Humpty Dumpty, or Can Anybody Spot AIG $75 Billion or So?
- Humpty Dumpty sat on a wall.
- Humpty Dumpty had a great fall.
- All the king’s horses and all the king’s men
- Couldn’t put Humpty together again.
Well, shit. Fat chance I’ll get a job in New York now.
In other news, the U.S. financial system appears to be imploding. The Dow was down 500 pts today, Lehman went bankrupt, Merrill Lynch is no more. Time for six or eight Tums and my predictions:
(1) AIG will fail this week. From what I’ve heard, this may be catastrophic in ways that nobody imagined even a few days ago, because frankly, nobody thought too seriously that it could happen. It’s happening, though.
(2) Either Morgan Stanley or Goldman Sachs (or both) will go under by the end of next week.
(3) Washington Mutual, the country’s largest savings and loan, will also declare bankruptcy by the end of next week.
(4) The Dow will drop another 500 points by the middle of next week.
(5) Disco, or some form of it, will make a comeback sometime in the next year. Disco makes people feel good.
To get some idea of the gravity of A.I.G.’s failure, check out this quote from an op-ed in today’s New York Times:
“Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.
Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.
A.I.G. does business with virtually every financial institution in the world. Most important, it is a central player in the unregulated, Brobdingnagian credit default swap market that is reported to be at least $60 trillion in size.”
You don’t even have to know what they’re talking about to know that sounds pretty bad. Oh well, nothing I can do.