‘In theory it is possible with patience over a long period of time to unwind the positions with minimal loss. You may remember the giant hedge fund Long-Term Capital Management, the bail-out consortium was actually successful in that case at doing just that.’
Sure in theory it is, but how much return will be left for taxpayers after $2 T of counterparty fees are paid to wind down the $60 T in derivatives? Doesn’t leave too much for recovery just the $12 T - $15 T in debt. Yep, life will be wonderful in 2012 when U.S. loses it’s reserve currency peg and a loaf of bread is $10 as is a gallon of gas. I am civilized and not an advocate, but I do believe we will see a repeat of 1820 hanging scenerio for particular bankers. Unfortunately for those whom continue now to fleece the global taxpayer (at least the 2/3 of the that peg to dollar) there will be no safe place on earth.
For someone who claims to “think big” you sure do miss the big picture.
It’s not the inefficient unwinding of their trading portfolio nor the bonuses to traders that is the big picture in the AIG bailout.
AIG’s 2007 annual report: “Approximately $379 billion of the $527 billion in
notional exposure on AIGFP’s super senior credit default
swap portfolio as of December 31, 2007 were written to
facilitate regulatory capital relief for financial institutions primarily in Europe.”
A hole in the equity of the European banks to the tune of hundreds of billions of dollars. And that is just the CDS portfolio, that is not ALL of the trades of AIG with the European banks. If AIG had gone under who knows how big the hole in the European banks would have been. Massive bank runs and failure of the major European banks?
The AIG bailout was in essence a second Marshall plan for the banks of Europe. I hope Mr. and Mrs. U.S. Taxpayer aren’t holding their breaths waiting for the Europeans to thank them.
But go ahead, bleat on about inefficient unwinding of AIGFP trades or bonuses paid out to traders (which are not the major contributors to inflation), while Uncle Sam holds you upside down and shakes out your pockets to bail out, once again, Europe.