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Thursday, February 26, 2009

What the hell is this?

From Calculated Risk: (emp add)

American International Group Inc. may get a backstop from the U.S. to protect against further losses on credit-default swaps, according to a person familiar with the matter.

The federal guarantees may be included in New York-based AIG’s restructured bailout ...

CR comments:

There you have it.

Credit-default swaps were essentially insurance policies sold to holders of (now) toxic bond instruments, to protect against losses. Those holders were not the banks. They were the wealthy and big institutions (including pension funds). This proposal is nothing more than a taxpayer cover for the losses that would have been sustained by investors. It's awful.

posted by Quiddity at 2/26/2009 02:36:00 PM

5 comments

what the hell is this?

socialization of risk
after privatization of profits from financial leverage (risk)

By Anonymous, at 2/26/2009 5:59 PM

I'm convinced that Obama is simply making up his economic policy as he goes along. The one item of economic policy that he is aware of, from his ACORN days, is the miracle of the Government Subsidy, and it appears to be the only item in his economic toolbox.

2 months down, 46 to go.

By Anonymous, at 2/26/2009 7:05 PM

Try one month down, 47 to go.

Your math skills are about as good as your political analysis. Which is to say, lousy. Bonus points for the gratuitous albeit nonsensical ACORN reference, though.

Smarter trolls, please.

By Anonymous, at 2/26/2009 9:51 PM

This proposal is nothing more than a taxpayer cover for the losses that would have been sustained by investors. It's awful.

AGREED!

I've been wondering about this---AIG has lost huge amounts of money since "we" took it over, and I thought to myself, "I'm on the hook for this CDS craziness?"

It's one thing to say "we can't just nullify all these CDSs immediately; we have to think out the consequences, etc." It's another thing to just pay them off blindly, as we appear to be doing.

Crazy.

By Anonymous, at 2/27/2009 12:56 AM

I thought using taxpayer money to bail out investers in companies too large to fail was started by the Bush Admin; so it is good to learn it was really an Acorn masterplan to socialize financial institutions.

I did not agree with it then and thought McCain could have been elected if he took a principled stand on this instead of waffling all over the place and voting for the bailout.

If no one knows how big the bag of shit is, why on earth do we keep trying to fill it up?

By Anonymous, at 2/27/2009 4:37 PM