And most don't realize how profoundly deregulated these instruments are. They are funds created from weak mortgages and sold to mostly institutional investors, and comprise a huge share of the investment market. But there is no single database of who created them and sold them - nor who owns them now. AIG went down because it offered insurance to make them credible, and it couldn't possibly pay up. No capital reserves are required to cover their value. Indeed, nobody really knows what their value is, for there is no single means of determining it. Where they are, what they are, whose they are - we only discover as organizations fail.
When AIG's assets are liquidated, a value for them wil...

And most don't realize how profoundly deregulated these instruments are. They are funds created from weak mortgages and sold to mostly institutional investors, and comprise a huge share of the investment market. But there is no single database of who created them and sold them - nor who owns them now. AIG went down because it offered insurance to make them credible, and it couldn't possibly pay up. No capital reserves are required to cover their value. Indeed, nobody really knows what their value is, for there is no single means of determining it. Where they are, what they are, whose they are - we only discover as organizations fail.
When AIG's assets are liquidated, a value for them will be determined, and this will shake the market. People who thought they had holdings worth, say, a dollar a share may see similar holdings sold for ten cents a share. Entire companies will need to re-state their net worth, for their assets will prove to be much less than they've been telling their customers.