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Articles Worth Reading
AIG in 30, or More Like 45, Seconds
Summary: simple, and thorough explanation of AIG’s credit default swaps, or CDS’s problems
Favorite Quote:
The financial structure of the U.S. has been compared to a house of cards, but I think of it more like the game Jenga. This game consists of a tower of blocks, and each player has to choose a block to remove without allowing the entire tower to come crashing down. Some of the blocks can be moved, some can’t. AIG could prove catastrophic.
http://nymag.com/daily/intel/2008/09/aig_in_30_seconds_or_less.html?imw=Y
The Players Remaking Financial World
Summary: An account of last weekend’s high profile boardroom activities
Favorite Quote:
Also on Monday, according to regulatory filings, Mr. Fuld sold more than two million Lehman shares at about 20 cents a share. The sale netted him almost $525,000, filings show.
Those same shares were valued at more than $145 million at the beginning of 2008.
Buffett’s “time bomb” goes off on Wall Street
Summary: Buffet knows when what is real risk
Favorite Quote:
In one notorious case, a small hedge fund agreed to insure UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz), the Swiss banking giant, from losses related to defaults on $1.3 billion of subprime mortgages for an annual premium of about $2 million.
The trouble was, the hedge fund set up a subsidiary to stand behind the guarantee — and capitalized it with just $4.6 million. As long as the loans performed, the fund made a killing, raking in an annualized return of nearly 44 percent.
But in the summer of 2007, as home owners began to default, things got ugly. UBS demanded the hedge fund put up additional collateral. The fund balked. UBS sued.
http://www.reuters.com/article/newsOne/idUSN1837154020080918
Headlines
UK FSA’s short-selling ban seen drastic but necessary
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLJ55666920080919
