Ha Joon Chang really is ignorant of what he writes, isn\’t he?

The most prominent case in point is Joe Cassano – the chief financial officer of AIG, the American insurance company, who has been described as \”Patient Zero of the global economic meltdown\” by the journalist Matt Taibbi, who famously referred to Goldman Sachs as \”vampire squid\”. Just six months before his company\’s bailout, Cassano had said: \”[i]t is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of the [credit default swap] transactions\”.

Err, he was at AIGFP, not AIG. A subsidiary, not the main company. And their CDS transactions. They didn\’t fall over because they lost on them. Almost none of the contracts have actually been triggered. They fell over because they had to post collateral on them. Vast great gobs of collateral, hundred (s) of billions of dollars in mere weeks.

This was a liquidity crisis, not a solvency one.

3 thoughts on “Ha Joon Chang really is ignorant of what he writes, isn\’t he?”

  1. CDS on asset pools, such as mortgage-backed securities, usually do not “trigger” as such, because the underlying assets can’t be delivered. Instead, they pay off bit by bit as component mortgages default.

    Describing AIG’s woes as no more than a liquidity crisis is misleading. If I borrow a lot of money to buy shares, and the market then crashes wiping out 50% of their value, is that just a liquidity crisis because if I wait long enough the shares may go up again?

  2. That vampire squid analogy really annoys me – because clearly whoever came up with it may have heard the term, but had no idea what a vampire squid is.

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