Marley

Lehman's CDS Mess: Who's on the Hook?

Wow.. can't you own up to it. Quotes below. You've admitted earlier that you
had NO IDEA what AIG's exposures were - even though this information was public and accessible every quarter - , yet you speak in a tone of near certainty
that golly gee we better watch out folks cause they won't have the dough to
settle, after all they are the BIGGEST writer of CDS, that drive thru discount window better stay open til midnight!

You've greatly mischaracterized AIG's exposure and frankly, mischaracterized
this whole settlement. If that isnt throwing gasoline on a fire, I don't know what
is. You are not the only one doing this, it is endemic to the financial press (written/online/tv) whereby they mischaracterize, misrepresent, mistate facts and figures while sounding sophisticated enough that most others take it for gospel.


"Now you know what the government bailout of AIG is for - the initial $85B and then the additional $37.8B (suspiciously precise isn't it?). Don't be surprised if the number goes up again before 10/21. Will tax-payers get the money back after 10/21? Fat chance. Is the money really for saving AIG, or making sure others who bought CDS on Lehman will get their windfall? Take your pick."

"If there are high-profile bankruptcies on 10/21 (banks, AIG), then markets will be spooked and all eyes would then turn to WaMu; otherwise it'd likely be a non-event in comparison."

"The Fed's discount window will stay open late on 10/21. For banks (or AIG) who cannot post enough collateral, Paulson will be ready to buy stocks in a heartbeat. If the initial $250 billion runs out that day, they can let foreign sovereign funds buy preferred stocks. It's a wonderful world."

Lehman's CDS Mess: Who's on the Hook?

Wow.. can't you own up to it. Quotes below. You've admitted earlier that you
had NO IDEA what AIG's exposures were - even though this information was public and accessible every quarter - , yet you speak in a tone of near certainty
that golly gee we better watch out folks cause they won't have the dough to
settle, after all they are the BIGGEST writer of CDS, that drive thru discount window better stay open til midnight!

You've greatly mischaracterized AIG's exposure and frankly, mischaracterized
this whole settlement. If that isnt throwing gasoline on a fire, I don't know what
is. You are not the only one doing this, it is endemic to the financial press (written/online/tv) whereby they mischaracterize, misrepresent, mistate facts and figures while sounding sophisticated enough that most others take it for gospel.


"Now you know what the government bailout of AIG is for - the initial $85B and then the additional $37.8B (suspiciously precise isn't it?). Don't be surprised if the number goes up again before 10/21. Will tax-payers get the money back after 10/21? Fat chance. Is the money really for saving AIG, or making sure others who bought CDS on Lehman will get their windfall? Take your pick."

"If there are high-profile bankruptcies on 10/21 (banks, AIG), then markets will be spooked and all eyes would then turn to WaMu; otherwise it'd likely be a non-event in comparison."

"The Fed's discount window will stay open late on 10/21. For banks (or AIG) who cannot post enough collateral, Paulson will be ready to buy stocks in a heartbeat. If the initial $250 billion runs out that day, they can let foreign sovereign funds buy preferred stocks. It's a wonderful world."

How AIG Took Down Europe

Here again another SeekingAlpha blog has mistated and mischaracterized events at AIG and its positions.

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%.

Lehman's CDS Mess: Who's on the Hook?

with all due respect then I think you should retract your story. This kind of speculative commentary/reporting has been fuel on the fire of many of the financial stocks (not just aig or leh).

Every quarter AIG publishes a credit presentation of order 75 pages long with details on their CDS book as well as their investment portfolio. To the best of my knowledge (which include review of the 10-Q and 10-K) this is the complete book.

Lehman's CDS Mess: Who's on the Hook?

where/what makes you think AIG will have a really huge exposure here?
They had 29 deals in their corporate arb cds book with 54B in net notional and an average 19% attachment. They aren't all going to be LEH either.

As to the multisector CDO's, given AIG claims to having written against 'super senior', would they even be on the hook? Would LEH be that large a part to make a technical default on the entire CDO? And if so, AIG could presumably sell or keep those tranches as they are worth > 0

That leaves the regulatory capital swaps to worry about but they too would be like the multisector cdos, right?

AIG: Are the Losses Accelerating?

And just how short are you? Why would three seperate pools of investors (common, hybrid, debt) toss a total of $20B at AIG if they thought it was not a good risk/reward? They clearly know, at a minimum, all that has been made public through the 10K/Q. As another comment pointed out, people *ran* from BS yet they appear to be running *to* AIG.

I do not disagree that Sullivan has mismanaged the company operations and certainly the company PR but you are spouting off pure speculation of the worst kind. Go get some CDO and CDX prices and show that they are below late March levels. Bring us some hard info on payments into these CDOs. Until you do, posts like yours are no better (or worse) than what passes for comment on Yahoo message boards