CHESSNOID

So the US has directly bailed out 4 companies this year for a total of about a billion dollars. We have Bear Stearns, AIG, Fannie Mae, and Freddie Mac.  BS was taken over by Chase so we won’t hear too much news about that.

The risk to the Fed—and to taxpayers—is what happens to those troubled securities, which the Fed is essentially insuring. If they end up being completely worthless, then the Fed would be out the whole $29 billion. Under the terms of the deal, JPMorgan would pony up the first $1 billion in losses.

AIG we heard use some of the funds for a big party.

AIG American General, at the St. Regis resort in Monarch Beach, Calif. Executives spent $443,000 on hotel rooms, restaurant tabs, golf and spa visits during the retreat — just a few days after the federal government rolled out an $85 billion emergency loan for American General’s troubled parent company.

The latest results even after the bailout were worse and prompted the government to improve the terms of the agreement more favorable to AIG. I don’t imagine it getting better next quarter for the bailed out company we took over.

CNN.Money:

Also on Monday, AIG reported that it lost $24.5 billion, or $9.05 per share, in the third quarter. Excluding one-time charges, AIG lost $9.2 billion, or $3.42 per share, in the three months ended Sept. 8. That compares to a gain of $1.35 per share during the same period a year earlier.

Liddy attributed the poor results to “extreme dislocations and volatility in the capital markets” during the quarter. Insurance on properties destroyed by Hurricanes Gustav and Ike also contributed to $1.4 billion of losses for the company.

The giant insurer, which has more than 100,000 employees worldwide, reported revenue of $11.7 billion, down 0.8% from the $11.8 billion the company reported in the third quarter of 2007.

Fannie Mae has also posted its latest report which looks similar to AIG as far as the numbers go. Nothing has fundamentally changed in running these companies and the housing crisis continues to pummel it down.

NEW YORK (CNNMoney.com) –

Troubled mortgage-finance giant Fannie Mae reported on Monday that it lost $29 billion in the most recent quarter, putting the firm closer to having to draw on the $100 billion in taxpayer dollars committed to it in September.

Fannie Mae (FNM, Fortune 500) said that as of Friday it had yet to draw on those funds. But the company warned in a filing that “if current trends in the housing and financial markets continue or worsen…we may have a negative net worth as of December 31, 2008.”

In that event, Fannie said it would need to tap into an unspecified amount of those taxpayer dollars.

The company would not comment on whether it had started to receive those funds as of Monday, and a spokeswoman from Treasury had no comment on the Fannie results or the filing.

Much of the loss was due to a $21 billion non-cash charge related to how it accounts for tax credits it had been carrying on its books – Fannie is no longer confident it will make enough money in the future to allow it to use those tax credits.

The company would not estimate what the loss would have been without the charge. But it appears that the other losses would have been weaker than in past periods, and worse than expected.

With more loans in default, credit-related losses soared to $9.2 billion from $5.3 billion in the second quarter and $1.2 billion a year earlier.

The overall loss came to $13 a share, far worse than the $2.3 billion, or $2.54 a share it lost in the second quarter. A year earlier, Fannie lost $1.4 billion, or $1.54 a share.

Analysts surveyed by Thomson Reuters had forecast a loss for the quarter of only $2.5 billion, or $1.60 a share.

We will hear about Freddie Mac soon enough. We can only guess it will be more of the same. The housing crisis has not improved and these bailouts are not the answer. The moral hazard the government created is not justifiable in my views. We are not in a better situation after spending 2 trillion dollars of tax money. I don’t buy the fear argument that it would be worse if we didn’t do anything. I don’t think so. That money was basically a handout to these companies and they are not doing anything fundamentally different before they failed. From my understanding, the executives will still be getting their bonuses paid via our tax money from the bailout! No kidding!

Paying Wall Street bonuses was not supposed to be part of the plan. At least that’s how Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson explained it to Congress and the American people. So, on Oct. 1, when the Senate, including Obama, approved the $700 billion bailout package, the illusion was that this would magically loosen the credit markets, and with taxpayer-funded relief, banks would first start lending to each other again, and then, to citizens and small businesses. And all would be well.

That didn’t happen. Which is why it’s particularly offensive that the no-strings-attached money is going to line the pockets of Wall Street execs. The country’s top investment bank (which since Sept. 21 calls itself a bank holding company), Goldman Sachs, set aside $11.4 billion during the first nine months of this year — slightly more than the firm’s $10 billion U.S. government gift — to cover bonus payments for its 443 senior partners, who are set to make about $5 million each, and other employees.

The link to the actual pdf file from the COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM dated October 28, 2008 is linked for your viewing. Click here for the letter written by Henry A. Waxman,
Chairman, Congress of the United States, House of Representatives, Committee on Oversight and Government Reform.

At this point, Waxman is just inquiring if they really are going to use that tax bailout money to fund executive bonuses. His letter was prompted from this Bloomberg article dated the day before.  Good thing he reads Bloomberg to make his job on oversight easier.

Broken Securities Industry Still Has $20 Billion to Pay Bonuses

Oct. 27 (Bloomberg) — Five straight quarters of losses and a 70 percent slide in its stock this year haven’t stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses.

Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.

The worst financial crisis since the Great Depression, a $700 billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won’t deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts say.

“Critical producers and critical managers will be retained with the same bonus they had last year,” said Robert Sloan, head of U.S. financial-services recruiting at Egon Zehnder International, a New York-based executive-search firm. “The others will see sharp cuts.”

Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about $6.85 billion for bonuses, or an average of $210,300 for each employee, down 32 percent from $339,400 a year ago. Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.

Merrill’s Compensation

The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people, up from $108,000 a year ago because more than 3,000 jobs have been cut.