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La La Land: Galileo’s Warning (Classic)
Cautionary Tales with Tim Harford
AIG Could Use Some Help, but Wasn't Bankrupt
AIG was both a bigger threat to the financial system than Lehman Brothers and a far more surprising one. The insurance contracts that were about to destroy AIG were called Credit Default Swops. They'd become popular as a way to offset risk with the blessing of regulators. But they backfired on Wall Street banks relying on these credit default swaps. When it became clear that AIG couldn't possibly pay out, the banks all scrambled to sell off their risky investments at the exact same time. For the same reason they gave the Oscar to the wrong movie, confusing communication and above all, a safety system that created a brand new way to fail. More than a decade later, we're still
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode