Quote:
Originally Posted by tisonlyi
If you really believe the PoorAIG! stuff, then please explain their exposure to naked CDS's. Did someone at GS and countless other institutions convince AIG to take money on what they considered to be long odds bets on a game neither AIG or the other gambling addicts had any skin in?
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I am beginning to understand a little how these credit default swaps work but there must be much I have yet to learn. Why in the world would someone sell swaps (insurance) on mortgage based investments when everyone knew that real estate was way over-priced and many of the mortgages they were based on were shaky at best. And then to increase the risk, sell these naked to anyone all the while not having enough capital on hand to begin to pay up when claims were made.
Surely they knew these were a recipe for disaster. I would surmise that this was a very stupid thing to do but it seems like many of those involved personally made lots of money and probably do not need to work anymore so perhaps for them the risk of destroying their company was worth it. Unfortunately they took the rest of us down as well.