(EUROSAVANT.COM) — The original German piece comes from the Frankfurter Allgemeine Zeitung or FAZ – often called Germany’s own New York Times.
London investment bankers name AIG as a further [Credit Default Swap]-seller. That company had to be nationalized during the financial crisis due to its having written insolvency insurance on American mortgages. This debt-load would have led to the collapse of the world’s biggest insurer.
Prior to the financial crisis AIG is said to have widely held State credit-risk. If yet-larger insurance positions on Greece exist, then the American government would have a strong interest in preventing that country’s insolvency.
PID comment: Let that last sentence register. If rumors are true and AIG did, in fact, sell credit protection on Greece (or Portugal, Ireland, Spain, etc.), then the company, now controlled by the U.S. government, may come back to the American taxpayer for more money–a lot more money.
Why? To prevent the complete collapse of AIG and the resulting devastation of global financial markets, the US government may decide it has no choice but to bail out insolvent foreign nations.
The question is whether the American taxpayer, which strongly opposed the bank bailouts, would go along.