A day ago, Washington, it was seven o'clock in the morning.

After taking a sip of his coffee, Paulson picked up the New York Times at hand, and on the front page of the editorial was still in the news of the Kamison brothers' bankruptcy, but from a very different angle. This is an article that dissects the whole thing from the government's point of view.

Naturally, the author is a big fan of the free market economy, and praises the government's failure to bail out the Kaminari brothers and let them go bankrupt. He also profoundly pointed out that the government intervened excessively in market activities on issues such as Bear Stearns and the "two houses", but on the issue of the bankruptcy of the Lemon Brothers, they began to correct their mistakes and no longer use taxpayers' funds to subsidize the rich Wall Street who make millions or even tens of millions of dollars a year, which is not only good for ordinary people but also for the market.

The article also said that as the management of these companies, they can still get huge salaries and dividends despite the huge losses of the operating companies, which is strange enough to happen on Wall Street, and what is even stranger is that the government is actually trying to save them, which is very puzzling and difficult to accept. Wall Street's greed is well known, and now it's finally time for them to take matters into their own hands.

It's a story with a more extreme point of view, but Paulson likes it because it is in line with public opinion in a certain way, especially if it satisfies lawmakers who are in charge of the budget.

On his desk, there are several other mainstream newspapers that are also reporting on the Kaminmon brothers' bankruptcy at length. Almost all the mouths are praising the government's laissez-faire approach, especially Henry. Paulson and Ben. Bernanke, the two were even praised to the sky.

Despite the absurdity of his thoughts, Paulson accepted the compliments with ease, in fact he was scolded far more than he was able to raise his praise. This is the only moment he naturally cherishes. And the reason why he was scolded was not because of his lack of ability, but because of pure political differences.

"The Treasury Department and the Federal Reserve have put Rehman Brothers on bankruptcy, have not given any subsidies to U.S. banks that have acquired Merrill Lynch, and have tried to organize a consortium of loans for aig in distress instead of lending themselves, a move that reassures the market. Although it is not recognized by large institutions. But Paulson and his colleagues have made it clear that the government's lack of intervention will cause unrest in the global financial system in the short term. However, in the long run, the financial system will inevitably re-examine its own operations and risk control after losing its last protection, which will be a reshuffle of the entire financial ecological chain......

That's a good point!

Whether he agrees with or disagrees with this view, Paulson feels the urge to slap in admiration. Although he knew very well in his heart that the reality was not consistent with what was reported. The fact is that the British side did not approve Barclays' acquisition of Rehman Brothers, leading to the failure of the entire acquisition plan, but the mistake was in and out of the way. Such a farce was widely praised by the outside world, which made him feel like he had lost the harvest of the East.

However, this good mood did not last long, and a sudden phone call made this wonderful disappear in an instant.

The call was from Geithner.

Because of the FOMC meeting, Bernanke didn't have time to deal with AIG, so he had to put Geithner in charge of the Fed's team and the Treasury Department's team. That is, the final decision will be made by Bernanke or the president, but the specific matters will be done by Geithner leading the team.

"Henry, something went wrong, we can't control it!"

As soon as the phone is connected. Geithner's panicked voice came over, and the anxiety and anxiety in his tone made Paulson angry. I almost spilled the coffee in my hand. Paulson took his nerve and put his coffee cup aside, then said with a little dissatisfaction, "Relax, man, what the hell is going on?" ”

"Panic, the market is full of panic!"

Geithner still hasn't been able to control his feelings. "Yesterday, AIG's share price fell by 60% and its market value evaporated by nearly $100 billion. Of course, these are not the most important things. Just last night, our team conducted an overnight audit. It was found that AIG's CDS position had reached an unbelievable level of over $500 billion. The worst thing is that their counterparties are all over the world, especially in Europe, and financial institutions use guòAIG to obtain CDS. ”

"In addition to these, AIG has more than 81 million insurance policies worldwide in life alone, and the amount of these insurances is close to 2 trillion. Although these policies are safely kept, if AIG does have a little trouble, there is no guarantee that these policyholders will flock to the run, and AIG's insurance business will fall apart in an instant. More importantly, this run is likely to spread to other insurance companies, which may lead to uncontrollable risks for the entire insurance industry. ”

Paulson didn't know much about insurance, but he knew CDS. This new derivative, known as credit default swaps, is essentially equivalent to a new type of insurance. However, compared with traditional insurance products, CDS can cover one qiē transaction target. For example, CDOs are bonds that are securitized against subprime mortgages, and CDOs on CDOs are a talisman for these CDOs, and the price of CDOs on CDOs is extremely low when the CDO is paying normally and without risk, and if the CDO fails, the price of these CDSs will skyrocket, because the CDOs default, and the party that buys the CDS can get potential compensation from the issuer.

The issuer is naturally a giant insurance company like AIG. They charge fees by issuing various CDSs, and the subject matter includes a variety of financial products, and even non-financial products can be priced, which all comes down to Zhong Shi's paper. Gradually, the CDS market swelled to become one of the largest in the financial markets, with the total amount of the underlying market approaching or exceeding the GDP of the United States.

Now, if AIG goes bankrupt, it means that the CDS it issues will not be able to be cashed out immediately, and the liquidity will be lost immediately, and the consequence will be that the entire CDS market will be severely impacted, after all, AIG has a pivotal position in this market, and even affects the entire European financial market.

Perhaps there is only one positive. That is, the price of CDS for AIG will rise sharply immediately.

"What do you mean......"

Paulson pondered for a moment, then finally spoke slowly. He had already guessed in his mind the purpose of Geithner's call, but he was reluctant to say it, because it would be like a hard slap in the face, after all, he and his team had allowed the Kaminari brothers to go bankrupt just yesterday.

This is the evil result of letting the Kaminari brothers go bankrupt, and the domino effect has only just begun. A world-renowned insurance giant was involved.

"We need an alternative plan!" Geithner's heart sank, knowing that deep down Paulson was not willing to do such a backshit, in fact, he was not willing, but reality forced him to say his intentions, "Even if necessary, the Fed and the Treasury will work together to save AIG, whether it is capital injection, trusteeship, in short, we must take action." It must not be allowed to go bankrupt! ”

"It must not be allowed to go bankrupt?"

Paulson chewed on the passage. There is some desolation in my heart. Although he had expected it, he was still reluctant to make a move, because it would deal a fatal blow to his reputation," said the United Consortium? Also, under what pretext do we proceed? ”

"According to our estimates, it will take at least $60 billion to save AIG, and that number will gradually expand as decisions go on, and I don't think they will be able to reach a deal." Geithner let out a long sigh. Rather helplessly, he said, "As for how to convince those councilors." I propose to use Article 3 of Chapter 13 of the Federal Reserve Act: 'The Federal Reserve is permitted to lend to non-bank financial institutions in unusual and emergency situations.' ’”

AIG is a financial institution, but it is not a commercial bank, so it cannot take loans from the Federal Reserve, the "central bank" of the "bank of last resort". But both Paulson and Geithner realized that AIG was now the center of the global financial system.

"Even if we plan to save AIG, how can we guarantee that they will have enough capacity to repay these loans in the future?" Paulson then raised another possibility.

Indeed, if the Fed really decides to save AIG. This may be done by lending, but the amount is absolutely astronomical, and in this case there is no guarantee that AIG will be able to repay these loans in the future.

"I can't guarantee it, no one can guarantee it!" "But we can put on an obedient manager." So that AIG is always in our sight. I think that's probably the most likely scenario so far. ”

"Make a rescue plan, find a new CEO, strictly control the risks, do everything you can to form a plan, and then we will vote." Paulson is no longer able to think about any more issues, and now the details will be done by Geithner and others, and he will have to convince the higher-ups, the difficult lawmakers.

……

Around noon, on Capitol Hill, Paulson began a meeting with some of the most important members of Congress, naturally about saving the AIG.

Naturally, none of the lawmakers were in favor of AIG's deliverance, but after Paulson elaborated on the positive implications of the rescue, they fell into deep silence.

"Do we have so much money to save AIG?" A councillor from the South asked with a solemn face.

"Maybe there is, maybe not, I need to ask Chairman Bernanke about this." Paulson was about to call Bernanke, but just then, his phone rang, from the Japanese Ministry of Finance, "Sorry, gentlemen, I need to answer a call." ”

The caller was Japan's Minister of Finance, which is AIG's second-largest market in the world, and Japanese regulators are also very concerned about AIG's problems. The Minister of Finance called to inquire about the U.S. government's attitude toward AIG, and hung up reassuringly when he heard Paulson's promise that the U.S. government would save AIG.

Throughout the call, Paulson didn't hide anything from the lawmakers, but turned on hands-free so they could hear it.

"Not only Japan, but also the Netherlands, the United Kingdom, Spain and other countries have called us to ask about our attitude towards AIG. This is only official, financial institutions are looking around, because the CDS market is not only its own market, but also the credit ratings of many related assets, in this case, if AIG goes bankrupt, the entire European market may soon be strongly impacted, and we are no different, including the insurance industry. ”

"I don't want to do anything that goes back on my word, but if I really ignore it, the whole world finance may fall into a place of no return. Although the organization consortium is currently saving the company, there is not much hope. In addition, there is a moral hazard that we will solve by changing the management, which is the best solution we can think of. ”

Dozens of parliamentarians, you look at me, I look at you, and no one speaks for a long time. At this time, it is no longer just a matter of a certain company, the danger of the bankruptcy of the Kaminari brothers has been further highlighted, and it has only been less than 48 hours, and no one knows what will evolve after that. Although public opinion is now praising them, if the situation really deteriorates rapidly, maybe tomorrow they will be scolded by public opinion.

Public opinion is not the most important thing, the economy is the most important, and if the financial system does collapse, the damage will not be recouped by tens of billions of dollars.

"Go for it!" Eventually, a respected parliamentarian spoke and set the tone. (To be continued......)

PS: Thank you book friends cpower, zfx871772403, book friends 140824235809695, line 0, Jiangnan Liu Feiyan for voting for the monthly ticket! Thank you for another reward from the miracle of civilization of Xiaoqi! Now I feel like I'm working so hard to write, and I can't tell if it's because I'm dizzy from the heat, but I didn't write it until midnight yesterday......