Friday, April 17, 2009

AIG bailout causing bankruptcies

Voltron says: according to this article, Bondholders who bought Credit Default Swaps as a hedge are less willing to make concessions and more willing to allow a company to go bankrupt, because they're covered by the CDS. Consider GM and General Growth Properties. The irony is that the CDSs sold by AIG would be worthless without the government bailouts. So the bailouts save AIG, but push other companies over the edge. Unintended consequences . . .

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