Moderators: LawBeefaroni, $iljanus
Austin wrote:Yes, although I'm in for a few this morning at ~$3.75LawBeefaroni wrote:WM especially.
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Yeah I imagine the CEO ouster is part of what made it go from +20% to >-10%.LawBeefaroni wrote:Austin wrote:Yes, although I'm in for a few this morning at ~$3.75LawBeefaroni wrote:WM especially.
You know Killiger is out, right? I love how they broke that and the Treasury memo news this morning. Totally buried in the FRE/FNM stuff. Might be a good buy though. $35 a year ago.
These little financials are great for popping 8-15% every couple weeks, in small doses of course, just in case.
+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
They shouldn't have though.farley2k wrote:+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
This is why I hate all that BS that conservatives say about privatizing things and how the market can fix anything/everything. When the rubber hits the road the government bails out large enough institutions.
Except that FRE and FNM are GSEs. They were chartered by Congress and there is widely understood to be an implicit guarantee from the US Government. Technically there isn't one but because of the implied relationship, it's not the same as, say, BSC. Which WAS a "socialized losses" bailout, I'll give you that.farley2k wrote:+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
This is why I hate all that BS that conservatives say about privatizing things and how the market can fix anything/everything. When the rubber hits the road the government bails out large enough institutions.
Fannie Mae's Daniel Mudd and Freddie Mac's Richard Syron stepped down but are helping with the transition of their companies into federal conservatorship under the Federal Housing Finance Agency. The agency has not said how much they will earn in their new roles.
Mudd earned $11.6 million last year, and Syron made $18.3 million. In both cases, a large portion of their pay packages included stock that was valued much higher at the end of 2007 than it was as of Monday, when it was trading at less than $1 a share.
By conservative estimates, Mudd, 49, and Syron, 64, will leave with an additional $7.3 million and $6.3 million, respectively, as part of a severance package, according to an analysis by Paul Hodgson at the Corporate Library.
Do you think we should blame FDR(D) for setting up Fannie Mae or LBJ(D) for privatizing it?farley2k wrote:+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
This is why I hate all that BS that conservatives say about privatizing things and how the market can fix anything/everything. When the rubber hits the road the government bails out large enough institutions.
As far as I know the Dems have never championed privatization, so why is it BS for them?The Preacher wrote:Do you think we should blame FDR(D) for setting up Fannie Mae or LBJ(D) for privatizing it?farley2k wrote:+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
This is why I hate all that BS that conservatives say about privatizing things and how the market can fix anything/everything. When the rubber hits the road the government bails out large enough institutions.
I guess it's not just conservatives full of BS, is it, my liberal friend?
A flurry of filings on 7/18/2008, fun stuff from the sec.gov.Little Raven wrote:At least it's not all bad news.Fannie Mae's Daniel Mudd and Freddie Mac's Richard Syron stepped down but are helping with the transition of their companies into federal conservatorship under the Federal Housing Finance Agency. The agency has not said how much they will earn in their new roles.
Mudd earned $11.6 million last year, and Syron made $18.3 million. In both cases, a large portion of their pay packages included stock that was valued much higher at the end of 2007 than it was as of Monday, when it was trading at less than $1 a share.
By conservative estimates, Mudd, 49, and Syron, 64, will leave with an additional $7.3 million and $6.3 million, respectively, as part of a severance package, according to an analysis by Paul Hodgson at the Corporate Library.
EX-99.1 2 exhibit1.htm EX-99.1
EXHIBIT 99.1
Transcript of Interview of Daniel H. Mudd by Judy Woodruff on July 17, 2008
on The NewsHour with Jim Lehrer
JUDY WOODRUFF: Lawmakers on Capitol Hill have been closely inspecting a controversial new proposal to help stabilize the nation’s largest mortgage finance companies, Fannie Mae and its brother, Freddie Mac.
Treasury Secretary Henry Paulson laid out the emergency plan this weekend after the stock value of the companies took a plunge.
Together they hold or guarantee more than $5 trillion in mortgage debt. They are unique in that they are owned by private shareholders, but were created by a government charter.
The Bush administration plan would increase a credit line to Fannie and Freddie and allow the treasury to buy direct equity in the companies, if needed.
Daniel Mudd is the president and CEO of Fannie Mae, and he joins me now.
It’s good to have you with us.
DANIEL MUDD: Fannie Mae President and CEO: Good to be here, Judy.
JUDY WOODRUFF: First of all, as we sit here this evening, how financially sound is Fannie Mae?
DANIEL MUDD: Fannie Mae is very financially sound. We have the highest capital classification. Capital is the amount we have to buffer any potential losses. We have a very high classification from our regulator, more capital than we’ve had at any point in our history.
That said, we’re going through a very tough market. Everybody knows that the housing market has been down for a period of time. We expect it to bounce around the bottom for a while longer before it starts to recover, so we need to be ready for that.
JUDY WOODRUFF: But if your capitalization and the rest of it is as strong and sound as you say, why is this Treasury plan and this Bush administration plan necessary to help you out?
DANIEL MUDD: Well, there’s a lot of uncertainty out there, because all the capital markets, the lending markets are really built on confidence, confidence that homeowners have that they can buy and sell a home, move to the next place, that banks can make the loan, that those loans can be sold to Fannie Mae or Freddie Mac and traded around the world.
Confidence has gotten very jittery over the course of the past quarter or so. And, as we saw, a very tough week in the markets last week. I think everybody agreed, given the importance of these companies, that there be a strong backstop in case that kind of lack of confidence and that kind of jitteriness continued for too long. The past couple of days have been better, so we’re hopeful.
JUDY WOODRUFF: But as you know, there are critics, Daniel Mudd, who say that Fannie Mae has brought this on itself to some extent by resisting requirements that you raise the amount of capital you have that would have put you in stronger shape to withstand the kind of crisis you face right now?
DANIEL MUDD: Well, we have built capital. Over the course of the past year, we’ve added about $15 billion to our capitalization.
Nobody certainly predicted that we would see a trough of this depth. Now that we see it here, we started immediately to raise capital. We’ve built it up, and we’re fighting our way through.
JUDY WOODRUFF: Well, how likely — I mean, assuming this were to pass the Congress — and that’s not certain yet — how likely do you think it is that Fannie Mae would take advantage of what’s in the package, this line of credit, or that the Treasury would actually buy stock in the company?
DANIEL MUDD: I think it’s very unlikely. And I think everybody that has described it — whether Secretary Paulson, Chairman Bernanke, our regulator, Director Lockhart — as a backstop in case things turn out different than everybody predicts. What we fully intend to do and what we are doing is running the business in a prudent, responsible way, making sure that that money is still flowing to communities all around America. I mean, we need that more than we’ve needed it ever before. So we’re keeping that going.
But having that backstop there, I think this is the right time to think about it and talk about it. I don’t think we’ll need it.
JUDY WOODRUFF: But as you know, there are those who say, “OK, what’s happening here is that this is going to be a federal, potentially a federal bailout of a quasi-private company to the tune of, what, tens of billions of dollars at least.” I mean, is that — I mean, is that a fair characterization?
DANIEL MUDD: I don’t think it is, Judy. You know, I think that the right characterization is a backstop during a time that the market is building confidence.
We’ve talked about doing this for a period of about 18 months. A lot of people see us moving through the crisis in that period of time. So there’s a backstop during that period of time.
And any type of interactivity with the government from a financial standpoint, folks have talked about a loan or an equity investment on normal commercial terms, not anybody giving anybody money. And I would point out in that, Fannie Mae has never taken a penny from the federal government.
JUDY WOODRUFF: Never taken a penny?
DANIEL MUDD: No.
JUDY WOODRUFF: Because of the way you’re structured.
DANIEL MUDD: Because of the way we’re structured.
JUDY WOODRUFF: Well, I want to ask you about that, because even your supporters point to what they say is sort of an inherent tension in the definition of Fannie Mae and Freddie Mac.
As a private company, you hold assets; you generate earnings; you want to do the best you can for your shareholders. On the other hand, as a company that was chartered by the federal government, it’s your job to find housing for people who need it to take risks.
Are those goals inherently incompatible with one another?
DANIEL MUDD: I don’t think they’re incompatible, but you’re exactly right to point out the tension. I mean, that’s the tension that was put into the system when it was created.
You know, we’ve had a policy in this country going all the way back to, really, to World War I that said we want people to own a stake in communities. We want them to live there. We want to build those communities. Families stay together. People get educated. The country is a better place for it.
What can we do to facilitate that? And the system we chose in the United States was to have private investment go to make that happen. In other countries, taxpayer money goes right into it. In this country, it’s private investment, gathered from all around the world by Fannie Mae and Freddie Mac, and put to use in American communities.
That’s why most Americans can rely on getting a mortgage, being able to buy and sell their house, and being able to build those strong communities. So it’s a tension, but it’s a tension that makes the system work.
JUDY WOODRUFF: Now, it was reported today that some of the Democrats in Congress want to add a requirement on this rescue proposal that would essentially have the government approving the pay package, the compensation package for all Fannie Mae and Freddie Mac executives, including you, of course. Is that something you’re prepared to go along with?
DANIEL MUDD: Well, I mean, I think if we ever got to the point that we needed that backstop, certainly, you know, the lot of accountability should be there. I don’t think we’re ever going to get there. And I think the main point is, back to the investment...
JUDY WOODRUFF: And, excuse me, when you say get to that backstop, you mean if this rescue plan were to be actually triggered?
DANIEL MUDD: Yes, that’s right. That’s right. That’s right. And we don’t intend on that. We’re not managing to that. I think it’s very helpful in terms of restoring confidence.
Right now, all of the burden has been borne by those that have invested in Fannie Mae. So back to your point, not a penny from the federal government. We’ve borne this through the share prices, through the private investment in the companies. That’s the way the system was supposed to work.
But we should also have the chance to use that private investment, to recoup the money, build back up, go through the trough to the other side. And on the other side, there’s a terrific market for home ownership, for investment in homes, for mortgages in this country. And so that’s why we’re pretty optimistic longer term.
JUDY WOODRUFF: Something else that has surfaced in the last few days is this sort of ongoing, bubbling criticism of Fannie Mae and Freddie Mac. You’ve spent something like $170 million over the last 10 years to lobby lawmakers, to get favorable treatment.
You have friends in high places, people working for you who’ve been in and out of government. Those critics say, and I’m quoting here, you’ve used your clout and your unusual status to almost create a regulation-free zone for yourselves. How do you answer that?
DANIEL MUDD: Well, we are out there every day making the case that we do want to have a stronger regulator. There’s a bill before Congress right now to develop a world-class regulator for Fannie Mae and Freddie Mac. And we’re in favor of getting that done.
There’s never been a time like now to see, as the stress in the system emerges, how important it is to have that regulator onsite and that regulator able to stand up and say, “I’m saying these companies are good.”
Our regulator has said that, but we do need to have the normal type of regulatory powers that you would see in banks or other large financial institutions. We’re not arguing against that at all.
JUDY WOODRUFF: But it’s not too late? I mean, why wasn’t this something that was pushed for earlier?
DANIEL MUDD: Well, we’ve been pushing for it for a couple of years through a couple of congresses. And there’s probably somebody else you should ask why it — why it’s taken so long. There have been other priorities in Congress, let’s say.
JUDY WOODRUFF: One last thing I want to ask you about. The head of one of the nation’s largest investment banks, JPMorgan Chase, said today he expects the home mortgage crisis to get even worse. He sees it slipping, already slipping out of just the subprime loans into the so-called much more sounder loans. And he’s saying we should expect much worse in the weeks and months to come. How do you see it?
DANIEL MUDD: Well, we think the rest of this year is going to be pretty tough. We expect home prices to decline into next year, as well, before you see a recovery.
There was a lot of lending. There was a lot of overconfidence, perhaps, in the housing market. That has certainly come out of it.
And as home prices kind of return to a more normal sustainable level, and as the type of mortgage products that are out there become safer and sounder, we’re restoring the market back to kind of a comfortable center.
Part of that comfortable center is the business that Fannie Mae does. And as that happens, then I think the market will start to resume a pretty nice course of growth.
JUDY WOODRUFF: And quickly, how essential is this rescue plan?
DANIEL MUDD: It’s an important backstop to make sure that there’s confidence in this part of the market. This is — we’re a large company, but we’re in one of the largest financial markets in the world. That’s an important market to have good confidence in.
And I think, through this process, a lot of officials have looked around and said, “These companies are important. They’re at the center. Let’s make sure they’re working and let’s make sure they’re safe.”
JUDY WOODRUFF: Daniel Mudd, the president of Fannie Mae. Thank you very much.
DANIEL MUDD: Thanks for having me.
[END]
This transcript contains forward-looking statements, which are statements about matters that are not historical facts. Although Fannie Mae believes that the expectations set forth in these statements are reasonably based, the company’s future operations and its actual performance may differ materially from what is indicated in the forward-looking statements in this statement. Factors that could cause actual results to differ materially from these statements include the company’s results of operations for the remainder of 2008; changes in accounting principles or practices, including changes in the rules governing qualified special purpose entities; recording a valuation allowance for its deferred tax asset; continued impairments of its assets; changes in investor confidence in the company; the effect of proposed and pending legislation. Additional factors that could cause actual results to differ materially from these statements are detailed in Fannie Mae’s quarterly report on Form 10-Q for the first quarter of 2008 and its annual report on Form 10-K for the year ended December 31, 2007, including in each case the “Risk Factors” section, as well as the company’s reports on Form 8-K. These periodic and current reports, as well as all other forms that Fannie Mae has filed with the SEC, can also be obtained on the company’s web site at http://www.fanniemae.com/ir/sec/" target="_blank.
EX-10.42 71 f02955exv10w42.htm EXHIBIT 10.42
Exhibit 10.42
Chief Executive Officer Special Performance Award
Opportunity — Parameter Document
Purpose
The Compensation and Human Resources Committee (CHRC) and other non-employee members of the Board of Directors (Outside Directors) of Freddie Mac approved the establishment of a special, one-time cash performance award opportunity for its Chief Executive Officer, Richard Syron. The award opportunity was designed to provide additional incentive and recognition for the completion of key tasks over the 29 month-period starting June 1, 2007 through September 30, 2009. These key tasks are beyond the performance measures established by the 2007 Scorecard used for the corporate annual incentive plan. This award is consistent with our pay-for-performance philosophy, which requires the demonstration and evaluation of performance prior to payment.
Timing of Award
This award will be based on performance over the 29-month period starting June 1, 2007 through September 30, 2009. The performance determination will be approved by the CHRC at a meeting in the third quarter of 2009 after considering the views of the Outside Directors. The actual payment, if any, will be made as soon as administratively practicable following the determination of performance (see below) but no later than October 31, 2009.
Main Design Provisions
The maximum award is $6,000,000 and the specific award amount will be determined by the CHRC, in its sole discretion, based on a reasonable relationship to the number and relative significance and/or strategic value of “Performance Milestones” (described below) that the Company achieves either in whole or part. In determining the award amount, the CHRC shall obtain and consider the view of the Outside Directors. The CHRC will also consider Mr. Syron’s actual compensation under Freddie Mac’s standard annual compensation program during the performance period, and how it compares to the compensation of Chief Executive Officers in the Comparator Group.
The amount of the actual award will range from $0 to $6 million, with no guarantee that any payment will be made.
Award Size
Payout Level as % of Target Description
Minimum 0% No milestones achieved
1% - 99% Some, but not all milestones are achieved in whole or part as described above.
Maximum 100% All milestones achieved
[1]
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Performance Milestones
The performance milestones which shall be measured from June 2007 through September 2009 are:
(Note: Information/data listed in parentheses following certain measures are the type of information, both objective and subjective, which the CHRC will take into consideration in determining whether the milestone has been achieved.)
• Remediate all material weaknesses and significant deficiencies disclosed in 2006 annual report dated March 23, 2007.
• Return to timely and sustainable financial reporting with the expectation that we will achieve Sox 404(a) compliance (with the issuance of our 2009 financial statements and substantial completion of each element of the Comprehensive Plan listed in the material presented to the Governance, Nominating and Risk Oversight Committee on September 6, 2007).
• Make material improvements in the information technology infrastructure. (Sustained and reliable operation of IT General Controls, remediation of all technology-related material weaknesses and significant deficiencies, consistent application of SDLC, progress on the development of mortgage conduit for distributing credit risk exceeding the company’s risk profile, completion of systems work necessary to support SEC registrant reporting, timely completion of major system projects as reported from time to time to the Mission, Sourcing and Technology Committee, improving ability of legacy systems to interface easily with external, third-party IT solutions.)
• Complete SEC registration and become an SEC reporting company.
• Manage a smooth Chief Executive Officer succession process. (Quality of the CEO search process, speed and success of integrating the new CEO into the company’s management team, success in transitioning day-to-day business operations responsibilities to the new CEO.)
• Substantially enhance the leadership strength of Freddie Mac’s executive team and the Board. Enhance the level of alignment and collaboration within both Freddie Mac’s executive team and the Board. (Increase in ready-now candidates for Tier 1-3 critical succession roles, increase success in filling critical succession roles with internal candidates, increase representation of minority and female officers, success expanding key experience/competency needs when new Board members are selected.)
• Position the company to be more proactive in its ability to identify and respond to new Mission needs and capital market changes and execute on those opportunities that enhance our housing mission and long-term shareholder value. (Success aligning the company’s efforts to improve its financial performance consistent with our mission, success helping shape the new affordable housing goals to focus on delivering housing opportunity directly to our Mission constituents, success developing and delivering to
[2]
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market viable, non-predatory sub-prime loan products, providing liquidity, affordability and stability to residential mortgage markets.)
• Demonstrate substantial progress toward imbedding a pay-for-performance culture. (Increasing the level of bonus differentiation versus 2005 results, maintaining an appropriate distribution of performance ratings that aligns with business performance, maintaining bonus payouts linked directly to actual performance against annual Scorecard, utilizing performance features in multiple elements of the pay structure for executive officers.)
• Demonstrate substantial progress in managing the company within the current and future legislative and regulatory framework. (Informing regulators, Congress and industry groups on the impact of proposed legislative and regulatory actions on the GSEs and providing constructive solutions to respond to legislative and regulatory changes and concerns; addressing concerns raised by Congress, regulators and industry groups regarding how GSEs fulfill their mission as well as concerns regarding potential safety and soundness issues; achieving compliance with the rules and standards under which the GSEs will operate.)
• Achieve meaningful enhancement of shareholder economic value. (Determining appropriate metrics to measure fair value; year-over-year adjusted GAAP results; return on capital; changes in market share; credit performance; quality and effectiveness of profitability measures.)
The accomplishment of most or all of these milestones would result in a dramatic transformation of the company as compared to its position in late 2003, when Mr. Syron assumed leadership.
The Compensation and Human Resources Committee of the Board is responsible to exercise its judgment at the end of the performance period in a responsible and deliberate fashion to assess all relevant information, including the information outlined above, to determine the extent to which the performance milestones have been achieved in whole or part (as defined above), in deciding what amount, if any, of the award opportunity should be paid.
Form of Award
The award will be paid in cash.
Termination Provisions
This is a special award intended to recognize the achievement of specific performance criteria prior to September 30, 2009. Freddie Mac’s normal plan termination provisions do not apply to this opportunity. In the event of death, disability or involuntary termination by Freddie Mac without cause or termination by Mr. Syron for Good Reason (as such term is defined in Mr. Syron’s Employment Agreement), the entire award will be forfeited unless the CHRC, in its sole discretion, determines that some or all of the performance milestones had been achieved prior to the event of death, disability, or involuntary termination by Freddie Mac without cause or termination by Mr. Syron for Good Reason. In determining whether
[3]
--------------------------------------------------------------------------------
any of the performance milestones were achieved, the CHRC shall obtain and consider the view of the Outside Directors. In the event of termination by Freddie Mac for cause or voluntary termination by Mr. Syron other than for Good Reason, the entire award will be forfeited.
Additional Design Features
The award will not be considered “earnings” or “base salary” for purposes of any bonus or short-term incentive program calculations or for calculating any qualified or nonqualified retirement or retirement-related benefit provided by Freddie Mac. The award is subject to the conditions outlined in the Amendment to the Employment Agreement between Federal Home Loan Mortgage Corporation and Richard F. Syron dated December 6, 2003.
The award will not be eligible for a deferral opportunity.
[4]
That's a pretty small bucket.... It only holds, what, about six and a half drops? (twelve with inflation).SpaceLord wrote: Also, the latest figures quote a bailout costing around 25 billion, from what NPR said, I haven't verified this number. You might freak out a bit, but if NPR is correcnt, that's a drop in the proverbial bucket compared to the S&L fiasco: 160 billion, unadjusted for inflation.
More tax cuts ought to clear that right up.Weak revenue growth and accelerated spending - including an economic stimulus package that returned billions to taxpayers - will drive the federal deficit to $407 billion in the fiscal year that ends this month, more than double last year's $161 billion, congressional budget analysts said yesterday. With the economy expected to stay sluggish for at least the next several months, the next president will take office facing a deficit of $438 billion, budget analysts predict - the largest in dollar terms in US history.
There's no way to tell what it will cost. They're committed to up to $100B per but in reality will pay whatever it takes.Nade wrote:That's a pretty small bucket.... It only holds, what, about six and a half drops? (twelve with inflation).SpaceLord wrote: Also, the latest figures quote a bailout costing around 25 billion, from what NPR said, I haven't verified this number. You might freak out a bit, but if NPR is correcnt, that's a drop in the proverbial bucket compared to the S&L fiasco: 160 billion, unadjusted for inflation.
Because it was never really privatized. A Democratic president taking the New Deal President's government institution private in a manner that created a quasi-governmental agency. They haven't been called "Government Sponsored Enterprise" for no reason. Using this to bash privatization is misplaced.godhugh wrote:As far as I know the Dems have never championed privatization, so why is it BS for them?The Preacher wrote:Do you think we should blame FDR(D) for setting up Fannie Mae or LBJ(D) for privatizing it?farley2k wrote:+1Aganazer wrote:Another wonderful example of privatized gains and socialized loses.
This is why I hate all that BS that conservatives say about privatizing things and how the market can fix anything/everything. When the rubber hits the road the government bails out large enough institutions.
I guess it's not just conservatives full of BS, is it, my liberal friend?
I think it would be great to see follow ups on these bailouts that could make the government money. I remember when Bear Stearns got bailed out the government got a whole bunch of their higher quality mortgage backed bonds. At the time I heard that they could potentially make the government money. I wonder what they're worth now. Probably not much since the market hasn't recovered yet. Hopefully in a year we will see some follow ups on this, but then again, people's attention will probably be elsewhere. Maybe Miley Sirus will get pregnant or something and we'll forget all about this.LawBeefaroni wrote:There's no way to tell what it will cost. They're committed to up to $100B per but in reality will pay whatever it takes.Nade wrote:That's a pretty small bucket.... It only holds, what, about six and a half drops? (twelve with inflation).SpaceLord wrote: Also, the latest figures quote a bailout costing around 25 billion, from what NPR said, I haven't verified this number. You might freak out a bit, but if NPR is correcnt, that's a drop in the proverbial bucket compared to the S&L fiasco: 160 billion, unadjusted for inflation.
The government could make money on the deal though.
It's time to lower the research slider and pillage a few enemy civs.Ironrod wrote:Oh, who cares? Just add it to our tab.
More tax cuts ought to clear that right up.Weak revenue growth and accelerated spending - including an economic stimulus package that returned billions to taxpayers - will drive the federal deficit to $407 billion in the fiscal year that ends this month, more than double last year's $161 billion, congressional budget analysts said yesterday. With the economy expected to stay sluggish for at least the next several months, the next president will take office facing a deficit of $438 billion, budget analysts predict - the largest in dollar terms in US history.
I thought this administration already did that.Freezer-TPF- wrote:It's time to lower the research slider and pillage a few enemy civs.Ironrod wrote:Oh, who cares? Just add it to our tab.
More tax cuts ought to clear that right up.Weak revenue growth and accelerated spending - including an economic stimulus package that returned billions to taxpayers - will drive the federal deficit to $407 billion in the fiscal year that ends this month, more than double last year's $161 billion, congressional budget analysts said yesterday. With the economy expected to stay sluggish for at least the next several months, the next president will take office facing a deficit of $438 billion, budget analysts predict - the largest in dollar terms in US history.
A failed plan to rescue Lehman Brothers was followed Sunday by more seismic shocks from Wall Street, including an apparent government-brokered takeover of Merrill Lynch by the Bank of America.
A forced restructuring of the world's largest insurance company, American International Group Inc., also weighed heavily on global markets as the effects of the 14-month-old credit crisis intensified.
A global consortium of banks, working with government officials in New York, announced late Sunday a $70 billion pool of funds to lend to troubled financial companies. The aim, according to participants who spoke to The Associated Press, was to prevent a worldwide panic on stock and other financial exchanges.
They should be.Tubular Rasta wrote:So, are any of the candidates still for privatizing Social Security?
NY Governor: Plan Lets AIG 'Make Bridge Loan To Itself'
Last update: 9/15/2008 12:32:19 PM
By Marshall Eckblad and Lavonne Kuykendall
Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--American International Group (AIG) has received permission from New York Gov. David Paterson to access as much as $20 billion in capital from its subsidiary companies to cover its day-to-day operating needs. "They can make a bridge loan to themselves," Patterson said during a press conference Monday. He said the relaxation of insurance regulations came in response to a request from AIG. "They asked us what we could provide," Patterson said, saying that up to 30,000 jobs were at stake if he didn't act. Patterson stressed the relaxation of insurance regulations allows AIG to essentially borrow money from itself and doesn't involve any state money...
NY Fed Adds $50 Bln In 2nd Round, Funds Rate Eases
Last update: 9/15/2008 12:54:37 PM(Adds details on liquidity injections in other developed countries, notes not a record for Fed injections.)
By Michael S. Derby
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A sharp jump in fed funds levels prompted the Federal Reserve Bank of New York to inject additional liquidity in money markets in an unusual second round intervention. The U.S. central bank's move comes as its peers around the developed world took action to ensure their domestic money markets had sufficient liquidity and to rein in domestic money market rates. The Fed's overnight repurchase agreement is technical in nature, and exists simply to tweak liquidity levels. But it was unusual in that it followed a $20 billion overnight repo transaction that came at the central bank's typical intervention time of around 9:30 a.m. ET. The Fed accepted $50 billion in overnight repos, driving traded fed funds to 4.25% from a high of 6.5% ahead of the Fed's action. Fed funds were last traded at 3.50%, according to Tullett data...
Last I heard the odds were actually 80%.Bloomberg wrote:Fed Funds Climbs the Most Over Target Rate in Decade (Update1)
By Liz Capo McCormick
Sept. 15 (Bloomberg) -- The rate for overnight loans between banks soared to its greatest margin over the Federal Reserve's target rate in at least a decade as banks hoard cash after Lehman Brothers Holdings Inc.'s bankruptcy.
Fed funds traded as high as 6 percent, or 4 percentage points above the target rate, according to ICAP Plc, the world's largest inter-dealer broker. The difference is the greatest since Bloomberg began tracking the data in 1998. The rate dropped to 4 percent after the central bank added a total o of $70 billion in temporary reserves to the banking system.
The central bank uses repurchase agreements, or repos, to buy or sell Treasury, mortgage-backed and so-called agency debt for a set period, to help maintain enough money in the system to keep overnight interest rates close to the target. They don't signal a policy shift. Futures show traders boosted odds to 68 percent that the Fed will cut rates when policy makers meet tomorrow to offset financial market turmoil...
Snapshot:
Go Big: Don't just risk your company, risk the entire world of Finance. Modest incompetence is insufficient -- if you merely destroy your own company, you won't get rescued. You have to threaten to bring down the entire global financial system. The fear and disruption caused by a Bear collapse is why it was saved. (AIG has the right idea on this)
It really depends on the product(s) held within said account. And the type of account.Enough wrote:Here's a selfish question that maybe someone here would care to speculate on: what sorts of effects could AIG's situation have on AIG VALIC/AIG Retirement account holders? Myself and many of my coworkers are in said situation.
U.S. regulators will not allow mortgage giants Fannie Mae and Freddie Mac to pay their departing chief executives multimillion-dollar severance packages outlined in their contracts.
The Federal Housing Finance Agency has notified former Fannie Mae Chief Executive Officer Daniel Mudd and former Freddie Mac Chief Executive Officer Richard Syron that the so-called “golden parachutes” will not be paid, the agency statement said in a statement.
Mr. Mudd and Mr. Syron were entitled to combined pay and bonus packages worth about $24 million as part of the government’s plan to restructure the troubled companies, which own or guarantee about half of the $11 trillion outstanding home mortgages in the United States.
Well, they have to survive until our annuities mature on 1/26/2011. They've got half of our Roth IRA money. This isn't funny anymore.LawBeefaroni wrote:It really depends on the product(s) held within said account. And the type of account.Enough wrote:Here's a selfish question that maybe someone here would care to speculate on: what sorts of effects could AIG's situation have on AIG VALIC/AIG Retirement account holders? Myself and many of my coworkers are in said situation.
I don't think annuities are insured.Ironrod wrote:Well, they have to survive until our annuities mature on 1/26/2011. They've got half of our Roth IRA money. This isn't funny anymore.LawBeefaroni wrote:It really depends on the product(s) held within said account. And the type of account.Enough wrote:Here's a selfish question that maybe someone here would care to speculate on: what sorts of effects could AIG's situation have on AIG VALIC/AIG Retirement account holders? Myself and many of my coworkers are in said situation.
CNN:Q What if I have a life insurance policy or annuity with AIG, which is struggling financially?
ALife insurance policies are covered by each state's guaranty association. The amount of coverage you get if the company fails varies from state to state, but typically, you will be able to recoup up to $300,000 in life insurance death benefits, $100,000 in cash surrender or withdrawal value for life insurance, and $100,000 in withdrawal and cash values for annuities. Check with your state's guaranty association or consult the National Organization of Life and Health Insurance Guaranty Associations, which oversees the state associations. Its web site, http://www.nolhga.com" target="_blank, has a list of state rules.
One caveat: State guaranty associations do not extend coverage to any policy or annuity in which the policyholder bears investment risk. This would include an annuity that is invested in stocks.
For life insurance policies, every state, plus the District of Columbia and Puerto Rico, runs a guaranty association that requires insurance companies to essentially cover for their competitors. That is, firms have to pay a fee -- the amount is based on their market share in any given state -- to help ensure any failed institutions' customers are protected. If they don't pay the fee, they risk losing their license in that state.
Life insurance policyholders are protected for at least $100,000 in cash surrender or withdrawal value on their policy and at least $300,000 in death benefits, said Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations in Herndon, Va.
"If you've got $100,000 or less in cash surrender value on your contract, there is a very good chance that your policy will be transferred and you'll never miss a beat," Gallanis said. Some states provide higher protection, he said. For instance, New York, Connecticut and Washington, D.C., protect life insurance policyholders up to $500,000, he said.
So how do I know if my annuity is invested in stocks? It pays me a low fixed rate. Should I rip it out while I can, at the expense of losing the past 5 years' investment gains (I think the surrender penalty is 4% this year)? Or am I panicking? I don't understand these things so well. Don't the stockholders get reamed before the depositors? I guess I need to read through that file again.One caveat: State guaranty associations do not extend coverage to any policy or annuity in which the policyholder bears investment risk. This would include an annuity that is invested in stocks.
AIG shares have lost 61% of their value - since this morning.Ironrod wrote:Are they?
It's been pointed out that Goldman Sachs and JP Morgan declined to come up with the $30 billion needed to save Lehman over the weekend. It will be interesting to see if they can come up with double that amount in a day.Without the financing, which was being arranged by Goldman Sachs and JPMorgan Chase in talks with the Federal Reserve officials, A.I.G. might be forced to declare bankruptcy, according to two people briefed on the situation.
Shares in A.I.G. tumbled more than 60 percent on Monday morning as concerns grew that the firm lacked capital to withstand cuts to its debt rating, which were borne out later in the day. The company’s potential write-offs are mounting and may reach $60 billion to $70 billion, according to two people briefed on the situation.
The day started off with news that A.I.G. had requested a $40 billion bridge loan from the Fed, a request that was rebuffed, and ended with the word that its need had soared to $75 billion. The firm suffered several credit-rating downgrades Monday evening, including cuts by Standard & Poor’s and Moody’s.
How are the foreign markets handling this? As of 12:39AM EST:Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor's because of the deteriorating housing market.
S&P reduced its rating on Seattle-based WaMu to BB- from BBB-, leaving it three levels below investment grade, the ratings firm said today in a statement.