As at Bear and Lehman, it was not the slow-moving crisis in real estate markets that threatened AIG. An avalanche of defaults and foreclosures would in due course grind its way through the system. But that would take years. The first credit default event on which AIG had to pay out did not occur until December 2008. The problem was the anticipatory reaction of financial markets and the fast-moving revaluation of securitized mortgages and the derivatives based on them. In the case of AIG, as it lost its top-tier credit rating, this triggered immediate margin calls from the counterparties to
...more
Yep
