What’s going on at AIG? ?
American International Group (AIG), which sponsors Manchester United FC, was hit hard by deterioration in the credit markets last week and yesterday issued a statement that said it was reviewing its operations. Its stock dropped 45% since the start of the week amid concerns about the security of its assets, many of which are linked to the financial turmoil on Wall Street. Over the weekend it crafted a $40bn loan facility from the federal reserve, which had obviously taken the view that AIG posed more of a systemic risk than Lehman.
Washington Mutual is named by several analysts as the next to find itself in serious trouble. It was the subject of a rescue led by private equity firm Texas Pacific group in the spring. But the billions poured into its coffers no longer look sufficient to satisfy investors and they are taking flight. It is possible shareholders will flee Bank of America, if they consider Merrill Lynch a bad buy.
Another victim could be the US mono line insurers, so called because they only insure the bonds of large company’s, including mortgage lending institutions. Like AIG, the insurance cover they provide could be invoked by customers and, like a tsunami, overwhelm their finances.
In the UK, mortgage banks such as Halifax owner HBOS, Alliance & Leicester and Bradford & Bingley, could suffer further if investors switch to safer havens.
Will it make a recession worse?
Yes. The CBI predicts a “shallow recession” next year, but this now appears optimistic. If the last five years of our decade-long economic boom were characterised by reckless lending, then living standards, along with property prices, have a long way to fall.
We are all spending money we simply don’t have and when we stop it will spell the end for many jobs in retail, hospitality and may other industries. A fall in the value of the pound will help exporters and that will offset the worst of the economy’s problems. But without banks willing or able to lend money to millions of people, except at sky-high interest rates, a long and deep recession seems inevitable.
What are your views???????????
The situation seems very complicated.
However, the U.S. Government has injected multi-billion dollar to help AIG and became the major shareholder of the AIG. According to the simple majority rule, U.S. Government can dictate every move of the director board of AIG and change AIG practice.
U.S. Government are launching their help to the financial market, you will see via news or news.yahoo.com.
The situation in UK should be better. The root cause for the collapse was due to the bad debt in U.S. In U.S. Laws, those bad debt operation are not illegal. However, in UK, the listing regulation and the Company Laws would say illegal.
Non-dislocation of Euroland, dislocation of the United Kingdom?
The further integration of Euroland with an acceleration and strengthening of budgetary and financial integration and the initiation of a fiscal integration . The Eurozone governments, led by Germany, have confirmed their willingness to go right through to the end of this process, unlike all the Anglo-Saxon and Eurosceptic discussions which, for the last two years, predicted that Germany would abandon the Euro. At the same time, they have refused to follow the path of the Fed and the Bank of England by refraining from running the printing press (Quantitative Easing) as long as budgetary discipline is not achieved within Euroland. The clear failure of QE in the US as in the UK confirms the relevance of this choice which will allow the issue of Eurobonds at the end of 2012 .
In fact this summit will have been historic, but not yet because it will have settled the European financial and budgetary problems. Angela Merkel has just said in the Bundestag, the Euroland path is a long journey, complex and chaotic, like the road traveled since the 1950s for European integration . But it’s a way that strengthens our continent and will place Euroland at the heart of the world after the crisis. If markets are not happy with this reality, it’s their problem. They will continue to see their ghost-assets go up in smoke, their banks and hedge funds go bankrupt, trying in vain to push up interest rates on European debt resulting in the ratings of the Anglo-Saxon credit rating agencies losing all credibility.
This summit is historic because it confirms and boosts the return of the EU founding countries in charge of the European project and because it shows that far from witnessing a collapse of the Euro zone, the shock treatment attempted by David Cameron on the orders of City financiers is resulting in an acceleration of the United Kingdom’s dislocation . In addition to the confrontation between Liberal Democrats and Conservatives which Cameron’s posture initiated, undermining even further a coalition already in really bad shape, this British marginalization raises fierce opposition in Scotland and Wales whose leaders proclaim their attachment to the EU and its volition, as regards Scotland to join the Euro once the independence process starts around 2014.And, the icing on the cake, the collusion between the City and the British government is now a topic that extends beyond the UK’s borders and reinforces the continent’s determination to finally bring this “outlaw” under control. As we have described since December 2009 and the beginning of the attacks against Greece and Euroland, the City, alarmed by the consequences of the crisis as regards European regulations, launched itself in an attack against an evolving Euroland, putting the Conservative Party and Anglo-Saxon financial media in its service . The episode of the recent Brussels summit marks a major defeat for the City in this increasingly public war, exposing by the way the resentment of a majority of British who are not so much against Euroland than against the City accused of exploiting the country .
With £1.8 trillion of public money invested in banks to prevent their collapse in 2008, the British taxpayers are in fact those who have paid the most for the rescue of financial institutions. And the British government may well continue to exclude this amount from its public debt calculations by claiming it’s an “investment”, de facto, fewer and fewer people consider that the banks in the City will recover from the crisis, especially since its worsening in the second half of 2011: the shares purchased by the Government in fact are already worthless. The “UK hedge fund” is on the brink of collapse … and thanks to David Cameron and the City, it’s isolated with no one to come to its aid, neither in Europe nor the United States.
With the Chinese bubble about to join the European recession and the US depression, the 2012 storm will determine whether David Cameron and his finance minister George Osborne are worthy descendants of the great British…
Not so much a question? More of a diatribe for full EU fiscal and political union.
Incorrect on a few points eg: majority of public not being against eurloand and being more against the ‘City’ and banks.
A common misconception by idealists , students and left wing activists.
ANY poll will show a majority of Uk ( especially english) feel that.
A) may be willing to become full members and adopt Euro but want it to be by voting to accept and NOT having it force fed. ( Ireland you may recall had to have more than one referendum before its voters made right choice )
b) quantities easing was used by labour to keep books and economy going despite knowing it will end in failure. ( Germany knew from past era before Hitler about that process)
c) allowing basic manufacturing base in Uk to die and using financial markets to drive Uk economy was flawed.
D) mr Cameron was going against many bankers advise in refusing to sign up to a financially devastating agreement for Uk and was in fact responding to Uk populations wishes in this area.
E) overall UK population wants an economic free market and elected officials etc. Neither of which is available and leaving EU will not as many try and hoodwink us into thinking. Leave us totally isolated.
F) Germany and FRance want UK to be weakened to a satellitte state with limited infleunce and power. Hence such steps as tax on shares etc all designed for Uk to pay for EU problems and bring us further into a weaker state. Only a matter of time before EU decides all finance must eb controlled by central bank etc and City of london etc will lose its instituions due to taxes, laws, bribes etc.
G) Uk will be broken up with Scotland being independant and working with Germany etc to bring about a full downfall and irrecoverable economic situation etc in England.
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