Overnight, AIG's stock fell 43%. As indicated by AIG fillings just a month prior to (August 6) such a drop could have activated more than $13 billion dollars in security calls from investors who purchased swaps from the organization and needed their cash back. This is only one case of how the money markets depend upon high credit ratings. As money related firms and markets request higher evaluations, CRAs are influenced to alter their benchmarks. All the more imperatively, once a coming up small organization has a high credit rating, minimizing that rating can push a falling flat organization over the edge as investors escape.
AIG got a credit facility of $85 billion from the Federal Reserve in exchange for warrants for a 79.9% equity stake. After that AIG has been kept afloat by more than $170 billion in federal assistance since September 2008. The uproar over AIG pay reached a new level amid revelations that it rewarded employees with $450 million in bonuses for 2008—when its stock fell from $57.14 a share to $1.57 a share. Worse, $165 million of the payments were in the form of “retention” bonuses to employees of its financial products division, which sold the complex derivatives at the heart of the company’s financial troubles. Even more ironic, 52 of the employees quit after receiving their “retention” bonuses.
The AIG Scandal 2005 started when AIG management was issuing a press release describing its third quarter earnings in 2000 to the public. The report showed that the premium of AIG was significantly increasing, while its loss reserves was decreasing by $59 million. However, according to many industry analysts, along with the positive earnings, AIG in fact should show an increase in its loss reserves as well. This caused the investors of AIG suspected that AIG was drawing down its loss reserves to boost its profits. The suspicious of the investors has unfortunately led to the falling of AIG stock price from $99.60 to $93.30 on New York Stock Exchange (NYSE).
In 2006, the Housing rates shot up and taking out mortgages seemed like a fair option. What the market did not apprehend was the drastic fall in its prices, almost subsequently, an year later, leading to the worst ever bankruptcy situation that sent many leading investment firms like the Lehman Brothers plummeting towards a financial depression and sped their end. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester all came within a whisker of doing so and had to be rescued . One of these firms, namely Goldman Sachs, under Lloyd Blankfein, survived the mess. It not only survived but recorded its highest profit in that particular year.
The fee of $ 550 million was as meagre as letting go of a two week profit for them. Even though it was the largest ever fee collected from the Wall Street, for Goldman Sachs it was just a soft pinch. The U.S. Treasury was to get $300 million and the remaining to those who had suffered due to the Abacus deal. There is a need for financial regulations which expose the derivative markets. The taxpayers need to be safeguarded against having to fund potential bail outs of banks and there needs to be transparency in the dealings of financial intermediaries.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers... In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980s.  In 2001, the independent research company Graham Fisher & Company stated that HUD’s 1995 "National Homeownership Strategy: Partners in the American Dream", a 100-page affordable housing advocacy document, promoted "the relaxation of credit
After the crime as in Lindbergh’s baby kidnapping, Leopold and Loeb wrote and sent a ransom note to Bobby’s father. Ransom amount: $10.000, the Kidnaper’s warnings: the money must be composed entirely of OLD BILLS of the following denominations: $2,000 in twenty dollar bills. $8,000 in fifty dollar bills. The money must be old. Any attempt to include new or marked bills will render the entire venture
As subprime market crashed the CDOs failed and Paulson ended up with net $1 billion while IKB lost $150 million. ACA Capital lost $900 million and Goldman ended up losing $100 million. The parties disagree on the amount of information disclosed by Goldman to the “other side” of transaction parties and sales stragies by Goldman to close the
Nate Gosbin The financial crisis of 2007/2008 was the largest and most severe financial event since the Great Depression and reshaped the world of finance and investment banking.The underlying cause of the financial crisis was a combination of debt and mortgage backed assets. In the 1980s financial institutions and traders realized that US mortgages were an untapped asset. Traders at Salomon Brothers were trying to take advantage of this untapped asset, and found that they could restructure mortgage payments into bonds and sell them to investors. The stock market crash of 2008 could have been avoided. In 2006, the Commerce Department reported that new home permits dropped 28%.
If I was the CEO of General Motors, my decision would be to accept the bailout. This decision would be made because General Motors would be able to still to open its doors to customers. The bailout would allow the business to continue and grow; which it did. The GMC Sierra is the seventeenth best-selling car in America (Zhang, 2017). It’s not always about the present, sometimes it’s beneficial to take risks and think long-term instead of only