Someone correct this if it is wrong but
Oh noze, the companies that sold all those “credit defaults” to protect the buyer against default (AIG?) - now have to pay up on some of them.
This is bad man really bad. It means some of the swappers got caught holding the bag when the music stopped.
CDS were only supposed to be funny money, not real insurance policies anyone would ever have to, like, redeem.
There’s only about a couple hundred... trillion ... of them floating around out there in the financial ether world.
Who has exposure and who is now wondering how to cover themselves when the other (PIIGS) creditors start lining up at the trough?
Don’t worry.
The Fed will simply print more money and lend it to AIG, maybe even at a negative interest rate.