Humpty Dumpty, or Can Anybody Spot AIG $75 Billion or So?

September 16, 2008
Humpty Dumpty sat on a wall.
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men
Couldn’t put Humpty together again.

Well, shit. Fat chance I’ll get a job in New York now.

In other news, the U.S. financial system appears to be imploding. The Dow was down 500 pts today, Lehman went bankrupt, Merrill Lynch is no more. Time for six or eight Tums and my predictions:

(1) AIG will fail this week. From what I’ve heard, this may be catastrophic in ways that nobody imagined even a few days ago, because frankly, nobody thought too seriously that it could happen. It’s happening, though.

(2) Either Morgan Stanley or Goldman Sachs (or both) will go under by the end of next week.

(3) Washington Mutual, the country’s largest savings and loan, will also declare bankruptcy by the end of next week.

(4) The Dow will drop another 500 points by the middle of next week.

(5) Disco, or some form of it, will make a comeback sometime in the next year. Disco makes people feel good.

To get some idea of the gravity of A.I.G.’s failure, check out this quote from an op-ed in today’s New York Times:

“Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

A.I.G. does business with virtually every financial institution in the world. Most important, it is a central player in the unregulated, Brobdingnagian credit default swap market that is reported to be at least $60 trillion in size.”

You don’t even have to know what they’re talking about to know that sounds pretty bad. Oh well, nothing I can do.

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9 Responses to “ Humpty Dumpty, or Can Anybody Spot AIG $75 Billion or So? ”

  1. Fortuna Köln on September 16, 2008 at 9:19 am

    definitely looks a lot worse than it did 24 hours ago, which is pretty depressing. i guess we’ll have to wait and see if the fed will bail out AIG. on a positive note, if AIG goes tits up we can take solace in the fact that manchester united will lose their shirt sponsor!

  2. MrOink on September 16, 2008 at 11:30 am

    In some sense, I wish the fed would bail out AIG. But they didn’t bail out Lehman, and they’ve said they’re finished bailing out companies. Perhaps another big issue is that the fed may truly not have the money to bail out AIG. That’s also a scary reality to think about.

    Yes, doesn’t portend well for my job search at all, does it. Hmm.

  3. RustedJesus on September 16, 2008 at 3:00 pm

    Rusted Jesus H. Christ. Should I quit my job and dig a foxhole?

    I kind of picture an even like this by the end of the week

  4. RustedJesus on September 16, 2008 at 3:00 pm
  5. MrOink on September 16, 2008 at 3:23 pm

    Foxholes are so World War I. Dig a bomb shelter, cold-war like.

    Install a nice minibar in your bomb shelter and stock it with a lot of liquor. Buy a couple Herman Miller Eames lounge chairs for the shelter — you need to start spending your money somehow, you know. It’s not like you’ll have banks to keep it in.

    Then you can enjoy Armageddon comfortably.

  6. RustedJesus on September 16, 2008 at 3:31 pm

    I’m strangely excited. A clear sign that I watch too many movies.

  7. MrOink on September 16, 2008 at 3:48 pm

    Yea, I am too. There is a certain thrill in watching history in the making, however morbid it may be. I find it very exciting.

    I still don’t have a job, though. That could prove to be a problem …

  8. stereocache on September 16, 2008 at 9:01 pm

    has anyone seen die hard 4. Fire Sale!

    i actually took this opportunity to open up a portfolio. i figure soon everything will be cheap enough that i could actually afford something.

  9. MrOink on September 16, 2008 at 10:48 pm

    Yea, I agree. As pessimistic as I’ve been, I’d invest right now if I had any money at all. I don’t, of course, but I would if I could. And things are looking up with New York State and the feds coming in to apparently save AIG. As exciting as the fallout would’ve been, I’m really glad we’ll (hopefully) never get to see it.

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