Wednesday, October 29, 2014

Paulson AIG, STARR- same rationale as he used on FNMA AND FMCC

Paulson Rationale

Paulson offered the court a rationale for treating AIG more harshly than investment banks.
The government avoided punitive terms for the banks because it feared doing so would encourage shortsellers to attack them or other financial institutions, further destabilizing the economy, Paulson told the court.
There was no similar risk of a domino effect in the insurance market, according to Paulson. “I didn’t see another insurance company that was vulnerable” and posed a risk to the entire economy as AIG did, he said.
Paulson said he advocated “fairness to the extent you can have fairness,” but “to me, stability trumped moral hazard.”

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Basically destroy 2 insurers instead of 10 to 15 banks. The banks would of had a run on them by depositors and bankrupted them. This is a good strategy but does not make it legal or right.
mostly who will fill the shoes of the whipping boys, the insurers, on next go round? Who wants to lose all their money when its clear the insurers will be wiped out? here is your answer, NO ONE. 

Great job Paulson for clearly putting the country in danger as no private capital will back up mortgages ever again and it looks like banks want nothing to do with even loaning money for mortgages anymore for fear that since no one is stepping up to insure, THEY(the banks) will have to eat all their bad loans on the next go round, and Bankrupt them.

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