Pardon the politics…

Didn’t we give a large amount of bailout money to the same Wall St companies we are now hitting with big fines.

Case in point, AIG:  bailout $150 Billion,  fined $725 Million (0.5%)

Here’s the part that really confounds me:

A first payment of $175m is scheduled within days of the court’s approval, however, while AIG is expected to raise the further $550m th[r]ough the issuing of new shares.

So the company was found guilty and fined. The first payment will be 1/1000th of the cost we bought 80% of the company for a year ago, and presumably will be paid out of that money. The rest they will pay by devaluing the bailout shares – by getting more suckers to invest in them…

Wouldn’t that make the fact they’re going to pay their fine by issuing new shares equivalent to a thief telling the judge he’ll pay bail “right after I nip next door to the jewelry store…”?

Is it not a bit like Bernie Madoff offering to compensate his victims with shares in a new enterprise he’s setting up … ?

Caveat: I’m asking questions, I am genuinely confused by this issue and poorly informed.

7 Comments

I get a little confused also. It’s like here in the UK everyone is moaning about greedy bankers and love the idea of hammering them with taxes, fines etc which is all well and good.
We bailed them out, we own them yada yada.
Yes well we did but we now own 40 or 70% of a bank in shares. Shares that had taken a savage beating and the price bought at was very good.

What people don’t realise once these greedy bankers start getting money back in, sort out toxic assests and become profitable again then the share price actually goes up and our government will sell them on the open market for a huge profit.

The more profit they make the more the governement makes in taxation (personal and corporation) THEN they get to sell it all off at a huge profit on top.

I know it’s a differnet angle to your above post but the whole situation amazes and confuses me – especially some of the processes and peoples opinions on the whole matter.

In the AIG case I don’t get it. So you guys own 80% and they have a small fine so surely the government is fining itself :)
Surely it’s better for the company to make profits and the goverment to tax that and take share dividends .
Now I’m more confused.

The AIG fine is actually in a fraud case, where they allegedly diddled 3 pension funds. If you follow the link and read the summary of the suit, you too can be dumbfounded at the fact that their solution is to pay the fine by … selling shares in AIG.

Here’s my little Daily Show skit proposal on the matter:

http://forums.thedailyshow.com/?page=ThreadView&thread_id=28964

Ahh that will teach me to read links more often :)
I thought it was a financial mis-management type fine

Very nice. The world of big finance, companies and markets is another world of make believe.

I haven’t read up on the details of it all, but Jim Kramer said Friday, on the Today Show, that the fine was only a few days revenue and really didn’t amount to much for them. He said the judge finding them guilty of misleading was what the real damage was.

… if they can sell shares to pay the fine, it’s not really done much damage has it? :)

They can sell shares as long as they are allowed to con you into it, which they are being allowed to do.

The financial system is still on life support, and are not any where near ready to be operating without the government backstop. Right now the governments are playing 3 card monte with the public hoping the public doesn’t catch on that the queen isn’t even on the table.

Long and short they will never repay all of it, eventually the debt will have to be forgiven, along with a lot of other debt that is out there sitting on banks books like it’s worth something when in reality it’s nearly worthless.

That’s because they are all brain, drug-mush hippies from the 60’s in office, they now have the intellect of a junior high student.
:p

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