the CDS were not sold as insurance policies as the are defined in the insurance world. to bad the author of this and so many other articles do not take make take the due diligence to understand how the financial arm and insurance arm of AIG are UNRELATED.
State v Federal Regulation
Finance arm did not hold adequate reserves
Insurance arm must maintain adequate reserves – Grahm Leach Bliley Act of the 90’s – and the banking arm cannot draw on the insurance reserves
get a new job at the Inquirer you two bit yellow journalist of an insurance publication – WTF
You’re right though, the financial arm of AIG is what crippled the company but they have to get the money to pay back the “loan” somewhere – that somewhere also impacts all other divisions and assets of the AIG umbrella.
Doesn’t really matter what division is doing what… they’re all being looked at as disposable and liquidatable assets now.
The definition of insurance is “risk transfer”. The credit crises is due to banks and other financial institutions not trusting each other because they all used some form of hide n seek accounting. CDS were used to hide and enhance the ability to sell the derivitives. Thus, “insuring” the gamble. The only way to work our way out of this economic condition is for financial minds to use their talents in ways that educated economic genius’s can understand and evaluate.
i think too many people have been way too lazy and didn’t care about the financial ruins!!! besides someone else will pay for their mistakes while they still sit in an office…BEING LAZY! yes, it will be paid back in time…whenever they feel like it!
I say let them pay for the defaults out of the profits they made selling them; in this case, those managers can cash in the bonuses they took before the whole house came down. too bad we have limited liability; otherwise, having their own assets subject to seizure would have given them pause before they marketed this crap!
Agree. Credit default swaps (CDS) are insurance-like contracts that are sold as protection against default on loans, but CDS are not ordinary insurance. Insurance companies are regulated by the government, with reserve requirements, statutory limits, and examiners routinely showing up to check the books to make sure the money is there to cover potential claims CDS are private bets, and the Federal Reserve has insisted that regulators keep hands off.
If ‘protection sellers’ has to pay 91 cents of $1 then it would be another hit to CDS market. In December quarter, it would be scary to read MTM losses of the I-bankers and balance sheet of the insurer or other ‘protection sellers’.
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the CDS were not sold as insurance policies as the are defined in the insurance world. to bad the author of this and so many other articles do not take make take the due diligence to understand how the financial arm and insurance arm of AIG are UNRELATED.
State v Federal Regulation
Finance arm did not hold adequate reserves
Insurance arm must maintain adequate reserves – Grahm Leach Bliley Act of the 90’s – and the banking arm cannot draw on the insurance reserves
get a new job at the Inquirer you two bit yellow journalist of an insurance publication – WTF
Wow… such venom.
I saw the CDS called “contracts”.
You’re right though, the financial arm of AIG is what crippled the company but they have to get the money to pay back the “loan” somewhere – that somewhere also impacts all other divisions and assets of the AIG umbrella.
Doesn’t really matter what division is doing what… they’re all being looked at as disposable and liquidatable assets now.
The definition of insurance is “risk transfer”. The credit crises is due to banks and other financial institutions not trusting each other because they all used some form of hide n seek accounting. CDS were used to hide and enhance the ability to sell the derivitives. Thus, “insuring” the gamble. The only way to work our way out of this economic condition is for financial minds to use their talents in ways that educated economic genius’s can understand and evaluate.
i think too many people have been way too lazy and didn’t care about the financial ruins!!! besides someone else will pay for their mistakes while they still sit in an office…BEING LAZY! yes, it will be paid back in time…whenever they feel like it!
I say let them pay for the defaults out of the profits they made selling them; in this case, those managers can cash in the bonuses they took before the whole house came down. too bad we have limited liability; otherwise, having their own assets subject to seizure would have given them pause before they marketed this crap!
Agree. Credit default swaps (CDS) are insurance-like contracts that are sold as protection against default on loans, but CDS are not ordinary insurance. Insurance companies are regulated by the government, with reserve requirements, statutory limits, and examiners routinely showing up to check the books to make sure the money is there to cover potential claims CDS are private bets, and the Federal Reserve has insisted that regulators keep hands off.
If ‘protection sellers’ has to pay 91 cents of $1 then it would be another hit to CDS market. In December quarter, it would be scary to read MTM losses of the I-bankers and balance sheet of the insurer or other ‘protection sellers’.