From Firedoglake here.
In the final push to the election, the New York Times asked what on earth AIG is doing with all the money: $90 bn and counting. The short answer: it’s giving the money to counterparties to credit default swaps as additional collateral for potential losses. AIG apparently has a portfolio of $447 bn in swaps. And who are those counterparties who are getting our bailout money? AIG won’t say, and neither will the Treasury, if it even knows.
Warren Buffet famously called derivatives, which include swaps, the neutron bomb of financial instruments, having the potential to destroy the financial system, presumably leaving the buildings and some of the people standing. It looks like one of the groups getting neutroned is us taxpayers. . . .
For an explanation of these instruments, see here.