Kyle Bass Warns "The 'AIG' Of The World Is Back"

http://www.zerohedge.com/news/2013-03-12/kyle-bass-warns-aig-world-back

Rescued by a Bailout, A.I.G. May Sue Its Savior

http://dealbook.nytimes.com/2013/01/07/rescued-by-a-bailout-a-i-g-may-sue-its-savior/

A Manipulation Timeline

http://www.silverseek.com/commentary/manipulation-timeline-7831

Wall Street hustle

This is an excellent article by Rolling Stone's Matt Taibbi on how "banks too big to fail" and our government are raping and pillaging its tax-paying citizens. It's long, but it's a MUST READ.

http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/1

New York Federal Reserve Bank

The term secret banking cabal is appropriate in describing the New York Federal Reserve Bank in its role of bailing out insurer AIG.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aaIuE.W8RAuU

That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.

Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.”

Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.

This belies the culture of secrecy obviously pervasive within the New York Fed. Committee Chairman Edolphus Towns noted during the hearing that the bank initially refused to disclose even the names of other banks that benefited from its actions, arguing this information would somehow harm AIG.

Now, I’m not saying Congress should be meddling in interest-rate decisions, or micro-managing bank regulation. Nor do I think we should all don tin-foil hats and start ranting about the Trilateral Commission.

Yet when unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil.

The White House / Wall Street circle jerk

Pardon my Goldman Sachs French, but this would be theatre of the absurd, if it wasn't so tragic to our livelihood.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a5ybwwGkJJXw

Spare Change

"Brother, can you spare a dime--or two? Actually, can you spare another $30 billion?" - AIG.

Wow, AIG announced a loss of $61.7 Billion last quarter, for a total loss of almost $100 Billion last year, both record highs in American financial history.

The market is so numb to bad news, it "only" dropped a couple percentage points overseas. While I've always believed the market is headed below 6,000--and it is opening below 7,000 this morning after the bad news, it has fallen so sharply in the last 3 weeks that market conditions are extremely oversold. A snapback rally here wouldn't surprise me (I know some of you think I'm REALLY crazy now), but alas, any rallies for the next several YEARS will be violent but short-lived, as we have not reached our secular low water level yet.

Remember: as a contrarian, you want to do the exact OPPOSITE of what everyone else is doing. However, as an investor, bear market forces are too strong to jump back in. Stay on the sidelines for a couple years--do nothing until we have confirmation of a bottom. As a swing trader, this temporary oversold condition may look tempting, but be careful--no need to catch a falling knife--it could cut you. In other words, even though technical analysis suggests an oversold equities market, sometimes fundamentals out-trump technicals. You can try to play the bounce, but conditions are still extremely perilous. Some high-quality stocks may seem cheap, but they could get cheaper. And many stocks may just get trashed due to lack of liquidity and credit.

AIG and Other Insurance Companies in this Bailout

I agree with Porter Stansberry's take on AIG's near-collapse, and its financial ramifications worldwide. Here is my take, with my own edits:

There's 3 things I learned that we need to understand before we figure out what we have to do going forward:

1) Without the government's actions, the collapse of AIG could have caused every major bank in the world to fail.

2) Without the credit default swap market, there's no way banks can report the true value of their assets - they'd all be in default. That's why the government will enact laws that require the suspension of mark-to-market accounting. Essentially, banks will be allowed to pretend they have far higher-quality loans than they actually do. AIG can't cover for them anymore. Our "recovery" plan includes false accounting.

3) Without the huge fraud perpetrated by AIG, the mortgage bubble could have never grown as large as it did. Yes, other factors contributed, like the role of Fannie and Freddie in particular. But the key to enabling the huge global growth in credit during the last decade can be tied directly to AIG's sale of credit default swaps without collateral. This went on for a decade, exacerbating the problem.

I agree with allocating at least 10% of assets toward gold. But a flight to quality means not only gold, but also to well-capitalized market share leaders who are being undeservedly punished. I have my targets, but every individual needs to find their own comfort level.