fuse lit on jpms $trillion interest rate swaps, page-27

Hi there Loki

"Why did AIG fail?"

Can I recommend that you read Roddy Boyle's book, "Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide". You will find a lot to agree with in Boyle's account.

The only thing that I would observe is that before September 2008, AIG and the banks didn't think of themselves as "to big to fail". With the possible exception of Goldman Sachs, they grossly underestimated the risks that they were taking in the mortgage market. I don't think that they can be accused of consciously taking irresponsible risk.

What I find appalling now is that the US banks still don't get it.


"Perhaps you are a bit too close to it (the derivatives market) to make an effort to understand the wider economic implications that these markets have on the rest of the economy."

Surely you can think of a better take down than that?

I live in the "wider economy". Derivatives and risk is just what I do (or have done) to earn a living.

The ultimate purpose of Derivatives Risk Management is to makes sure derivatives don't impact adversely on the "rest of the economy". I would say that since 1998, the risk management on derivatives has been successful.

Remember that the GFC was caused by irresponsible mortgage lending and falling house prices.

Cheers