Christmas Greetings from AIG and the Federal Reserve

This time of year is particularly a dangerous time for us taxpayers. It is a time when those in Washington can slip out bad news but, chances are less people will notice it. The reason for this is because everyone is running around for the Christmas holidays. Even most of the media empties out of this town for the next week or so. Not me. I am looking for the bad news leaked out. I think I found it in today's Washington Post. It concerns AIG and how it was able to get some of those nasty credit default swaps off it's books. Here are the money quotes:"American International Group retired $16 billion in credit default swaps, the contracts that almost caused the company's collapse, after buying the underlying securities with help from the Federal Reserve."

"The fund created by the Fed and AIG to protect the insurer's customers from losses has now purchased collateralized debt obligations with a face value of about $62.1 billion, the firm said in a statement."

"The business guaranteed more than $70 billion in securities created by pools of different kinds of debt, including sub prime mortgages, that plunged in value. The federal government committed $150 billion to bail out AIG and prevent losses at investment banks that bought protection on fixed-income securities from the insurer."

Whoa! AIG only guaranteed $70 billion in securities. But, we taxpayers gave them $85 billion and then another $65 billion in loans? What wrong with this picture?

My car is died and Detriot is not looking too healthy either.

Since 1988 I have been driving a 1986 Mazda subcompact. It was a hatxhback, not flashy but, reliable transportation and very good on gas. One August night in 2007 I was driving it home from the Ronkonkoma train station. I turned a corner and the car died. It cranked fine but, just never started again. Since it had only 66,000 original miles on the odometer I knew it still had some life in it even if the body was starting to show it's age. I was planning on buying a new car anyway but, I thought I try and use it for one more year. I had it towed to my house thinking I would try and revive it. I never did make much progress or really spend much time on it. This week I donated it to a children's charity. It was sad to see it being towed off. I knew it still had a few miles in it. But, the reality is I did not have the time to work on it like I thought I would. I had bought a new car brand new which if my driving remains the same may last me until I die. Only a few months before I had spent $600 for a new muffler system for it to keep it going. It nows looks like that was money that was wasted. Meanwhile in Washington the Federal Government has granted billions of dollars in loans to the big three U.S. car makers to keep them going. I just hope that will not be money that was wasted too.

Sub prime McCain?

"By last November, John McCain's presidential campaign was broke. To survive, he offered his fundraising lists as collateral for a $3 million line of credit from a local bank. But obtaining the loan required an unusual extra step: He had to take out a special life insurance policy in case he did not survive the campaign."-Washington Post

Well at least it was not an adjustable sub prime loan. When it comes to politics it is always useful to follow the money. Here is another money quote on McCain's loan:

"Cleta Mitchell, a Republican campaign finance lawyer who has been a critic of McCain's, said she believes the arrangement raises serious questions. "Did they base this loan on the fact that, even if he lost, he would still be a sitting senator and able to raise money?" she asked. "In my mind, that raises questions about whether he complied with Senate ethics rules," which bar members from using their position to negotiate financial terms that an average citizen could not. "

So John McCain gets a loan from this bank using his political donor list as collateral. I wonder how much of a loan the average person could get if they used their Christmas list as collateral. File this in the Hmmmm file.

Sub prime suckers!

As the Washington Post reports today the other shoe is about to drop on the sub prime loan debacle and as I predicted it is going to fall on us taxpayers. In a cryptic speech yesterday Treasury Secretary Henry Paulson announced a "plan" to help bailout the sub prime loan borrowers and lenders. Details of which are supposed to be announce "later this week". Let's hope it is not in the dark of night here are some of the money quotes:

"Municipal housing authorities now offer mortgages at lower-than-average rates to credit-worthy, first-time buyers whose earnings are at or below the average household income levels, which vary by region. Cities and states can provide such advantageous loans because they sell tax-exempt bonds backing the mortgages to investors at lower rates, passing on the savings to homeowners. "

Translation: The loan risk will be slid off the banks portfolio and onto the taxpayers, Hola suckers taxpayers!

"The lack of details has made it hard to know how many homeowners the plan would help. In the past two years, about 2 million credit-challenged, or sub prime borrowers bought houses with mortgages that typically had interest rates of 7 to 8 percent. "

Credit challenged? What type of politically correct nonsense is this? The banks and lenders gave these loans out to these people. They are the ones responsible but, there is a slight of hand going on here and these "credit challenged" homeowners are about to become the problem of us taxpayers and not the lenders and banks who gave them the loans.

"Paulson's plan also faces a daunting task of figuring out who is eligible for mortgage relief, because many loans have little documentation of a homeowners income, said Douglas W. Elmendorf, a senior fellow at the Brookings Institution"

You can just smell the lawsuits beginning from those who don't get relief. I'm not even going to go into the number of illegal immigrants who have gotten sub prime loans which is the eight hundred pound gorilla in the room that no one wants to talk about.

" Whatever plan Paulson presents, "they are going to need the nonprofit community," said Kenneth D. Wade, chief executive of NeighborWorks America, who spoke at the housing forum yesterday. "

Oh yeah this is a good one. Let the "non profits" run the show. You can see the corruption beginning. The banks will be off the hook and by the time anyone realizes how much money was ripped off from the taxpayers who are subsidizing this bailout it will be too late. Get ready to open your wallets sucker taxpayers!