Things I Don't Understand
So I actually passed Econ 100 (or 101?) in college, and I like to think I generally understand stocks and supply & demand & stuff, but I really can't claim to understand larger financial stuff. It's just not my strong point. So I turn to you, my collective of smart and/or knowledgeable friends, to explain it to me in terms I can understand.
1. When we talk about bailing out a firm like AIG, we're talking many billions of dollars. The millions being paid out in bonuses is unconscionable, yes, but I'm really confused about the BILLIONS. Where the hell is that money actually GOING? Because sooner or later it winds up in SOMEONE'S pocket, yes?
2. As I understand it, AIG was doing fine in normal insurance (your house burned down in a fire, AIG pays out your fire insurance policy as planned). But they were insuring these big bundles of bad mortgages, and that's what got them in trouble, right? So is the AIG bailout money going someplace DIFFERENT than the big bank bailout money?
3. If it's really this financial services subsidiary of AIG that fucked everything up and not the mammoth AIG as a whole, would it make any difference to cut that subsidiary loose and let IT fail, while AIG continues on?
4. I keep hearing these employee bonuses were contractually and legally mandated. Isn't there some level at which the government can intervene with criminal negligence charges & such to block it? Granted, failure to follow through on a contract opens one up to legal liability, but isn't there a stronger argument for "ZOMG these guys screwed everyone?!"
5. How much of all this financial meltdown (banks, AIG, etc.) comes from actual losses? How much of it is simply PERCEIVED loss?
My understanding of it is that this is a lot like people realizing that comic books aren't really WORTH a whole lot, despite what the Comics Buyer's Guide tells us. The CBG may list X-Men #200 as a $100 comic book, but if I can't find a buyer for more than $13, then my X-Men #200 is really only worth $13. Only this isn't comic books or beanie babies, but rather houses. Correct?
And if so... then all this money that's going to the banks to make them more willing to loan again doesn't actually change anything, does it?
6. Them people at CNBC are some real fuckers, aren't they?
1. When we talk about bailing out a firm like AIG, we're talking many billions of dollars. The millions being paid out in bonuses is unconscionable, yes, but I'm really confused about the BILLIONS. Where the hell is that money actually GOING? Because sooner or later it winds up in SOMEONE'S pocket, yes?
2. As I understand it, AIG was doing fine in normal insurance (your house burned down in a fire, AIG pays out your fire insurance policy as planned). But they were insuring these big bundles of bad mortgages, and that's what got them in trouble, right? So is the AIG bailout money going someplace DIFFERENT than the big bank bailout money?
3. If it's really this financial services subsidiary of AIG that fucked everything up and not the mammoth AIG as a whole, would it make any difference to cut that subsidiary loose and let IT fail, while AIG continues on?
4. I keep hearing these employee bonuses were contractually and legally mandated. Isn't there some level at which the government can intervene with criminal negligence charges & such to block it? Granted, failure to follow through on a contract opens one up to legal liability, but isn't there a stronger argument for "ZOMG these guys screwed everyone?!"
5. How much of all this financial meltdown (banks, AIG, etc.) comes from actual losses? How much of it is simply PERCEIVED loss?
My understanding of it is that this is a lot like people realizing that comic books aren't really WORTH a whole lot, despite what the Comics Buyer's Guide tells us. The CBG may list X-Men #200 as a $100 comic book, but if I can't find a buyer for more than $13, then my X-Men #200 is really only worth $13. Only this isn't comic books or beanie babies, but rather houses. Correct?
And if so... then all this money that's going to the banks to make them more willing to loan again doesn't actually change anything, does it?
6. Them people at CNBC are some real fuckers, aren't they?