The derivatives allow tremendous amount of leverage , but the problem comes with the counter parties , the reason that AIG went banckrupt is because they could not afford to make good on the obligations on those contracts and the irony of the whole thing Goldman Sachs the firm that originated the most toxic pools of securitised mortgages , 20 percent of the securitised subprime mortgages were created by Goldman Sachs, and Goldman Sachs knew that they were crap , and as they sold these toxic assets to their customers , they knew that they would fail that's why they bet on the fail of AIG , they knew that it was crap because after all they packaged it ...so Goldman Sachas got the government to bailout AIG , so that AIG could pay back Goldman Sachs Peter Schiff explains ...at the money they have bet that the product in securitiesed would fail ...I mean the whole thing was a fraud ...we should have that firm gone bankrupt and here they are making more money than never before
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