Is there any reason we shouldn't be beheading executives on NYSE steps?
http://www.cnbc.com/id/29353282Sources close to the company [AIG 0.53 -0.01 (-1.85%) ] said the loss will be near $60 billiondue to writedowns on a variety of assets including commercial real estate.
That massive loss is likely to spur downgrades in its insurance and credit ratings that will force AIG to raise collateral that it doesn't have.
In addition, if AIG's book value falls below a certain level, as it seems certain to do, it will trigger default in certain of its debt instruments, say people familiar with the situation.
All of this adds up to a huge headache for the Federal Reserve and Treasury, which have already provided over $150 billion of assistance to AIG.
Basically, AIG is holding the tattered remnants of the nation's financial system hostage and sending taxpayers a second ransom note.
If those "certain debt instruments" trigger default, the result is an Black Mesa-esque resonant cascade failure of the derivative/reinsurance, which would utterly annihilate Citigroup (and likely BoA) and enough Big European Banks(tm) to send the rest of the system down like a path of dominoes.
Scary stuff, but super high drama on the finance blogs today makes for good multislackin'. Also, it points out that the losses in commerical real estate are at this point mostly unrealized by most of the big banks, and there is a LOT of bad loans out there for that sector too.
edit: article also mentions this-
That seems unlikely, but last November, the government took control of many of AIG's credit default swaps and so a bankruptcy of the holding company might not pose the systemic risk it once did.
Emphasis there on the might. Honestly all it would take to bankrupt half of the big banks in the world right now is for an honest executive to pipe out and lay out of the bank's balance sheet with some real talk.
