AIG now worths about $1 bil, and we put in $180 bil

[davelj]

[quote=capeman]Exactly. It’s not the business of the government to be paying out private insurance except possibly in the case of natural disasters.

I just recently bought a sizable term life policy from a company that has been around for a long time and is very well capitalized. If they somehow go down then I need to find a new insurance company. There’s no reason outside of Soc. Security that my family should be getting paid out because I bought insurance from a defunct company.[/quote]

OK, your position in consistent. I can’t disagree on a micro level. On a macro level, I would have preferred some level of AIG “bailout” where ALL claimants took (big) haircuts. Just not big enough to bring down the entire system. But what’s done is done.

You might feel differently if you were the beneficiary of an AIG policy and discovered you were getting zippo. It’s one thing to have your insurance company blow up when it doesn’t owe you anything. You just move to another insurer. It’s quite another to have it blow up with an outstanding claim. As I like to say, where you stand on an issue generally depends on where you sit.

[UCGal]

Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.

[UCGal]

Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.

[UCGal]

Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.

[UCGal]

Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.

[UCGal]

Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.

[capeman]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.[/quote]

They’re supposed to be regulated but then so are the banks and they got into all of the trouble they did. Honestly though you have to recognize what the insurance business model is. In the case of inadequate capital be it a natural disaster that takes out to many covered assets to pay out or the insurance company plays with investments they shouldn’t and takes losses, they can’t pay out on all of the claims covered at once. They likely can only pay a small fraction. How much faith do you put in your insurer with that in mind?

If they are allowed to write too many policies in excess of the ability to pay a very reasonable amount of them then they should not be in business. Somehow aside and beyond that banks wrote “fog a mirror” loans and got themselves into death spiral trouble. You can’t let the depositors take the damage or everyone will lose confidence in the currency and the gov’t ability to back that currency. Seeing the gov’t not use it’s ability to back insurance policies has nowhere near the detrimental effect.

[capeman]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.[/quote]

They’re supposed to be regulated but then so are the banks and they got into all of the trouble they did. Honestly though you have to recognize what the insurance business model is. In the case of inadequate capital be it a natural disaster that takes out to many covered assets to pay out or the insurance company plays with investments they shouldn’t and takes losses, they can’t pay out on all of the claims covered at once. They likely can only pay a small fraction. How much faith do you put in your insurer with that in mind?

If they are allowed to write too many policies in excess of the ability to pay a very reasonable amount of them then they should not be in business. Somehow aside and beyond that banks wrote “fog a mirror” loans and got themselves into death spiral trouble. You can’t let the depositors take the damage or everyone will lose confidence in the currency and the gov’t ability to back that currency. Seeing the gov’t not use it’s ability to back insurance policies has nowhere near the detrimental effect.

[capeman]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.[/quote]

They’re supposed to be regulated but then so are the banks and they got into all of the trouble they did. Honestly though you have to recognize what the insurance business model is. In the case of inadequate capital be it a natural disaster that takes out to many covered assets to pay out or the insurance company plays with investments they shouldn’t and takes losses, they can’t pay out on all of the claims covered at once. They likely can only pay a small fraction. How much faith do you put in your insurer with that in mind?

If they are allowed to write too many policies in excess of the ability to pay a very reasonable amount of them then they should not be in business. Somehow aside and beyond that banks wrote “fog a mirror” loans and got themselves into death spiral trouble. You can’t let the depositors take the damage or everyone will lose confidence in the currency and the gov’t ability to back that currency. Seeing the gov’t not use it’s ability to back insurance policies has nowhere near the detrimental effect.

[capeman]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.[/quote]

They’re supposed to be regulated but then so are the banks and they got into all of the trouble they did. Honestly though you have to recognize what the insurance business model is. In the case of inadequate capital be it a natural disaster that takes out to many covered assets to pay out or the insurance company plays with investments they shouldn’t and takes losses, they can’t pay out on all of the claims covered at once. They likely can only pay a small fraction. How much faith do you put in your insurer with that in mind?

If they are allowed to write too many policies in excess of the ability to pay a very reasonable amount of them then they should not be in business. Somehow aside and beyond that banks wrote “fog a mirror” loans and got themselves into death spiral trouble. You can’t let the depositors take the damage or everyone will lose confidence in the currency and the gov’t ability to back that currency. Seeing the gov’t not use it’s ability to back insurance policies has nowhere near the detrimental effect.

[capeman]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?

I think that is the key difference.

It’s like comparing a State Farm Car Insurance policy (picked an insurance brand randomly) to paying some street thug $5 to make sure your car isn’t vandalized when you have to park in a bad neighborhood. The first you purchase with a confidence that it’s well regulated and backed with assets. The other you know has inherant risk. When you purchase the latter type of “insurance” you know the kid you’re paying off may or may not stick around and watch your car.[/quote]

They’re supposed to be regulated but then so are the banks and they got into all of the trouble they did. Honestly though you have to recognize what the insurance business model is. In the case of inadequate capital be it a natural disaster that takes out to many covered assets to pay out or the insurance company plays with investments they shouldn’t and takes losses, they can’t pay out on all of the claims covered at once. They likely can only pay a small fraction. How much faith do you put in your insurer with that in mind?

If they are allowed to write too many policies in excess of the ability to pay a very reasonable amount of them then they should not be in business. Somehow aside and beyond that banks wrote “fog a mirror” loans and got themselves into death spiral trouble. You can’t let the depositors take the damage or everyone will lose confidence in the currency and the gov’t ability to back that currency. Seeing the gov’t not use it’s ability to back insurance policies has nowhere near the detrimental effect.

[XBoxBoy]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?
[/quote]

Yes, but the problem is that those brilliant folks we put in Washington allowed companies to play in both markets. So, AIG would have been fine, except for the division that wrote tons of CDS policies which took out the whole shebang.

I know that some (many?) will disagree with me here, but the government should have made distinctions, and they should only have stood behind those policies which they regulated, and had some responsibility for. This would have meant significantly more turmoil in the big banks as AIG defaulted on all those CDS, but honestly I believe that bankruptcy is a solution, not a problem. (Just like foreclosure is a solution and just like the FDIC taking over an insolvent bank is a solution) But the powers that be, or maybe better described as the powers that are beholden to the banksters didn’t see it that way and moved all those losses on the CDS’s to the taxpayer.

[XBoxBoy]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?
[/quote]

Yes, but the problem is that those brilliant folks we put in Washington allowed companies to play in both markets. So, AIG would have been fine, except for the division that wrote tons of CDS policies which took out the whole shebang.

I know that some (many?) will disagree with me here, but the government should have made distinctions, and they should only have stood behind those policies which they regulated, and had some responsibility for. This would have meant significantly more turmoil in the big banks as AIG defaulted on all those CDS, but honestly I believe that bankruptcy is a solution, not a problem. (Just like foreclosure is a solution and just like the FDIC taking over an insolvent bank is a solution) But the powers that be, or maybe better described as the powers that are beholden to the banksters didn’t see it that way and moved all those losses on the CDS’s to the taxpayer.

[XBoxBoy]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?
[/quote]

Yes, but the problem is that those brilliant folks we put in Washington allowed companies to play in both markets. So, AIG would have been fine, except for the division that wrote tons of CDS policies which took out the whole shebang.

I know that some (many?) will disagree with me here, but the government should have made distinctions, and they should only have stood behind those policies which they regulated, and had some responsibility for. This would have meant significantly more turmoil in the big banks as AIG defaulted on all those CDS, but honestly I believe that bankruptcy is a solution, not a problem. (Just like foreclosure is a solution and just like the FDIC taking over an insolvent bank is a solution) But the powers that be, or maybe better described as the powers that are beholden to the banksters didn’t see it that way and moved all those losses on the CDS’s to the taxpayer.

[XBoxBoy]

[quote=UCGal]Excuse my ignorance. But isn’t life insurance, car insurance, home owners insurance well regulated. Are the issuers required to have a decent percent of capital to back up the policies they write?

And weren’t CDS’s unregulated, and there weren’t requirements for capitalization?
[/quote]

Yes, but the problem is that those brilliant folks we put in Washington allowed companies to play in both markets. So, AIG would have been fine, except for the division that wrote tons of CDS policies which took out the whole shebang.

I know that some (many?) will disagree with me here, but the government should have made distinctions, and they should only have stood behind those policies which they regulated, and had some responsibility for. This would have meant significantly more turmoil in the big banks as AIG defaulted on all those CDS, but honestly I believe that bankruptcy is a solution, not a problem. (Just like foreclosure is a solution and just like the FDIC taking over an insolvent bank is a solution) But the powers that be, or maybe better described as the powers that are beholden to the banksters didn’t see it that way and moved all those losses on the CDS’s to the taxpayer.

[Author]

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