Re AIG as a Ponzi scheme:
That’s not quite correct. In a Ponzi scheme, the schemer uses the incoming funds to payoff early investors (and usually diverts some to himself).
The thing that brought down AIG was a bit different. They wrote insurance that they couldn’t cover. It’s like sitting down at a poker game, showing your wad which is really a stack of play money with $100 bills on each side, and betting. If no one finds out, you can walk away with your winnings, but you have to welsh on your bets if you lose. Its a different kind of theft, because a welsher is establishing an option on the pot, which has value. He can’t lose (he doesn’t have any money), but he can win.
Where I come from, welching on a bet on a poker hand can get your ass in some serious trouble in a hurry. Like shot!
Yes it is, AIG used bogus warrant sales, it was not insurance, to pay off current loses, the spent all the rest!! LOL, But it was still crooked and should be regulated out of business just like hedges and credit default swaps all the DERIVATIVES BS.