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Do You Understand the Consequences of AIG?

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March 16, 2009 – Comments (5)

I have no time to comment right now, but Big Picture has a post on AIG.

I have done posts on AIG and derivatives in the past and certainly the derivatives is a big part of why I have remained so cautious and chosen to stay away from investment risk.  An sudden unwinding of a serious derivative position has the potention to hurt well beyond where people expect even this deep into the bear.

5 Comments – Post Your Own

#1) On March 16, 2009 at 10:58 AM, jgseattle (31.18) wrote:

It was obvious that the bailout of AIG was a bailout of the entire banking system, to some extent.  The reason they could not fail was that they were the largest counterparty for CDS.

So it is easy to understand how the tax dollars are being passed through AIG to the holders of these obligations.  If AIG did not pay other banks would be in trouble.

Now that said it seems to me the article brings up a good point.  Why are the other banks being paid face value?  I think this is a problem with the T&C of the contracts.  That said unless AIG goes BK it must honor the contracts so look out tax payer.

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#2) On March 16, 2009 at 11:20 AM, lquadland10 (< 20) wrote:

Yes either we end up with a one world currency or We will disband the world bank and the IMF and each country will have their own money. I will be real bad and they will need the Fema camps here in the states. There is 503 trillion of this floating out there. 10 bucks for a loaf of bread coming soon to a neighborhood near you if you can find a loaf. IMHO.

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#3) On March 16, 2009 at 12:39 PM, EHoyle80 (< 20) wrote:

Ben Bernanke’s angry defiance regarding the utter necessity of more taxpayer money for AIG tells the Stock Research Portal “How fragile the U.S. (and world) economies really are when the U.S. Government, by the admission of its Fed Chairman, declares ‘we had no choice.’”

Conclusion: “Batten down the hatches – only now use spikes instead of nails.”

Via Stock Research Portal 

I think this AIG situation shows how much trouble we are in.

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#4) On March 16, 2009 at 4:03 PM, weg915 (< 20) wrote:

Re: Obama's comments on AIG bonuses.

 

What I want to know is when did the party of:

"Yes we can"  

become the party of:

"If we can" 

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#5) On March 17, 2009 at 4:17 AM, dwot (49.32) wrote:

I think an unwind results in another round of mass loss of wealth.  Something I've said a few times is that these things hit one company and there is a domino effect of defaults and then companies are scrabbling to raise cash.

 

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