Here is the thing, regarding AIG, CDS's, and market collapse

[whosinpower]

We, main street peons have been told time and time again, that no one could see this coming.
And yet, this is not true at all.
If it was true, then, the credit default swap market would not of ballooned to what it is today. If it was true, then AIG would not of been able to sell so many, for the simple reason that there would of been little incentive IF THAT HOLDER NEVER DEFAULTED.

Fact, is that the market was telling us for quite awhile that the risk of default was rising - that is why so many insurance's were sold in the first place. That is what Credit Default Swaps are, in essence, aren't they - insurance in case the holder defaults.

Would you buy flood insurance when you lived in a desert? I don't think so.

And the more that was sold, the less confidence in the market as a whole, which, inevitably led to no one trusting the other, and a lock up of credit, exasperated by the sub-prime fiasco.

And we, main street peons are being made to pay for this, with lost jobs, lost homes, while AIG pays out with taxpayer dollars the CDS contracts, and then, as an ultimate slap in the face, gives its executives big bonuses for selling high risk swaps, with no oversight, no accountability, assuming that Uncle Sam will bail them out, because if he doesn't, then the whole house of cards collapses.

The whole house of cards has already collapsed -that is what main street peons, such as myself have grown to acknowledge. Banks, hedge funds, etc who bought into the credit default swap industry are trying to extract their last drop of blood from that collapse, instead of rebuilding the house from the ground up, instead of loaning, they are reaping what they sowed, and we are paying for it.

For those "economists, experts and soothsayers" that state they never saw this coming, I would firmly tell them simply that they are bold faced liars - and the truth is staring at them for all to see - the multi trillion dollar credit default swap industry.

[ixion]

1. liars, at best...

accomplices to the "white-collar" crimes of their masters, more than likely.

[FormerDittoHead]

2. I am of the conspiracy mind - seriously.

As you say, they could have stopped leveraging these out one on top of the other, but they choose to keep going.

It wasn't really a traditional ponzi scheme. Seriously, IF housing simply picked up they would have 'won' and the swaps would not have to be redeemed.

But here's the conspiracy part. I honestly believe there got a point when they DID see weakness in the market. As the OP says, everyone did. But they chose to 'double down'. And the bet (I had 'bet' in quotes but took it out because it WAS a bet) was that if they could generate such a LARGE pool, and that were to fail, then the government would HAVE to step in or the whole system would collapse.

Call it blackmail.

There is little doubt in my mind that this was the thinking, after a certain point. They played the government, and won.