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Fed takes over AIG

dealbook.blogs.nytimes.com

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Re: Fed takes over AIG

#2

Post by Alaric »

I think some questions have to be asked about how risks are mitigated since AIG appears to have a 400bln$ portfolio of CDSs and looks to have been hours from the brink of potentially passing that risk back down through the system. The counterparties of AIG's CDS must be mightily relieved.

Re: Fed takes over AIG

#6

Post by krschultz »

So if big companies can't fail what prevents them from taking a risk that ends up this way in the future? Small companies have the advantage of being able to risk it all, big companies have the advantage of large sums of capital. To upset that balance is to increase the barrier of entry for small players.

Re: Fed takes over AIG

#9

Post by sethg »

krschultz wrote: post #6

So if big companies can't fail what prevents them from taking a risk that ends up this way in the future? Small companies have the advantage of being able to risk it all, big companies have the advantage of large sums of capital. To upset that balance is to increase the barrier of entry for small players.

Well, the government is buying the company out (and, one hopes, firing the CEO and board) and diluting the existing shareholders' stake, so it's more like "big company sucks up insolvent small company for pennies on the dollar" than "government helps cronies by pouring money into badly-run business".
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