Yes, it's good to see a relatively comprehensive article in a relatively
mainstream source
on this mind-bogglingly obscene shell game.
After reading this piece, and gleaning bits from other references, I still have
a couple of
questions about all the complex actors and dynamics. Might someone enlighten me?
I still don't get exactly how the hedge funds got tied up with credit
derivatives and made
mega-profits from the credit derivatives.
Were/are the hedge funds actually using their huge size and secretive practices
to first buy
these insurance contracts cheap and then to sell them dear, using classic "pump
and dump"
methods?
Or were/are they simply getting rich off purely speculative "bets"? (In which
case we're talking
about credit default swamps, not credit derivatives, yes?)
Finally, I've heard certain critical commenters argue that in the end the TARP
money thus far
has mainly paid off the hedge funds (to the tune of grotesque sums, further
skewing the mal-
distribution of wealth), who've been able to collect on their gambles that
holders of toxic trash
would default. (If that indeed is what was happening!) But through what
channels and mechanisms
does this work? Had AIG not been bailed out would the hedge funds have been
left hat in hand?
This really is the crime of the ages.
John G.
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