The corruption knows NO limits! It is the biggest GIVEAWAY of wealth ever…given away.

Look at the IRONY: We are propping up (in a SOCIALISM sense) BETS AIG undersigned on its CDS portfolio (the CEO comes on cnbc and uses the term “policyholders” doing his best joe plumber impersonation) which CDS are probably held by I-Banks, and HedgeFUnds who are NOW INTERESTED In PUSHING other companies into BANKRUPTCY: companies like Ford, Lyondell, SixFlags.

What is this? SOcial handout to the pinstripes…bankruptcy for the proletariat? With Obama/Geithners blessings! Doh!

The consequences would have been a global banking collapse – not pretty.

While I don’t like bailing out AIG any more than the next guy, I like global collapse even less.

So let them work out their CDSs. In another 6 to 12 months, we’ll be done with this.

Then, let’s track ‘em down and lock ‘em up.

Dec. 10 (Bloomberg) — American International Group Inc., the insurer rescued by the U.S. government, made $18.7 billion in payments tied to credit-default swaps to banks including Goldman Sachs Group Inc. and Societe Generale SA, according to a person briefed on the situation.

The insurer sent the money to the banks in the three weeks after AIG’s Sept. 16 bailout, said the person, who declined to be named because the information is confidential. The banks bought the swaps from AIG as protection on mortgage securities that plunged in value.

“The AIG bailout wasn’t meant to help the American taxpayer,” said Janet Tavakoli, president of Chicago-based Tavakoli Structured Finance. “What this has ended up doing is helping the investment banks who had AIG as counterparty.”

The payments may protect the biggest U.S. and European banks from investment losses tied to the collapse of the subprime mortgage market. AIG’s expanded $152.5 billion government rescue included funds to buy the underlying assets of swaps so the contracts could be retired. The insurer has won agreements to terminate $53.5 billion of the swaps.

The largest recipients were Societe Generale, which got $4.83 billion, Goldman Sachs with $2.97 billion, Deutsche Bank AG with $2.92 billion, Calyon Securities with $1.89 billion and Merrill Lynch & Co. with $1.32 billion, the person said.

Nicholas Ashooh, an AIG spokesman, Michael Duvally of Goldman Sachs, Ted Meyer of Deutsche Bank and Danielle Robinson of Merrill Lynch declined to comment. Jolyon Barthorpe of Societe Generale and Bertrand Hugonet of Calyon didn’t return calls.

AIG’s payout was reported earlier today in the Wall Street Journal

And it gets worse: Not enough cash in the Universe for the world’s money centers to get their act together. So down we go and go till a real “leader” surfaces. Could be soon, years, or never. No indications to date. Therefore the Red Herring Blame Game. The vested personages of current so-called investement banks reached Peak Wealth essentially selling mortgage mutations to one another. All based on real estate, a standard cyclical. Using your credit card. Embarrassing. Tulip bulbs would make a better story in retirement. Remember that picture of the Chairman of Woolworths beitn carried in his chair from his office? These guys don’t want to go home to their wives.

If I play Monopoly(Tm) board game with my neighbour, using real money, this is only a two-party contractual agreement. No matter what the outcome of the game and the stakes of it, it is inconceivable that any other third non-playing party would support my neighbour or my losses !!!!

Wake the EF up America !!

1) There are (were) some $500 trillion in derivatives floating around the world according to Gross a few years back. The US GDP is some $14 trillion for perspective.

From PIMCO in January of 2008:

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+January+2008.htm

2) Paulson used the idea of buying toxic assets to justify TARP I ($750 billion slush fund). Not one toxic asset was bought with no real explanation except Paulson changed his mind, my thought was that he started looking under the hood and realized $750 billion was chump change in the world of toxic assets on the bank books. This is pure speculation on my part.

3) Enter the new administration and the direction doesn’t change, SHOVEL AND HOPE is the plan. Taking the whole shadow banking system down via bankruptcy would involve, retirement funds, money market funds banks etc.

http://roylat.com/

About a third of the way down the page is the following post:

WHY IS THE GOVERNMENT AFRAID OF RESTRUCTURING BANKS?

“The deepest, darkest concern of bond professionals is whether bond holders of banks will ever be asked to share the bailout pain. Ever since Lehman the Fed’s reluctance to impair bank bonds has been palpable. Finance issues represent more than 60% of 1-5 year maturity bonds. They are ubiquitous in pension funds, insurance company portfolios and, until last fall, money market funds(most money market funds have moved up the capital structure to CDs at this point). So there are “systemic” reasons to protect them. Large foreign holdings of bank debt may complicate matters further as the U.S. is dependent on foreign financing.

A plausible explanation for the government’s fear is the unknown magnitude and distribution of CDSs. When Lehman failed, it brought AIG, one of the biggest insurers in the world, to immediate insolvency — saved temporarily to date by two huge government bailouts. What would happen if Citigroup and Bank of America were allowed to fail? Perhaps the consequences are too great for the government even to talk about in public, for fear of creating a new wave of panic.”

My only conclusion is that the government is operating from fear, of what would happen if the banks and AIG were nationalized (restructured) and the assets written down to their true worth, they must see that option as worse than the SHOVEL AND HOPE plan we are now following. The guys running things are a lot smarter than I am and certainly have better information. But I do like to understand why things are done, and at this point fear is the only reason I can see.

But these derivatives are unbelievably complicated, often taking thousands of pages to describe and understand according to Buffett. The scope, scale and complexity of unwinding hundreds of thousands of derivatives, would give anyone pause.