AIG: Socialized Risk, Private Gain
No doubt if you've been watching the news you've noticed American International Group (AIG). Taxpayers have pumped about 170 billion dollars into AIG, and you probably are wondering why.
No doubt if you've been watching the news you've noticed American International Group (AIG). Taxpayers have pumped about 170 billion dollars into AIG, and you probably are wondering why.
It was uncharted territory: Fannie Mae and Freddie Mac (GSEs) used to be the only game in town for mortgage originators and their strict guidelines limited the number of people able to get mortgages. After the GSEs' accounting scandals, suddenly mortgage originators both new and old found someone to replace the GSEs deep pockets: Wall Street. If you're a mortgage originator you obviously want to make more loans and now it was easier than ever. Combining an unregulated Wall Street with a bunch of new money begat a new and experimental wave of securitization. The greed stretched from unqualified borrowers all the way to the international finance arena.
Continue reading "The Global Economic Collapse Part 2: The Money Chain" »
Leave it to Wall Street to make money in new and imaginative ways. Most people, when they think of Wall Street, think about the usual way of making money: buy low, sell high. That relies on a very simple and understandable concept: buy something real like stock, which is a real percentage of ownership in a real company, and when the value goes up, sell out. Derivatives are trickier.
Continue reading "The Global Economic Collapse Part 3: Questionable Derivatives" »
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