A few posts ago I wrote about how the Fed. is saving the world one Sunday at a time. Well they couldn't wait until Sunday. The Fed has taken over AIG, the nations biggest "insurance" company. I put insurance in quotation marks because of the fact that if they were only in the insurance business, they wouldn' t be failing. In return for an approx 85 billion dollar loan, AIG will sell its many parts, to pay back the loan, to others all the while paying 11.4% interest to the Gov. or more precisely you. Unfortunately you and I will never see that 11% money except in the form of more regulation after this all shakes out (it will eventually end, whether it ends next month or 50 years from now :) ). The more troubling happenings now is that the overnight dollar loan rate has topped 10%. This means banks are hording cash and lending has stopped because of counter party risk (remember I blogged about counter party risk last year). This is the really frightening thing now.
The Fed will be back again on Sunday with an announcement about WaMu and then after that it gets hazy. Maybe a Hedge Fund you have never heard of or a local bank that bet too much on home developments. Who knows except maybe the CEO's and Presidents of these institutions.
1 comment:
Hmmm.... I think I might go withdraw some money for safe keeping under my mattress. I mean every measure the gov't takes seems more extreme than the other previous measure. They are really trying to stave off something huge. Whether it happens or not I don't know. But I also don't want to lose my money even if the bank is FDIC insured. I mean does the gov't really have the money and the capacity after all this to be to cover everything if a bunch of banks fail? Beside just selling this country to some foreign land through bonds etc... This is kinda scary.
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