Is AIG Selling Credit Default Swaps (CDS) to Greece? Will American Taxpayers Be On The Hook Again?

THE RETURN OF THE CDS – WHY YOU SHOULD BE CONCERNED

Remember, Credit Default Swaps or CDS, were one of the culprits behind the “toxic mortgage scam” that brought down the US economy.

At the behest of their Democratic political masters Fannie and Freddie ”provided” mortgages to millions who could not pay. Then Fannie and Freddie sold the “toxic mortgages” as investment securities with the help of the likes of Goldman Sachs. Finally, AIG “insured” the “securities” by selling Credit Default Swaps to back up the worthless mortgages and put the US taxpayer on the hook for paying off the “toxic debt”. While most of the parties made billions – the US taxpayer got stuck with bill. 

Fast Forward To Greece

Is AIG creating a Greek Debt Bubble – just like the ”housing bubble” AIG helped create?

Greece is purchasing Credit Default Swaps (CDS) to insure its national debt.

“Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, and prices decline as perceptions of creditworthiness improve. A basis point equals $1,000 annually on a contract protecting $10 million of debt.”http://www.businessweek.com/news/2010-05-11/bank-swaps-libor-show-doubts-on-europe-bailout-credit-markets.html

The Greek markets aren’t quite buying the latest bailout, since they price-in a higher chance of default than just a month ago. Moody’s isn’t buying the bailout either. Which is odd, because theoretically Greece has been just provided a life-line that should at the very least allow it to meet its current outstanding debt obligations.