AIG - That Sucking Sound (remember Perot) is the sound of $170 billion federal dollars being sent abroad

The reason is because disclosing this may kick off a series of large sell-offs and bank runs for institutions that are otherwise solvent. And the info is confidential to these counterparties.

AIG's counterparty risk exposure was so large (larger than Lehman's), that a bankruptcy would trigger off a catastrophic meltdown.

It's the ultimate blackmail from AIG: http://www.bloomberg.com/apps/news?pid=20601087&sid=aH_oy9PSQ3KQ&refer=home

So what happenned to counterparty risk? Isn't that the point? The lucky 10 should have bought credit default swaps on AIG. It other areas of the insurance world its called "reinsurance" you lay off second loss pieces on entities with reserves to absorb the losses not the federal government. FYI, I am not convinced by the mantra of systemic risk, I think it will just leave us all with less money when we can no longer choose rescue them. Just good money after bad.

I'm not arguing either way, pro or con, just stating the rationale as I understand it.

Would be interesting to find out if anyone was offering a CDS on AIG, and how they're faring. Anyone know?