Daily Archives: 2008/09/19

Fat Cats Burden US Taxpayers with Trillions of Dollars of Losses in the Marketplace

On Wall Street and in Washington, there is increasing expectation that U.S. taxpayers will either take the bad assets off the hands of financial institutions so they can raise capital, or put taxpayer capital into the companies, as the Treasury has agreed to do with mortgage giants Fannie Mae and Freddie Mac. As always the Middle Class Taxpayers are the ones who Lose. The Rich Do Get Richer and the Poor Do Get Poorer.

When you have a big loss in the marketplace, there are only three people that can take the loss [1] the bondholders, [2] the shareholders and [3] the government TAXPAYERS

The latest financial crisis is an area called CDS, credit default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall according to the risk that a company won’t be able to honor its obligations. Firms use these instruments both as insurance to hedge their exposures to risk and to wager on the health of other companies. There are now credit default swaps on more than $62 trillion in debt, up from about $144 billion a decade ago.


One of the big new players in the swaps game was AIG, the world’s largest insurer and a major seller of credit-default swaps to financial institutions and companies. When the credit markets were booming, many firms bought these instruments from AIG, believing the insurance giant’s strong credit ratings and large balance sheet could provide a shield against bond and loan defaults. AIG believed the risk of default was low on many securities it insured.

The Biggest Bailout in History. $10,000 for every Man Woman & Child on Planet Earth. Thanks Federal Reserve, a private bank chartered by the U.S. government and UN-Constitutional. Do Your Own Research.

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