US Government's Confession Re AIG's Subprime Mtg Ins

[Pat]

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In Q&A-14, John Karls did a very nice job of explaining that AIG's insurance of the value of sub-prime mortgage pools had nothing to do with traditional interest-rate-swap and currency-swap derivatives which involved OFFSETTING TRILLIONS of dollars of bets in "Las Vegas casino"-style "balanced books."

If anyone doubts that former Federal Reserve Chairman Greenspan was lying when he claimed that the AIG insurance of sub-prime mortgage pools had something to do with the traditional "Las Vegas casino"-style derivatives, all that the objective observor need do is consider the statements of the U.S. Government.

The Dodd-Frank financial reform law of 2010 provided for a Special Fund of ONLY $50 billion to be formed by imposing a special tax on the financial industry.

Both Congressional supporters of the bill and President Obama who signed it, trumpeted that the $50 billion Special Fund would GUARANTEE that a "financial meltdown" could never occur again!!!

If they were really concerned about the TENS OF TRILLIONS of dollars of interest-rate and currency bets made in the "Las Vegas casino"-style derivative markets, $50 billion would not even be a "speed bump" in preventing a financial meltdown!!!

Obviously, they were solely concerned that AIG or a "wannabe" AIG might write insurance in the future and succeed in fooling state insurance regulators and the U.S. government that the insurnace they are writing does not require the normal regulation of insurance contracts!!!

After all, $50 billion is the same order of magnitude as the amount the Federal Government had to devote to the bail-out of the AIG mess. Though actually a bit less which is probably based on the assumption that the U.S. government will be a bit more alert next time.