The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October.
I wonder if AIG is doing the same thing as other banks across the country are doing with the bailout money. JPMorgan Chase is trying to acquire new banks, while others are paying off their executives. And we all know AIG blew over $400,000 the week after their bailout on a week-long spa resort.
“When investors don’t have full and honest information, they tend to sell everything, both the good and bad assets,” said Janet Tavakoli, president of Tavakoli Structured Finance, a consulting firm in Chicago. “It’s really bad for the markets. Things don’t heal until you take care of that.”
This is what happened during Japan's lost decade. They didn't just write everything down and get on with it, instead they slowly and continually lost money.
Suspension of mark to market accounting certainly won't provide "full and honest information." Maybe a central clearinghouse for derivatives would help, but why would we want to regulate the market? "Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary," Greenspan said, even while Long Term Capital Management was collapsing months later (for much the same reason that there are no more Wall Street investment banks anymore).
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