightening that private banks (e.g., GMAC!) can offer whatever CD rate they want knowing that the FDIC is there to catch them. And the innovation that lets a network of banks distribute a depositor's CD (to provide FDIC backing for as much as $50 million) wil only increase the eventual public burden.The brouhaha over the hike in FDIC fees (to cover help cover the flood of failing banks) suggests that one long-term solution is to make FDIC fees a regressive function of reserve ratios. Well capitalized, conservative banks would pay low FDIC fees, and more highly leveraged banks would pay increasing fees. And, yes, this would be pro-cyclical for troubled banks which would enter a death spiral of rising fees and declining reserves but I'd rather see the system include a strong culling mechanism. Moreover, given the capital structure of most banks, such a regressive FDIC fee schedule would effectively automatically convert bond-holder money (or CDS writer money) into depositor coverage. Thus, bond-holders would finance the liquidation of the bank and provide just a little bit more incentive to for due diligence.
 
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ppauper
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March 16th, 2009, 12:41 pm

AIG to make $165 million in bonus paymentsthis makes both AIG and congress look bad
 
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ppauper
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March 16th, 2009, 12:46 pm

who got what$105 billion flowed to U.S. states and banks including Goldman Sachs Group Inc., Societe Generale SA and Deutsche Bank AG:Banks that bought credit-default swaps or traded securities with AIG got $22.4 billion in collateral, $27.1 billion in payments from a U.S. entity to retire the derivatives, and $43.7 billion tied to the securities-lending program, AIG said yesterday in a statement. States led by California and Virginia got $12.1 billion tied to guaranteed investment contracts.Goldman Sachs $12.9 billionSocGen $11.9 billionDeutsche Bank $11.8 billion. Barclays PLC $8.5 billionMerrill Lynch $6.8 billion Other banks receiving between $1 billion and $3 billion from AIG's securities lending unit include Citigroup, UBS and Morgan Stanley.AIG and the Fed had previously refused to reveal the counterparties, saying the contracts were confidential and that the information could damage AIG’s business prospects.
 
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hanss
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March 16th, 2009, 12:55 pm

Nice bill;-)
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