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Strategies & Market Trends : The coming US dollar crisis
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To: ggersh who wrote (18090)3/2/2009 8:14:21 PM
From: Hawkmoon  Read Replies (1) of 71475
 
And so therefore AIG being to big to fail. But what if they do fail, and the GOV"T just says those CDO'S are illegal and void.

Well.. I think there might be some merit there. But it would require the gov't declaring that the majority of those sub-prime mortgages were originated in a fraudulent manner, thereby any derivatives of those mortgage bonds are null and void. I just don't think anyone's yet prepared to go that far because of the pecuniary liability to be incurred by the US banks who either originated those fraudulent loans, or bought out the fraudulent mortgage bankers who did.

Too many of these bankers are trying to hide behind the defense of "the borrowers shouldn't have lied, so we're not responsible". That's UTTER BS!! When a banker originates a loan, they have a fiduciary responsibility to safeguard the depositor's money and that means performing due diligence on any borrower.

Btw, it's not just AIG that we have to think about. Other BIG monolines like ABK and MBI will have to be back-stopped in order to get them back into the insurance business. It's too complex for "newbies" to get involved in and requires some experience (even if that experience includes having gotten burned by recent events).

I often read the ABK, MBI, and RDN threads on Yahoo. The guy below often has some insightful commentary:

messages.finance.yahoo.com

Hawk
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