terroristic acts and CDS payments

here is an idle thought:
there was much conjecture back in sep '01 that people with "inside knowledge" had shorted certain stocks likely to be affected by the events of that month and made significant short term gains by subsequent events

the market, of course, paid up, and there have been claims those contracts were looked into
there have also been claims that certain people associated with this disappeared suddenly and unexpectedly from the plane of existence not long afterwards
there were some sudden deaths among not very old mid-east financiers not long after, that does seem clear

so... if certain organizations wanted to make a lot of money, playing games shorting stocks is for pikers
what you want to do is to arrange for multiple independent Credit Default Swaps on some third party highly rated large debt, and then "arrange" for an incident which triggers the CDS, it need not even be a full bankruptcy - eg apparently the sudden non-availability for employment by high ranking corporate executives is sufficient to trigger some CDS contracts...
(cf: "Departures also have regulatory ramifications. As an example, the resignation of the senior managers of AIGFPs' Banque AIG subsidiary would allow the Commission Bancaire...to appoint its own designeee...Such an event would constitute an event of default..." - from "AIGFP Employree Retention Plan" presentation to US Treasury March 2009).

this seems sloppy to me - a company would risk its existence on CDS triggers caused by, say, a mass food poisoning at an executive retreat, or a disabling corporate jet crash enroute to a swanky Caribbean restort.
The existence of the world's financial system would then depend on the health and vigour for work of a handful of senior corporate executives - man, better hope they don't "do a Galt" as the saying goes.

So, the real question is: in this event, the suddent disabling due to third party acts of the AIG financial unit execs, for example, would the US Treasury feel the contract entered into was unbreakable, and they pay, say, the financial frontman for al Quaeda (Europe)?

I mean, these AIG contracts are unbreakable, according the top lawyers.

Hey, maybe the UK finanicial authorities can look into this?
At the very least they can freeze the money, in case it might be transferred to unregulated tax havens in commonwealth caribbean nations, and then maybe they can just seize the assets of AIGFP.
There is already UK precedent that potential credit default constitutes an actionable event under anti-terrorist laws; I'd think even the possibility of CDS payments to al Quaeda ought then be grounds for investigation.
A very long and thorough investigation.

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By Ketil Tveiten (not verified) on 16 Mar 2009 #permalink

It doesn't matter if contracts are 'unbreakable': when one party fails to uphold its contractual obligation, the other party is entitled to sue for damages, which would put these cases in the hands of juries.

Want to guess how lavish juries will be toward wall street gazillionaires?

By Nattering Nabo… (not verified) on 16 Mar 2009 #permalink

Fire them all.

Then let them fight for their bonuses in court with their ever diminishing funds. If the government loses, unlikely given the sentiment of the average citizen, appeal. In the end, assuming they win every fight, they still only get less than half the money because of legal fees and they get it, after the appeals, in ten or twenty years.

Big business has played this game with consumers for a very long time. A bit of their own medicine would serve them right.

In those years, after their funds are expended and they realize they have no practical skills other than talking BS and shifting paper, these Galt wannabes can live in a refrigerator box under a bridge, eat out of date discount sardines and collect aluminum soda cans for spending money.