more fun, from LAT:

Countrywide sues AIG unit over its failure to cover loan losses

With the mob fury and death threats and calls to reveal who AIG had paid bailout monies to and now with this suit it appears somebody wants AIG to fail.

If they fail their CDSs fail and all the premiums they received are already gone. It would appear bankruptcy may be a way for somebody, not just top-level management, to walk away unscathed.

Maybe the attacks on Geithner are really because he’s doing too good a job with AIG, just as the employees there are being attacked for doing the job of winding down that business…without going bankrupt.

Somebody doesn’t want those FP products wound down neatly!

American International Group, in a gloom and doom discussion paper, has warned regulators that unless it is kept afloat, there would be “turmoil in the U.S. economy and global markets.”

The craziness at AIG is beginning to sound a lot more like Bernie Madoff’s Ponzi scheme and the size of it is horrendous to consider.

I’d love to hear something happy, something you could call a ‘dot’ which connects to Ken Starr or the Bushies. That would take some of the sting out of these stories.

If all these insurance companies operate off-shore and perhaps use a Bermuda loophole to avoid holding reserves and are beyond state regulators and when there is no federal regulator (for insurance), then who’s to say there’s any ANY money in the accounts labeled ‘reserves’?

Were they using the health and life insurance businesses, which have performance that is actuarially predictable, to leverage in swaps?

Have a friend with considerable background in reinsurance, will ask an opinion on this.

Even if they weren’t using the actual funds they might have implied those were reserves and they were certainly using the AAA rating AIG earned with those funds. It was a fraud one way or another.

Greenberg has been ramping up his operations since last year, hiring more staff and entering a joint venture between C.V. Starr and Bermuda insurer Ironshore Inc, called Iron-Starr Excess Agency Ltd. Ironshore has recruited several executives from AIG.

Wasn’t someone named Starr (Ken’s uncle perhaps) the original founder of AIG back in the early 1900s?

Seems like Greenberg still feels tight with AIG.

So AIG admits that its got a company, AIRCO, that is reinsuring its own insurance, and AIRCO is using a Bermuda accounting trick to limit the reserves it holds for this reinsurance.

This seems to be a key of the “new Wall St.”. They use fake ratings agency ratings on CDOs and they use CDSs with no reserves and they use money market funds like a bank (again with no reserves) and they go through Bermuda to avoid having to hold reserves.

Add this to maxi leveraging as just another fraud trick to avoid sound business practices.

The rest of it was probably illusory.