The news media do not want to let people think that the financial system is faulty - after all they, and politicians, depend upon the largesse of the banking fraternity to keep them in their positions. However when individuals in the news media are affected, they sometimes start to question things.
Jeremy Clarkson, a BBC employee involved in car programmes, in his column for The Sunday Times [28-9-08] reported that at a dinner he overheard a banker mention that the Union Bank of Switzerland was in troUble. As his life savings were held by that institution, he switched them to a company he had never heard of - AIG (American International Group)
When AIG revealed its financial problems, he tried to retrieve his savings from them, but was told that the fund was shut and would remain closed for three months while it tried to sell assets.
Clarkson said he decided to try a two-week course in understanding banking. His conclusion There isn't a single person in the entire world who has the first idea how the system works. [His reading must be limited]
He quoted a letter he received from AIG which may have lead to this conclusion. Perhaps members or supporters of the National, Labour, ACT, Green and other parties favouring the privately owned financial services industry they worship could explain it. I am sure Mr Clarkson would appreciate their advice. AIG, which was saved by the American taxpayer, wrote:
Approximately $307 billion ..... of the $441 billion in notional exposure of AIGFP's super senior credit default swap portfolio represented derivatives written for financial institutions, principally in Europe, for the purpose of providing regulatory capital relief rather than risk mitigation.
In exchange for a guaranteed fee, the counterparties receive credit protection with respect to diversified loan portfolios they own, thus improving their regulatory capital position.