I think you hit the nail on the head here in two regards: 1) Overstretched, irresponsible consumers did bring the economy down.... it wasn't CDSs... that's like saying guns murder people and the ones who pull the trigger are victims. Had every consumer borrowed responsibly and honored the contracts they signed we wouldn't be having this discussion. 2) Usually it's the freeloaders and deadbeats who defend overstretched consumers and notice that Landis82 didn't deny it
I am well aware of what NOTIONAL value is. That having been said, your sole blame of the consumer for causing the current financial crisis in the banking sector doesn't add up. The numbers don't add up. 6.85% default on $14 trillion doesn't even get you to $1 Trillion dollars . . . and certainly is nowhere near the amount of underwater CDS exposure out there.
You must be joking. You suppose the policies AIG sold actually had value to AIG and were rational in terms of risk and reward to the company, as opposed to being created and peddled purely to generate commissions for the individuals who sold them, namely the insiders at AIG who are long gone with their fortunes intact? The eager, ready buyers of these policies tells you all you need to know about the policies. They weren't rational for AIG. The salesmen were concerned only with how much of the them could be sold, i.e., how huge commissions quickly could be cashed out. The policies were terribly bad bets for the writer (AIG) which were snatched up by the likes of GS and others because they were esssentially free money for the buyers. The only question -- the buyers' only risk, in other words -- was who or what would make good on the policies. The Bush Administration answered that, as if there'd have been any doubt. Who's naive? Maybe if Prof Greenspan ever had learned something of the world, he'd have known that individuals can be counted on to act on temptations and opportunities laid before them, especially against the interests of the company where they work -- if, that is, the reward is great enough. AIG is exhibit A. What an idiot.
not sure where you try to go here, but re-read my claim, it was targeted at CDSs, nobody is claiming that no mistakes were made at AIG ;-)
who said anything about mistakes? No mistakes at all, just pure exploitation of the fact that, due to no regulation, the "financial products" squad of AIG (the insiders who walked with fortunes) could create and sell any policy they wanted, for whatever price they'd need to get the sale (read "commission"), and the buyers would love the policies because they were so risky to the writer, meaning lucrative in the extreme to the insureds (the buyers). It must have been so, because the liabilities exploded at a speed and size out of relation to the insurer's means and the deterioration of the underlying, like MBSs. A con of epic proportion. "Mistakes" makes it sound almost innocent, as if some bumblers are to blame. The opposite is true.
I agree. All I can say is I have used my ignore function many times throughout this thread. Sooner or later, I'll have a great board to get guidance from. It's simply going to take me hitting the ignore button for about 95% of the ET community... Pohpoh, can you help me with this? I've found the arrogantly ignorant, and ignored them. However, there are some that may/will fall through the cracks I don't need to waste time on. No, I'm not kidding. This board could be HUGE if we put the dumbas*es "out to pasture," and only got guidance from those in the know. No, I'm not being mean. I'm never mean to ANY poster here. Making $$$$$$$ is serious business to me, as I'm sure it is to the 5% here.
I see where Mr. Liddy, over at AIG, agrees with me, today's article quoting him below, with my own take from last week below it. Not real comfortable having anyone at AIG agree with me, much less the CEO, but that's the way it is. Let me know when you need more education. _____________________________ Mr. Liddy told Bloomberg Television that Mr. Greenberg was partially to blame for A.I.G.âs financial problems since he was in charge when the giant insurer formed its financial products unit, which sold derivatives that cost the company more than $30 billion in writedowns and led to a government bailout. Mr. Greenberg, meanwhile, has filed a lawsuit against A.I.G., accusing it of securities fraud. The clash came as the federal government agreed Monday to provide an additional $30 billion in taxpayer money to A.I.G. and loosen the terms of its huge loan to the insurer, which reported it lost $61.7 billion, the biggest quarterly loss in history. Mr. Liddy told Bloomberg Television that Mr. Greenberg, known as Hank, was responsible for the insurerâs difficulties, especially in A.I.G. Financial Products. âThe formation of the A.I.G.F.P. unit, which has literally brought us to our knees, that happened on his watch,â Mr. Liddy said. âThe compensation systems that have gone astray, happened on his watch. I donât think itâs as clean and simple as sometimes Hank would like to portray.â _______________________________________
Wow, even the Fed chairman reads ET. Wonder where he gets his other material. Here's his testimony today, presented by Bloomberg, a week after my comment further below: The company âmade huge numbers of irresponsible bets, took huge losses, there was no regulatory oversight because there was a gap in the system,â Bernanke said. At the same time, officials âhad no choice but to try and stabilize the systemâ by aiding the firm.
This thread was going ok before it just got ridiculous and misinformed. Landis can be a cocky, and arrogant SOB sometimes, but he is right. AIG basically collected the equivalent of premiums on writing options. They did it in mass and unregulated in the form of CDSs, and CDOs. They are like the option holder about to be assigned a contract they can't cover cause of thier premium greed. So yes these derivatives are to blame, along with anyone near or associated with the process. Its fraud to promise something you know you can't deliver. AIG overwrote the options. Now people need to assign them to each other to protect them selves, but they all thought their risk was ultimately covered by AIG. So no ones protected, and "swimming naked" So Landis is right, and this is ultimately a fucked up situation derived from the financial derivative world you can not just blame it all on the common home owner. They have their share of blame but it goes in this order. AIG - Banks - Idiot Home Owner. Watch this for those who have no clue WTF they are talking about. <object width="480" height="295"><param name="movie" value="http://www.youtube.com/v/Q0zEXdDO5JU&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/Q0zEXdDO5JU&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="295"></embed></object> <object width="480" height="295"><param name="movie" value="http://www.youtube.com/v/iYhDkZjKBEw&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/iYhDkZjKBEw&hl=en&fs=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="480" height="295"></embed></object> Hopefully this will take the conversation back into the intellectual realm. Post on..