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Sure you can. You buy a bond, you're not guaranteed 4% interest, you're gambling that the entity who's indebted to you will still be around long enough to pay
by jbooth 14y ago
Sure you can.
You buy a bond, you're not guaranteed 4% interest, you're gambling that the entity who's indebted to you will still be around long enough to pay you. Same with these credit default swaps.
If the government doesn't step in, AIG folds and Chase doesn't get paid for those CDS contracts. Nobody paid the government back for AIG.
- tedunangst 14y agoAnd the government insured AIG. that doesn't move the debt from AIG's books to Chase's books.
- jbooth 14y agoThe government did not back those credit default swaps, until they did of course. But the fact that the government stood behind other forms of insurance at AIG doesn't mean that they were obligated to pay back the CDSs. Again, until they did so after the fact.