Could the AIG hedge-fund deals and subprime mortgages be connected?

[KansDem]

I read this DU thread by kpete:

Hedge funds could reap billions from AIG

The massive now mostly-government owned insurer American International Group is slated to shell out billions of dollars to hedge funds that bet against the US housing market, according to documents reviewed by the Wall Street Journal.

In other words, vulture investors that bet the US housing market would crumble are scheduled to receive billions of dollars in premiums on their bets, even though many of them never had a material investment in the housing market. And the cash paid out to these investors is coming from US taxpayers, who bailed out AIG.

…and wondered about the subprime debacle.

Couldn’t someone bet that the US housing market would suffer a downtown, then actively pursue that downtown by encouraging highly-risky lending, such as subprime mortgages? It seems to me if you knew you could hasten a housing crisis resulting in record foreclosures and consequently deflated values and at the same time bet that a housing crisis would happen, you’d be in fat city...

[liberal N proud]

1. No way!

:sarcasm::sarcasm::sarcasm::sarcasm::sarcasm::sarcasm:

[Junkdrawer]

2. A financial crisis MIHOP? No way. That would be a conspiracy...

and we all know that only idiots believe in conspiracies....

Look, as Samantha Bee on the Daily Show says:

"Just because you robbed the grave doesn't mean you killed the guy."

[KansDem]

4. I see your point...

"Just because you robbed the grave doesn't mean you killed the guy."

So perhaps these hedge-fund managers knew this crisis was coming and bet on the worse happening. Wouldn't that be similar to finding out your neighbor has taken up sky-diving and then taking out a life-insurance policy on him?

[Junkdrawer]

5. You should know, I hate the sarcasm tag.... And, no, it's like...

You and 100 of your other neighbors finding out your neighbor has taken up sky-diving and then taking out a life-insurance policy on him.

[peacetalksforall]

3. I believe they were not only involved, but that there is still a risk that they will bring

them down entirely. Short term profit to the players.

There are no Congressional hearings scheduled on hedge funding that I've heard about. Still legal?

The hearing today is only about bonuses, it seems, and it's not a criminal investigation which is what is really needed, this one only seems to be about things that need to change.

There is a big gap in reality. Today is now. Hearing end game is some tomorrow in the future.

Hope I'm wrong. Very wrong. Open to correction by someone who is not a plant.

[Oilwellian]

6. Cramer recently mentioned...

naked short sellers brought down AIG & Lehman, and could bring down others. I used his quotes in a recent video. You can see them here:

http://www.youtube.com/watch?v=1qxdJ3FdRZM

This is a part of the entire fiasco on Wall Street. There are many facets to it and naked short selling is one of them. Jon Stewart almost hit on that by showing parts of Cramer's infamous 2006 video. There's a gang of Hedge Fund managers who have been very naughty boys.

Another video to watch and understand what these cats have done is a Bloomberg News documentary called "Phantom Shares." That can be seen here:

http://video.google.com/videoplay?docid=4490541725797746038

[MadrasT]

7. Absolutely.

Do I think that's what happened? I don't know yet. But I won't rule it out.