Iceland is going bankrupt. Since they are already part of the European Economic Area, adopting the euro would be a way to get themselves out of trouble, since the krona is completely devaluated and they’ve stopped trading in it since Thursday.
The latest Reckoning article is up. Greenspan was all for not regulating the derivatives market, which is at the heart of the current financial crisis. If he would have been for regulating it, things might have been different. Then again, the main fault lies with greedy Wall Street and London investment banks, who exploited the contracts to their utmost limits.
AIG is best known for selling conventional products like insurance polices and annuities, products that are overseen by state and federal regulators. The problem is that AIG is also deeply involved in the risky, opaque market for financial derivatives and other complicated financial instruments, which are unregulated.
“It’s pure crisis management,” Mr. Chernow said. “It’s the Treasury and the Federal Reserve lurching from crisis to crisis without a clear statement on how financial failures will be handled in the future. They’re afraid to articulate such a policy. The safety net they are spreading seems to widen every day with no end in sight.”
Credit default swaps are a type of credit insurance contract in which one party pays another party to protect it from the risk of default on a particular debt instrument. If that debt instrument (a bond, a bank loan, a mortgage) defaults, the insurer compensates the insured for his loss.