Reading Jim Grants new book, where he reprints many of his newsletter articles over the last decade. He wrote compellingly in 2006 and 2007 that CDS were badly mispriced and that huge profits were possible on a very small bet. Were the turds at AIG the imbeciles largely responsible for this mispricing, or did they have lots of company?
They weren't morons - just sociopaths. AIG is the Enron of the financials. CDS mispricing was a scam that based on insuring bundled guaranteed-to-fail instruments.
I'm not sure. Human stupidity is so great, and people blow up so often with yield hogging, that I think it's probably a dumb move rather than a deliberate scam on their part. It's like those conspiracy theories about 9/11 - Occams Razor gives us the much cleaner and simpler explanation, the government is just dumb as hell.