Arraya we absolutely agree on that… yes I would agree that as of about 2003 Wall Street and even companies like AIG knew that for sure it was a no lose bet. Either you win and make money or you lose and get bailed out.
I think that Arraya is more pissed off at Goldman than AIG. He should really be pissed off at AIG. They were a primary insurer for MBS(s). Goldman recognized that a problem was coming down the pike and extricated themselves as best they could. AIG continued to do business as usual (They even tried to pay themselves as usual too). The result was that risk was mis-priced everywhere (AIG was considered an ‘expert’ at CDS(s)). This is why I feel AIG should be liquidated. To prevent systemic risk.. the gov would have to step in and make good on any CDS(s) that were in force for a period of time (duration of the existing contract). The liquidated portions of AIG should go up for bid and the money from the purchasers should go to cover as much of the cost as possible.
