Ross Snyder

AIG Now Fed's Vehicle for Buying Toxic Assets

Thanks for the update on CDOs. This resembles what Bloomberg was sniffing out with their (so far denied) FIOA request.

If we the taxpayers knew the toxicity of these assets today, the markets would say, "No thanks!" and crash. But devalue the dollar through these billions of dollars of transactions, and when we finally know what's been going on in a few months or years, we may just shrug.

All the government's answers to fix these massive toxicity problems resemble eating the cost tomorrow and not today. We'll pay for these AIG deals with inflation tomorrow. We'll pay for these massive Wachovia-etc. mergers with lost tax revenue as the parent companies retain profit while the subsidiary holding companies go bankrupt, thanks to an obscure IRS ruling conveniently made in September. (The Washington Post had a good series on that issue a couple months ago ... sorry, no link here.)

Just wait about 2-5 years, and 20-year bonds might be going at 19%. (30-year? Forget it, the government won't be selling them.) And the credit default risk on US sovereign debt? Now about 7%, in the next 5 years, who knows where it will be ...