LIGUY73

How AIG FP Brought Down the World

AIG FP did not bring down the World. The Sub prime mortgage did. Saying otherwise is a miscarriage of journalistic standards.

What is wrong with you people!!

AIG and the Free Lunch Myth

I have a real problem with this statement.
"In effect they were disobeying a fundamental rule of the Insurance business, you know that rule about setting premiums at a high enough level to cover potential payouts in addition to having enough capital on hand to cover additional risks?"

There is not one insurance policy issued today that is priced to protect the insurer from a catastrophic loss. If they were, insurance premiums would be through the roof and no one would be able to afford them.

What happened in the CDS market brings us to the fundamentals of frequency and severity analyses. It is an insurance law and a statistical fact that Sever losses do not occur frequently. It seems to me through the following quote,

"The company realized, of course, that it might have to post collateral if the market values of the underlying securities declined. But AIG executives believed that such price moves were unlikely to occur"

that AIG did price these insurance contracts knowing there would be losses. They however didn’t price these insurance contracts to avoid going bankrupt in the face of catastrophic losses.

It would indicate to me that AIG was following standard insurance operating procedure in their pricing.

What AIG should have done to protect itself was to purchase reinsurance on these insurance contracts to protect from the potential for catastrophic losses.

Who knows if such a reinsurance market even exists for these products.

AIG got caught big time from the fallout of the housing market crash. They got caught looking. Before you blame AIG for not seeing this coming, you should know that all banking institutions got caught by the same issue. Singling out AIG is ignoring the systemic issue that companies did not think the housing market would crash as perfectly, and thoroughly as it did.

3 Things America Needs to Do to Get the Economy Back on Track

Folks, has anyone ever stopped to think maybe this is a good thing. Before you line up to shoot me isnt our greatest problem that we are all in debt up to our ears. Credit Cards and Home Equity Line of Credit have replaced true cash in the pocket. The average American is almost broke and they have little if no cushion to protect themselves from an illness or job loss.

The current condition might actually force us to stop spending and start saving. Even if we put the cash in a mattress because we dont trust the banks. Folks, the government must stop its rediculous spending but so do we.

If we all stopped spending the economy would tank. If we took this time to save and pay off our credit cards and pay down other bills, in time this country and us individually would immerge a financial power house.