The Man Who Crashed the World (AIG)(scribd.com)
scribd.com
The Man Who Crashed the World (AIG)
http://www.scribd.com/doc/17017708/vf-article
2 comments
It would be nice to have something like antiscribd.com.
Yea, Scribd was aggravating enough in this case for me to return from a half-year hiatus...I imagine the demand is strong for such a thing!
Or a hypertext version:
http://www.vanityfair.com/politics/features/2009/08/aig20090...
http://www.vanityfair.com/politics/features/2009/08/aig20090...
[deleted]
nice article (this is more or less a summary for myself to remember the highlights):
-AIG FP was created in 1987 when Howard Sosin, former Drexel Burnham, created a model on how to value and trade interest-rate swaps
-The company to make money insuring these transactions could not be a bank (which would be bound by law to hoard unreasonable amounts of collateral), but needed AAA status: thus... an insurance company
-AIG stops sub-prime mortgage insurance business in 2005 after realizing that 95% of their mortgage-related portfolio is sub-prime
-Other firms instead jump into the lucrative market after 2004/2005... Wall Street underwrites 1.6 trillion $ in sub-prime and 1.2 trillion in Alt-A mortgages from 2004-2007
-AIG is bound by contract to provide collateral in case they lose AAA rating; as such legacy business (built up until 2005) traps them into bleeding collateral in the 2008 crash on their sub-prime credit default swap business
-In result AIG runs out of capital reserves to provide collateral
-By comparison, no money is lost on their corporate credit default swap business
-AIG FP was created in 1987 when Howard Sosin, former Drexel Burnham, created a model on how to value and trade interest-rate swaps
-The company to make money insuring these transactions could not be a bank (which would be bound by law to hoard unreasonable amounts of collateral), but needed AAA status: thus... an insurance company
-AIG stops sub-prime mortgage insurance business in 2005 after realizing that 95% of their mortgage-related portfolio is sub-prime
-Other firms instead jump into the lucrative market after 2004/2005... Wall Street underwrites 1.6 trillion $ in sub-prime and 1.2 trillion in Alt-A mortgages from 2004-2007
-AIG is bound by contract to provide collateral in case they lose AAA rating; as such legacy business (built up until 2005) traps them into bleeding collateral in the 2008 crash on their sub-prime credit default swap business
-In result AIG runs out of capital reserves to provide collateral
-By comparison, no money is lost on their corporate credit default swap business
http://www.703designs.com/sites/default/files/article.pdf
Awaits threatening email.
If you read this comment after today, expect the link to be dead.