AIG Outrage
Out of context: Reply #49
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- TheBlueOne0
From the above article:
"There is a sub-plot here as well – a second story arc as the TV people would say – involving the U.S. government. Treasury Secretary Geithner didn’t know about these payments until last week, when the Federal Reserve notified him that round two of retention payments was due on the 15th of the month (apparently round one worth $55 million was paid out last December 15th). It appears that the Federal Reserve
seems to be heavily involved in the details of what goes on at AIG now that it is effectively owned and managed by the government, even though it is the Treasury that is the actual owner. This is probably due to the fact that the Treasury never, even under the best of circumstances, has the staff to understand and do the necessary oversight work, whereas the Fed does. But it also means that the Treasury, which has a direct link to the White House’s political arm, lacks the direct knowledge necessary to avoid political catastrophes like this one.........Buried in all these arguments is one in particular that AIG must have known is the Achilles heel of the Fed and the Treasury, and that is the claim that cross-default clauses will be triggered around the world if AIG fails to make these bonus payments on March 15th. Remember that it is a lawyer making these claims, not AIG, so they must therefore be serious and credible arguments. And what we have seen consistently from the U.S. throughout this financial crisis is avoidance at all costs of the possibility of massive derivatives contract defaults, which presumably would drag down one bank after another into receivership. Whether or not AIG management knew that this argument would be like poking at an abscessed tooth, the U.S. responded predictably – give these people what they want, and make the possibility of massive derivatives defaults go away."
- Key word: Cross-default causes. Meaning European banks go "boom". And then we really get into Depression 2.0TheBlueOne