financial links

select links to ponder:

Krugman ponders lack of leadership and consensus at G7 meeting

Naked Capitalism ponders the Lehman Bros CDS auction

Steve Hsu at Information Processing has more on Lehman CDS auction - somebody is paying a couple of hundred billion or so to other people by Oct 21 - if they don't have the cash to do so, then there will be cascading defaults due to counterparty failures. Basically people making bets without having the reserves or assets to honor them in case the bet goes bad.

ex-investment banks tightening hedge fund margins?

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so apparently insurance conglomerate giant AIG is on the verge of bankruptcy, again, despite something of order $200 billion bailout from the US, which now owns 79.9% of the company the news solution is to request the US government guarantee the outstanding CDS that AIG issued I propose a solution…
If the US assumes liability for Credit Default Swaps issued by financial institutions, its potential exposure is many times its gross domestic product. If the US does not take on this liability it risks annihilation of the modern financial system. The only solution is to seize both sides.…
So... these credit default swap thingies, they pay out if some credit instrument goes bad, like a bond issue, and, famously, financial companies buy them as side bets hedges against financial "events", including betting against instruments they are promoting to clients, and deals they have no…
so, as you may have heard, AIG, the insurance giant "lost" $61 billion and change this last quarter... welll, I found it, I think, but I can't be sure, since it could be someone else's $60 billion, I mean one big pile of used $20s looks much like another; anyway, the US taxpayers are going to…

Ohhhh, that last one is interesting.