It is About Those Credit Default Swaps.

Several years ago I heard about CDS’s and heard the word Counterparties. I’m not sure if it was Roubini, Krugman, Soros or Buffett who talked about them. But I remember thinking at the time, “uh, oh!” Now we are all familiar with Buffett saying that derivatives are the “Financial Weapons of Mass Destruction.” Well, Joe Nocera does a pretty good job of describing their role in the AIG debacle or “scam” as he puts it.

Pour yourself a drink and then read the whole thing! It isn’t all that long or complicated, just really, really, scary. The “Best and the Brightest indeed!”

Update: It also explains why we have all those Goldman Sachs folks in the Treasury. Their exposure to CDS’s from AIG were apparently huge.