Quote Originally Posted by GoldenBoy812
...........AIG was also a large holder of SPMBS with short term liability. The difference is, AIG was able to make their "mortgage payments" but had to issue debt to cover various costs associated with the insurance industry. This forced their tripple A credit rating to be lowered to A-. In doing so, collateral accounts that contractually required for example 10% at AAA rating, now required say 15%, 20% or even 25% collateral. This type of collateral was in the form of liquid assets held in collateral accounts. Once the rating dropped, AIG was then contractually obligated to deposit the upwards of $80 billion into these collateral accounts to stay in business by Wednesday (the 17th).

Had AIG been allowed to file Chapter 11, it would have sent a signal to all investors to pull out of investment markets due to AIG's interwoven relationship to virtually every business entity on the planet. They insured cars, houses, business, bonds, manufacturing plants, etc...

Suffice to say, this next week could have been a really fucked up period of history.
Great post.

AIG also INSURED those SPMBS, as you know.

Bailing out AIG was not "bailing out Wall Street". It is MAIN STREET.

There would have been panic in the streets today if AIG was not rescued. And McCain was against it. Boggles the mind.