Word: defaulters
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...with its derivatives-trading subsidiary AIG Financial Products. AIG FP, as it's called, merits a mere paragraph in the nine-page description of the company's businesses in its most recent annual report. But it's a huge player in the new and mysterious business of credit-default swaps: derivative securities that allow banks, hedge funds and other financial players to insure against loans gone...
...generally sells credit-default swaps, thereby promising to insure others against defaults. It's a great business when defaults are low; when they rise it can turn toxic. AIG FP lost more than $10 billion in 2007 and $14.7 billion in the first six months of this year. That, along with losses in other investment portfolios, has cut deeply into the parent company's capital reserves. The credit-default-swap contracts decree that if AIG's credit rating drops below a certain level, it has to fork over $13 billion in collateral to the buyers of the swaps. Monday night...
...troubles, for example, began with big losses in its mortgage-laden investment portfolio. But its current crisis has to do with its big position in credit default swaps - securities that allow one to bet on or insure against a company's failure. If the credit-rating agencies downgrade AIG's debt, as is considered likely, it will be forced by the terms of the credit default swaps in its portfolio to cough up so much cash that its survival would be in danger, the New York Times reported lastnight...
...told him I had been the bureau chief for an American newsmagazine in Moscow in the second half of the '90s and that we correspondents in those days had a saying that we thought apt for the times: what was happening in Moscow then - devaluation of its currency, default on its debt, rapacious bandit-dominated "up against the wall" capitalism - was "great for journalism, but bad for Russia...
...enough about housing or finance to make a judgment about whether the measure President Bush signed this week was a good deal or not. About all you can say is that neither party had much choice. Washington could not let five trillion dollars worth of government backed agency paper default without sending a signal to investors and central banks in Asia - which held about a third of the debt - that its other guaranteed instruments, like Treasury bills, might not be secure. And so it jumped in to save Fannie and Freddie. I do know that the speed with which Congress...