Re: [Pen-l] the looting of the US Treasury

[Gar Lipow <gar.lipow@xxxxxxxxx>]

On Wed, Mar 11, 2009 at 2:13 PM, Jim Devine <jdevine03@xxxxxxxxx> wrote:
>
> I understand this chain of events sounds a bit like a conspiracy. And
> Unfortunately, we can’t very well stop the flow of that money now. The
> bankers have already walked away with their profits (though many more
> of them deserve a subpoena to a Congressional hearing room). Allowing
> A.I.G. to collapse, out of spite, could cause a financial shock bigger
> than the one that followed the collapse of Lehman Brothers. Modern
> economies can’t function without credit, which means the financial
> system needs to be bailed out.

But can we bail out AIG's debts at 100 cents on the dollar. AIG has 20
trillion worth of credit default swaps outstanding, more than the U.S.
annual GDP. Of course these are contigent debts, only triggered in
certain conditions. But given the crashing economy, what percent of
them have NOT been triggered. Are AIG's creditors deliberately
avoiding calling in what they are owed because they know the
equivalent of a "run" makes their assets worthless? Or, since these
are triggered on a case by case basis, are a lot people who own the
credit default swaps not actually owed any money?
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