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Tuesday, September 16, 2008

 

fed holds steady; AIG way down after hours


the market managed to rally on the fed's rather hawkish announcement this afternoon which held rates steady. the rally was of very questionable quality, however, in spite of headline gains -- decliners over advancers by 400, uptick volume less than 60% of total volume. hardly a compelling day.

and now AIG -- which managed to lose just 22% during the day's trading closing at $3.75, rallying from a loss of over half at one point -- has started to plummet in after hours trading. it's down to $1.65 at this writing, or (-56%) since today's close just 80 minutes ago. could it be that the fed denied them the rumored loan?

UPDATE: ah -- a potential treasury conservatorship on the model of FNM/FRE. someone will have to explain to me how that comports with the law, but i suspect treasury is happy to bulldoze both precedent and congress at this point for expediency in risking chinese central bank taxpayer funds.

The U.S. Treasury is considering taking over American International Group Inc. under a conservatorship as one option to address the insurer's crisis, according to two people briefed on the discussions.

Executives from AIG, bankers and Treasury and Federal Reserve officials are meeting today on the company's situation at the New York Fed. A number of options are under being discussed to fill a shortfall of $75 billion to $100 billion in funding, one of the people said. The talks are continuing, he said.

Goldman Sachs Group Inc. and JPMorgan Chase & Co., which have been leading efforts to find a private-sector solution, informed the Fed that such an effort would be difficult, the person said. Under another option, the Fed would extend a loan to New York-based AIG, according to a person informed of the matter.

Treasury Secretary Henry Paulson earlier this month seized Fannie Mae and Freddie Mac and put them into conservatorships, where officials will oversee the firms and aim to protect their assets.


via yves smith -- senator dodd apparently has missed how the crisis has cut the legislative branch out of the appropriations business every bit as effectively as truman's "police action" in korea ended their real authority over the armed forces.

Senate Banking Committee Chairman Christopher Dodd warned the Fed and Treasury against a rescue of AIG without checking with him first, expressing anger about past incidents where he was only informed afterwards. He also said he was skeptical that AIG merited aid while Lehman didn't.

``Tell me why this situation is different from Lehman,'' he said today. ``I'm willing to listen.''


UPDATE: off the bloomberg:

17:32 16Sep08 RTRS-AIG HAS HIRED LAW FIRM WEIL GOTSHAL TO DRAW UP BANKRUPTCY PAPERS-NYT
17:33 16Sep08 RTRS-AIG COULD FILE FOR BANKRUPTCY AS SOON AS WEDNESDAY IF FINANCING SOLUTION NOT REACHED-NYT, CITING PERSON BRIEFED ON THE MATTER


brinksmanship with treasury? or ceding to the limit of legal authority?

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