Giant Scam
Forget the good bank/bad bank, I have an even bigger beef with this INSANE absurdity: Why are the taxpayers making good on hedge fund trades gone bad?
I cannot figure that one out.
When AIG first faltered, there were two companies jammed under one roof. One was a highly regulated, state supervised, life insurance company. In fact, the biggest such firm in the world.
The other firm was an unregulated structured finance firm, specializing in credit default swaps and other derivatives.
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AIG, this insurance company, was well run. It made a steady income, provided a valuable service to its clients.
It was also very solvent.
The other part of the firm was none of the above. It was neither regulated nor transparent. It existed only in the shadow banking world, a nether region of speculation and big bets on derivatives. This part of the company engaged in the most speculative of trading with hedge funds, banks, speculators, gamblers from around the world. Huge derivative bets were placed, with billions of dollars riding on the outcome. It served a far more limited societal function than the Life insurance portion, other than a legal pursuit of profit.
This part of AIG was nothing more than a giant structured finance hedge fund. Despite the fact this hedge fund had no rating, no supervision or oversight, it managed to trade off of the Triple AAA rating of the regulated half of the firm. Somehow, it was treated as if it was Triple AAA, regulated and guaranteed by the government.
This was nothing more than a giant scam, perpetrated by the people who were running the AIG hedge fund.
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Apparently greed is spelt AIG these days
Comment by Malcolm — 3/4/2009 @ 5:45 pm
And then the former CEO – who no doubt had a hand in creating this mess – has the gall to sue the company.
Comment by BMB — 3/4/2009 @ 5:58 pm