I guess economists, insurance commissioners and financial newswriters all share my ideas which do not mesh with your reality. Your arguments would be more compelling if you were able to offer proof, as I have. But I notice that you have not been able to offer one iota of proof, merely generalizations and simplifications. And I have also noticed that you are unable to offer up another insurer that leveraged itself in the manner AIG leveraged itself. And yes, with AIG's amount of leverage, it is easy to predict failure. It is a common practice, and it is called fundamental analysis. AIG was able to hide it.

"I defy you to show me another insurer which came close to that amount of leverage -- or give me a valid reason an insurer should be so leveraged. It simply can't be done."

If one company can do it, it can be done.

"And if you assert profits, you do not understand. Sure, and insurance company should make a profit, but an insurance company's drive for profits should not exceed its drive for solvency."

I never questioned or commented on profit as much as capacity. Taking on risks in a manner that guarantee solvency and profit. Regardless of investment or at the policy holder level.

"AIG was not "motivated to fail" - it was destined to fail."

Now your injecting destiny into a financial matter? Am, you have shown yourself to not have even the smallest idea of what your talking about. Your ideas simply do not mesh w/ reality and are usually out in left field. I give up.

By exp mod, I beleive you are referring to "experience modification factor", which has no place in the discussion -- it is not the reason for AIG's failure. As for the "under my theory", you are missing the point. AIG had a balance sheet of $1T -- give me a break -- it was phoney money, which should be painfully obvious to us now. AIG leveraged their company 11 to 1, and I defy you to show me another insurer which came close to that amount of leverage -- or give me a valid reason an insurer should be so leveraged. It simply can't be done. And if you assert profits, you do not understand. Sure, and insurance company should make a profit, but an insurance company's drive for profits should not exceed its drive for solvency. AIG was not "motivated to fail" - it was destined to fail. Your statement that AIG "took chances and failed" demonstrates that you do not understand exactly why it failed and why such behavior has no business in the insurance business. As for your "questions", they are red herrings, and will be treated as such, much like your attack on my word choice.

Justanotheruser - I don't begrudge you your right to disagree with me one bit. I don't think I need to remind you that you engaged me on this issue, and when I answered your question, you went on the attack. If you didn't want to hear what I had to say, perhaps you shouldn't have opened the can of worms. I don't need to tell you you're wrong b/c if you're lucky enough to re-elect Drake, she will surely show you.

Johnbo - Judging by your posts over the last year, you are so far right-wing and radical that even the uneducated and underwhelming Thelma Drake would be smart enough to distance herself from you.

To both of you - Call me liberal, but I have proudly supported many Republicans (including Drake) and am simply fed up with some of their performances to date.

Retiredguy, no doubt the mortgage company is glad to see that your friend is up to date on his mortgage, even though it is upside down. And no doubt the mortgage company has more pressing problems with loans that are delinquent and upside down. But adequate collateral is important to the the health of a financial institution, in case of default (as in the 400,000 reported bad loans at Countrywide that caused them to fail)and that is what the auditors are looking for, to indicate if the institution is on sound financial footing, with adequate collateral to back the loans, in case of default, so that the institution does not fail.

"AIG structured itself abnormally to avoid regulation. "

Under your theory AIG had no other motivation than to fail. It is nonsensical. They took huge risks. Executives made poor and often unethical choices. No one was expecting the bag to pop. Bottom line. They took chances and failed. It is the American way. I do not understand why you keep returning to this non issue. You toss in sight words like they make you more credible. Do you know what a exp mod is? Do you know AIG has been writing up to a 1.79? Why would you do that?

At this point I assume you are unwilling to discuss the questions I have asked you three times on this board alone. YOU blamed lacke of regulation and you blamed it on McCain. I have proven Obama is more at fault in his voting record. What is your take on this?

You continue to make assumptions about me that are false. Yes, retired, but recently (2006). I have served in the Army under Bush. Both of them. I am intimately aware of what Bush policies have meant to our military. I currently serve Soldiers proudly as an Army civilian. I do not make political decisions based on TV commercials or the evening news. I know Thelma Drakes record and can defend my support of it. I don't take this or any election lightly. As I defend myself to you, I do so under the full realization that you will continue to tell me I am wrong. You have earned that right. Please respect my right as an American and a veteran to disagree with you. And please stop making assumptions about those that you don't know. I support Thelma Drake and am proud to do so.

I beg to differ with you I also am a veteran and Just retired after serving over 20+ yrs in our great Military, So do not try and lecture me or other Veterans on how we don't understand what it is like to be on active duty with the war.We made our sacrifices time and time again for our country and we know what it is like to be away fighting wars. IF you would look back in history the only wars this great Country has ever lost was due to Congression interferance and backyard quarterback who second guess our Military Leadership. If a certain Ex- President had done his Job yrs ago and taken OSAMA Bin Laden when he was offered up to us by Jorden than this mess we are in today would not have happened. And if you want to balme someone try blaming the Leadership in Congress who not once,not twice but 3 times voted to cut off funding for our troops on the ground fighting this war so you can have this Liberal mindset. Put down the Democratic koolaid and pull you head out of the sand before it is to late and you are forced to send your Kids to fight a war that should have been done with now.

I know how an insurance company works. That is not the issue. If you bothered to read the articles that I presented, you will see why your assertion is off of the mark. It is not the traditional insurance business that got AIG in trouble. The investment pools that you speak of are regulated under the insurance commissioners -- again, that is not the issue. AIG structured itself abnormally to avoid regulation. Again, if you bother to read any of the articles that I posted, you will see why your assertion fails. That is why I continually state that you are merely providing simplifications and generalizations. Don't you remember any of this from your series 7 or life and health exams?

Congrats on your service, but if you are retired, I respectfully disagree that you know what is like for military families who are active and facing the harsh reality of the poor decisions made by Bush and those who support him. I have a family full of veterans who all agree that what we are facing is a whole new ball of wax. I have not seen the DNC ad -- I put little stock in ads from either party. I do my own reading online and keep up VERY closely with how our representatives are voting in Washington. Your comments on this site are clear evidence that you do not do the same. It is this type of political illiteracy upon which Thelma Drakes relies so heavily during each election. Good luck in re-electing her on Nov. 4 and giving the military families serving in our area exactly what they do not need.

"The investments were NOT tied to their insurance practices. If they were, Insurance Commissioners would have recognized that and put a stop to it."

Without the investments, there are no insurance practices. They are symbiotic. The money being invested is collected at the policy holder level. It is rare in the last 30 years for ANY insurance company to actually realize a profit by simply collecting premiums. Without outside investment none of us could afford the products. Your suggestion is like telling people to make sandwiches w/o the bread.

Anyhow, back to regulation. As you are a proponent of not electing those who relaxed regulations, are you voting against Obama because he voted down bills promoting stricter oversight?

I think 25+ years service to the United States Army allows me to have an opinion that differs from yours. Your post mimmicked the DNC attack ad almost word for word, deny it if you wish. Thelma Drake supports the military, supports veterans, supports me - and you. Your attitude is clearly based upon partisan ideology, as is obvious from your posts. But you are also entitled to your opinion. Have a blessed day.

The investments were NOT tied to their insurance practices. If they were, Insurance Commissioners would have recognized that and put a stop to it. That is why AIG was able to get away with it, because of the way it structured itself. Do the reading, real reading - it's there. Perhaps you should read some interviews conducted by state comm. as well. Again, back to the generalizations and simplifications that cloud the issue. Aren't you a financial professional? Have you ever heard of the NAIC?

http://www.naic.org/Releases/2008_docs/AIG_facts.htm

...it only shows your difference to the sacrifice of our loved ones. Give me a break, I live her mistakes daily. So keep on voting for Drake because you don't have to live with it the way we do.

Unless you are a member of military family yourself, as I am, you don't exactly have the up close and personal experience with the ramifications of her record, and quite frankly, I find it insulting and a joke that you think you can tell me about something with which I have a personal connection. Give me a break... clearly, you are nothing but a blind supporter of Thelma Drake. You can assume what I have said are talking points all you want, but the facts are the facts. Her records stands for itself. She didn't even vote on THE MOST important veterans bill to hit the table this year, which would allowed for billions of dollars in veterans healthcare and military construction... yeah, a NO VOTE, that's really taking a stand and supporting veterans and military families. And supporting an open-ended commitment in Iraq when the Iraqis refuse to take an responsibility themselves? Thus sending our military family members to bear the burden of a battle the Iraqis won't even fight themselves? Oh yeah, that's definitely supporting the position of servicemembers and their families. Honestly, you want to tell me about this? Laugh all you, it only shows your indifference to sacrifice of

"That's awesome
Submitted by am81430 on Wed, 10/08/2008 at 7:23 am.
she said that? Way to have a handle on the crisis, as the crisis is a direct result of reduced regulations."

If you believe this to be the case, then you are voting against Obama for voting down proposed controls during his brief but well documented appearance in the Senate? It is an undeniable fact he voted he against increased over sight for the FM's.

As for AIG, their ability to sell insurance is directly linked to their investments. They took large risks and failed. Their corporate leadership took too much money. They failed. They have over $200B in parts that can be sold. They have more than they borrowed/sold in international life markets. Break 'em up and sell 'em off. Their is no goverment fix here.

Militaryfamily - sounds like the text of the anti-Thelma commercial I saw last night! Priceless, really. Like I explained to my child last night - just because someone votes against a bill containing veterans funding (for example) doesn't mean that they're against funding for veterans. Unless your an opponent in an election year. BTW, my daughter understood what I was explaining to her. (I'd bet that you do as well, it's just not politically expedient for you to admit it. It's OK, Thelma's a republican and this IS an election year. I get where you're coming from.)

So, keep spouting your negative talking points about a staunch military supporter. But you should add a disclaimer on your posts: "The DNC is responsible for the content of this message." LOL, thanks for the chuckle!

Before you point fingers at Drake, find out what was attached to the bill she did not support. It was not the bill but the sttachments by the dems. PORK PORK PORK This go on all the time, it is a great waste of taxpayer money. A bill comes to vote, it sounds good. The bill has one attachment after another on it, overspending on some completely different project. Bill does not pass, it goes back for rewriting, comes up again this goes back and forth back and forth. I think the rules for submitting a bill should be changed. If the bill is about the military then attaching funding for acorn or some other dumb thing should not allowed to be riding on it. Politicians would not like that idea because they would actually have to work.

You need to get off the Talking points for the Liberal Democrats and stop expecting everything to just be handed to you. IF you would take the time to actually do some research into what Thelma Drake voted against you would have found out , she voted against this bill because it would not have let these benefits transfer to the spouces and survivors of the military FAMILIES YES THE SAME ONES YOU CLAIM SHE CARES NOTHING ABOUT. If you would also chec JOHN WARNER ALSO VOTED AGAINST THIS SAME BILL only Senator Webb the PELOSI lapdog voted for it. Now as far as her voting record once again if you would check she voted along party lines like every other congressman and woman did INCLUDING THE DEMOCRATS MOST OF ALL BARRACK HUSSIEN NOBAMA. In this case he voted every single time right along party lines yet you don't carry on about him? and I am willing to bet SENATOR WEBB havs also voted 95% of the time down party lines so why not critize him for not supporting the troops and their families. After all the Democrats tried 4 times to unfund our troops while in active combat, THIS IS TOTALLY UNACCEPTABLE under any circumstance. So drop the glass of kool-aid and get the facts straight.

Most, as much as 75%, of the subprime loans were outside of any socially inspired regulations. They were made because there was a market for packaged loans, fraudulently rated and fraudulently marketed by investment banks in the most abstruse and undecipherable financial instruments ever devised. And this market for these loans was totally unregulate…a wild west casino built around short term profit for bonuses. That is the problem. AIG and the crisis in Iceland are examples of secretive, unregulated and overly leveraged investment vehicles gone sour, and they had little to do with the small percentage of non-performing subprime mortgages in the US.

I have a friend in Phoenix who falls almost exactly into Doc Tabor's example. My friend bought a $400K house there three years ago, and he said that he'd be lucky to get $300K for it in today's market. But he's not interested in selling and makes the monthly payment to the lending institution. His house has been valued at less than the loan amount for more than a year now, but the lender hasn't come after him to put up another $100K. I wouldn't think that a lender who is getting a regular payment would risk default by demanding a big chunk of change from the homeowner.

Doc, it doesn't matter that the loan is up to date. The collateral must be adequate to cover the loan. When you don't pay down the principal and the home falls in value or is damaged by fire or storm, you have to make up the difference between the loan balance and the home value.

Thelma Drake is anything but an open book. She says she's for veterans, yet she votes against them or just doesn't vote at all. She says she's for the military and their families, yet she votes against them. Check the record on these... the proof is in the pudding. She tries to distance herself from George Bush, yet she's voted with him over 96% of the time and is quoted as saying she trusts him more than her own brother and sister. She says she wants to lower gas prices and find alternative sources of energy, yet some of her biggest contributors are big oil companies. She has the audacity to hold a press conference saying she is offended by an ad that distorts her record, yet it accurately states her record while she distorts her opponent's positions over and over again with ads that are not only misleading, but border on complete fabrication. She is typical Washington, it's time for her to go. If you believe she is an open book that is working for her constituents, I have a bridge I'll sell you...

Make regulations for preventing fraud as tight as you want. No fraud should be tolerated.

But don't make regulations that distort the marketplace in order to effect social change. That's what caused the problem.

Well, that plus the unrealistic SOX regulations which applied 'mark to market' rules for loans which were being paid on time.

Doc T., In your example, the value of the loan is 400K. The value of the security for the loan is 300K. When the security for a loan is worth less than the amount you owe on the loan then you are required to pay the loan off or put up additional collateral. You should know that Doc. You can't even refinance the loan because you don't have the required collateral. That's the chance you take on the interest only or 100% loan to value loans. When you big time gamble, you have to have big time money to back you up. Most people don't.

also allowed AIG to skirt insurance regulations to engage in the business activity which brought it down. Perhaps you are on to something with the mark-to-market Don -- I'll be honest, I do not remember the arguments (there was a reason to change the accounting standards), but loosening regulations is not the answer. We need to tighten them.

It continues to astound me how many people in this country insist on blaming the government for everything that goes wrong in their lives. Regulation and deregulation certainly play a part; but the bottom line is the lack of personal responsibility and accountability. From the many posts and letters to the Pilot as well as many news articles and interviews around the nation, it is sadly obvious that the concept of personal responsibility is rarely taught, practiced, or understood in our society any longer.

As far as I can tell, Thelma is an open book, whether you agree with her or not. I'd like to know what shadiness you're referring to...

She is correct. It is not a matter of too much or too little regulation, it is a matter of imposing an accounting method, 'Mark to Market,' which does not reflect reality for mortgaged based securities, which are really just packages of individual mortgages.

Reducing the concept to a single mortgage, assume I owe $400K on a house that was worth $450K when I bought it, but with the decline in home prices would now sell for $300K. Mark to Market rules from Sarbanes-Oxley say that loan is now worth only $300K and is $100K in the red.

If it was a stock I could sell and take my loss, that would be accurate, but I don't want to move and I have other assets that I could lose if I default, so I keep up the payments. So, the true value of that loan is the $400K plus interest I will pay if I do not default. Mark to Market should only be applied to loans in arrears, or more accurately, to the portion of a mortgage based security which is. Accounting should reflect reality.

This is the exact type of shadiness that makes Drake such a poor representative. I don't trust her, and she doesn't deserve to win this election.