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Here again another SeekingAlpha blog has mistated and mischaracterized events at AIG and its positions.
Oct 21 16:22 pm
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All Comments by Marley »How AIG Took Down Europe [View article]
1) AIG did *not* go bankrupt.
2) AIG has not been writing any regulatory capital swaps for some time and a number of these have already run off the books as the new Basel accords take effect and the deals become uneconomic. Q1 there were a total of 77 deals outstanding, Q2 there were 67.
3) AIG has posted collateral. That the Europeans may now view AIG as a risky credit is their choice and if that means they accelerate the termination of these structures, good for AIG.
4) AIG did not 'bring down europe' any more or less than anyone or any event did. That they used the capital relief structures to inflate their base was their decision. They also decide how much counterparty risk they are willing to take.
5) Finally, it is a mischaracterization to say that the Europeans 'avoided the risk' by doing these Reg capital swaps. The subordination % on these deals range from 8% to 41% with the aveage being 19%.