AIG Bailout
By Barry Ritholtz - March 2nd, 2009, 11:11AM
In any great organization it is far, far safer to be wrong with the majority than to be right alone. —John Kenneth Galbraith
Macro Notes
US$ rally continuesPeter Boockvar
Asian currencies continue to sell off vs the $ on the heels of the news yesterday that South Korea said they will look into hot money inflows stemming from the $ carry trade and the Bank of Indonesia said they are looking into the foreign buying of bills. This follows the news a few weeks ago that Taiwan was limiting foreign deposit holdings and Brazil was taxing foreign inflow transactions. As I mentioned yesterday, we may have reached a short term pain threshold in terms of $ weakness and foreign countries are fighting back as they certainly won't wait for...
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March 19th, 2009 at 10:58 am
I believe the Bailout should be done in the following way;
1. If the AIG Counter Party was actually Hedging a position then AIG Bailout money would support that instrument by the Counter Party passing over the instruments to AIG.
2. If AIG Counter party was actually just speculating (NO hedging of a position) then he would just receive the amount of premium paid to AIG. Typically AIG charged 1% rate on line so that would be the payment to the Counter Party.
If AIG had gone into Bankruptcy Court there is a good chance that those Counter Party speculators would have received nothing.
March 22nd, 2009 at 12:40 pm
I think all speculative CDS contracts should be handled as suggested above.
This is the uncertainty that is spooking everybody not what Treasury or the Fed may of may not do.