Home > The Economy > House of Representatives’ Financial Services Committee votes to regulate [financial weapons of mass destruction]

House of Representatives’ Financial Services Committee votes to regulate [financial weapons of mass destruction]

http://news.bbc.co.uk/2/hi/business/2817995.stm

“[Derivatives are] financial weapons of mass destruction.”–Warren Buffett

http://finance.yahoo.com/news/House-banking-panel-votes-to-apf-2451938848.html?x=0&sec=topStories&pos=3&asset=&ccode=

EXCERPT:

“A U.S. House of Representatives’ panel voted Thursday to regulate for the first time privately traded derivatives, the kind of exotic financial instruments that helped bring down Lehman Brothers and nearly toppled American International Group….

In the case of AIG, the company sold a form of derivatives, called credit-default swaps, to investors who were looking to protect themselves against losses in the housing market. When home defaults rose, AIG did not have enough resources to make good on all of its promises and required a hefty government bailout to avoid folding.”

Q: A “hefty government bailout”? With taxpayers’ money? How hefty was it?

A: $120 billion

http://money.cnn.com/2009/09/21/news/companies/aig_bailout/

AIG has stabilized thanks to a massive government bailout, but more than $120 billion in taxpayer loans to the insurance company remain at risk, according to a report issued Monday by a bailout overseer.

The Government Accountability Office, which oversees Treasury’s $700 billion Troubled Asset Relief Program, said the government’s efforts to support AIG (AIG, Fortune 500) have largely succeeded in propping up the company. But AIG continues to rely heavily on federal assistance to maintain that stability.

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