One of the most interesting stories developing in recent weeks is the detail and circumstances (Joe Nocera - NYT) surrounding the bailout of the monster US insurance company, AIG.
AIG was insuring (assuming the risk in return for fees) banks and financial institutions against the possibility people who owed a bank money might not be able to pay. These are the "credit default swaps" (CDS) we have heard so much about.
The risk was too often a securitised bundle of mortgages, so AIG has been holding the bag for potentially hundreds of billions of US dollars in bad debts. In some cases, the amounts insured were being used by non-US banks to allow them to claim the money was part of their reserves. Yeah, they had lent it out anyway, but it's insured, so it's as good as in the bank, right?
Apparently not.
The result of this is that AIG has received almost US$200 BILLION worth of bailout cash. They have paid that money out to "counterparties" who have claimed their insured losses. So the bailout money is REALLY going to those counterparties.
Who are they? Sorry. That's a secret.
So US taxpayers are shovelling cash into the pockets of - whoever - and they aren't allowed to know who is getting their money.
Well.....that sucks. Can't see much enthusiasm for more bailouts if the people paying for it aren't even allowed to know who is geting their money.
Daily review 15/07/2025
36 minutes ago
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