AIG Saved! For Now (Attention Government Shoppers!)

Well, well, well, Lehman is thrown to the wolves, but AIG gets a government bailout (do I need to point out that again taxpayer money is used to salvage a private company with no public or Congressional input at all? Another step on the road to serfdom).

Obviously the powers that be felt that they were a "systemic risk" to the financial system. Which in a way is funny because all of their actions so far in committing literally trillions of dollars to "save" the banking system have done little but kick the can further down the road. They tried this before in France and it was a total failure. The day of reckoning was moved further down the road, but when it came it was only worse.

All of this only proves what these guys say, which is that if you are going to make risky bets, make sure you don't make mediocre risky bets, make sure you make bets that will bring down the financial system, so that when they fail, the government will bail you out. Lehman's problem wasn't that they made risky and foolish bets; its problem was that they weren't risky enough and foolish enough, which is the lesson from AIG and Bear Stearns.

2nd Biggest Bank Failure in US History

IndyMac fails. This is not the last bank failure we will see. How many fail depends a lot on how bad the economy gets. The reason the Fed waited until Friday night to do this was to keep it from roiling the markets even further than they already are.

Zombie Banks

This is an interesting article. If you're not business oriented then you won't understand it. To put it in laymen's terms, the Fed is not forcing banks to price the assets they hold at actual value because it would mean that some (many?) banks are insolvent. In order to prevent this the Fed allows the banks to "pretend" that their assets are worth more than they are so that they appear solvent. This is known as a Zombie bank and the US Govt was very critical of Japan when they did the exact same thing in the 1990's.

Societe Generale And Its "Rogue Trader"

Think a low-level trader could lose 7.1 billon dollars without the bank that he works for knowing it? This is the story that Societe Generale, a bank in France, would have us believe. I do not believe it for a minute. Neither do many other people: Among financial veterans of other trading floors as well as financial experts across Europe on Thursday, there was widespread incredulity that a junior employee like Mr. Kerviel could have racked up such huge losses without the knowledge of his superiors.