- Fed purchased CDO assets from AIG during the crisis, so that CDS contracts on the CDO could be terminated. The Fed made the controversial decision to pay the CDS contracts in full, as a way of injecting money into the banking system, and criticized as a 'back door bail out'
- Those assets have increased $29.6bn to $45bn; a paper profit difficult to realize since the CDO market is still illiquid
News
- I really can't bring myself to care about Cadbury
- Citi reports 7.6bn loss; excluding 1-time items, 1.6bn loss in 2009, 27.7bn loss in 2008; however 70% of revenue outside the US; most saw this as a buying opportunity, shares went up 2% on the news
Greece!
- Promises to cut deficit of 12.7% GDP to 3%; won't happen
- Falsified financial figures for years
- Doesn't have monetary tools (policy, currency depreciation) to combat deficit
- Unit labor costs (along with Ireland, Italy, Spain) up 23% compared to Germany, making them uncompetitive
- Borrowing much more as a % GDP than Ireland, Spain
- Could default: removed from EU, would make the weaker remaining members much more vulnerable; significant political upheval
- Could bail out: fast-track merging the EU into a more cohesive group; easier to dictate future policy.
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