AIG - Securities Lending - Media

The Short Sellers Come Calling Again. In the end, AIG's strategy of betting with borrowed money--the collateral their customers had put up to borrow mortgage backed securities from AIG--became a fatal mistake.

  • When short-sellers closed out their positions, they demanded back the collateral.
  • When hedged credit funds decided to exit long positions in the MBS market, they also closed out their short-hedges.
  • AIG had put the collateral into mortgage backed securities, some of which had lost half their value. AIG simply couldn't meet these obligations.
  • *Ring! Ring* "Hello, Mr. Bernanke? This is AIG. We need to talk."