Via TPM
http://www.ritholtz.com/blog/2009/04/aig-before-cds-there-was-reinsurance/
Short sell Berkshire Hathaway.
Recent Comments
5 Comments
Via TPM
http://www.ritholtz.com/blog/2009/04/aig-before-cds-there-was-reinsurance/
Short sell Berkshire Hathaway.
Unfortunately, by not moving to seize AIG immediately last year when the scandal broke, the Fed and Treasury may have given the AIG managers time to destroy much of the evidence of criminal wrongdoing.
Whalen is a market absolutist and when it comes to CDSs he is a lot like Cato the Elder and Carthage (“Ceterum censeo…”): The CDS market is to be retroactively invalidated and asap please.
How much of what Whalen claims here is innuendo? Worth an investigation certainly, at least in theory. Allowing the insurers to insure what is in the aggregate uninsurable seems pretty crazy yes.
Yet from Treasury’s point-of-view unilaterally wiping out most of the Western insurance industry (which is what Whalen’s “case” amounts to) can’t be an attractive option, since we already have this development to deal with. Better have the Fed prime the pump and hope for the best…
I gotta say the style of that article was too wacknut for my taste. It has a bit of the breathlessness of the crank – and affects a kind of shock that, OMG insurance companies sometimes commit fraud. On the other hand, it provided a plausible motivation for AIG to go into CDS market as regulators cracked down on “regulatory arbitrage” in reinsurance.
I’ve also had to defend the suspension of “mark to market” recently – market fundamentalism is pretty common among supposedly leftist commentators. I point out that a bank with $10M of market value Pets.com stock in their vault is not really more solid than it would be the next day when the market value of that same stock is $0.
What’s really dizzying to me is the degree of institutional capture achieved by oligopolies in so many different areas in the US: banking, insurance, national security, health care, agriculture, detention, even banal things like internet access: price per downloaded gigabyte in Japan 15 cents, in the EU 30 cents, in the US more than 3 bucks…
The sloganeering is all about free markets, but way too much of the game is about corporate extortion via guaranteed revenue streams.
corporate extortion via guaranteed revenue streams.
Please, this is what we call “synergy”.
The basic corporate business plan over the last 20 years: go on a debt fueled buying spree until you have enough of the market captive to allow you to squeeze it to death.