AIG had more in its equity than in debts, about 40 percent more (the issue was the term structure of the liquidity in one of it's divisions). But Fed was disorienting the market, saying "let it sink" one week, and fueling AIG with 85 bln next week, and finally seizing 80% of it, not knowing what to do with it.
A simple analogy: imagine you've got a crack in the oil filter of your car. All you need to do is to switch the engine off, wait until it cools down, unscrew the filter, put a new one and fill up the engine with the oil. Instead, a stupid mechanic disassembles the whole car, assuring you that he has to check every single part of it for possible failures and then realizes that he doesn't know how to put the instrument panel back together. He has to ground the car then, and it will sit under the rain at the back of his yard.
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A simple analogy: imagine you've got a crack in the oil filter of your car. All you need to do is to switch the engine off, wait until it cools down, unscrew the filter, put a new one and fill up the engine with the oil. Instead, a stupid mechanic disassembles the whole car, assuring you that he has to check every single part of it for possible failures and then realizes that he doesn't know how to put the instrument panel back together. He has to ground the car then, and it will sit under the rain at the back of his yard.
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