AIG bailout provides derivatives blueprint

Okay, at this point I think everyone is probably sick to death of hearing about AIG, and I wasn’t actually planning to add anything to our recent AIG-related posts.

Nevertheless, the Financial Times has a very worthwhile article today about the effects that the US government’s bailout of AIG will have on the derivatives market.

And since we’re all about trends here at Finance Trends Matter, it’d be careless of us to omit such important news. So let’s get into it.

Excerpt from, “Backing for AIG provides derivatives blueprint”:

“The US government’s decision to pay out all the money owed by AIG to its financial derivatives counterparties is widely regarded as a “blueprint” for the level of government support that can be expected in the derivatives industry.

Indeed, the list of counterparties shows that many banks benefited from the government’s decision to ensure AIG’s obligations were met, including some of the biggest dealers in the derivatives industry, such as Deutsche Bank, Goldman Sachs and Société Générale…

…The government’s support of the derivatives industry – in effect using taxpayer funds to prevent huge losses at some of the biggest banks active in the derivatives market – is a key reason why efforts have been able to continue to reduce the risk of many of the privately traded, over-the-counter derivatives sectors.”

Check out the full piece at the link above, and see our related articles and posts below for more on AIG’s payments to its counterparties.

Related articles and posts:

1. AIG funnels taxpayer cash to counterparties – Finance Trends.

2. AIG: $105 billion to counterparties – Big Picture.