Tuesday, November 11, 2008

Floyd Gives the Dope on AIG's SPV


As I suspected, the collateral posted is in play, but not in the way I thought.

It will go toward the purchase price of the CDOs, so that the Fed gets up to $70+5 billion CDOs for the $35 billion that it has put up in cash for the SPV, or better than half of AIG's net "multi-sector CDO" exposure. AIG will take "subordinated" exposure to the first $5 billion in Fed losses (what "subordinated" means, in this context, is laughable).

Flloyd Norris has the dope. [n.b. he's the only one I've seen throw out the $70 billion figure. AIG, so far as I know, has not said how much collateral has been posted in aggregate, have they?]

The staggering "securities lending" "business" will ... also get a $22B TARP-like relief from the FED, who will purchase illiquid securities, to remove the stress on that part of the AIG, as it shuts it down.

I continue to believe that there is more to the story here than "securities lending". It just requires too much to believe that this could have occurred quite the way it is described ...

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