Fannie Mae-No Politics (FNMA)

[Donotunderstand]

best I understand

AIG made an insane level of risky bets and lost

derivatives of phantom products (I now forget the name)
in essence bets on bonds of various sorts will pay off (bull) or will not pay off (bear)

these "instruments" for which there was NO market - had no regulation
all of these instruments were contra built (one on one) They were made by insurance companies or TBTF banks or others. If you held a bond and were afraid it would not pay at the end- you could for highly leveraged small amounts - buy coverage from a bull (to insure your bear position or concern).

As I recall - there were about 80B of these contracts in $ value
The writers et al -- agreed to a one day summit to "close positions" --- bull and bear
As it turned out - other than AIG no participant lost a significant amount of money - as they ALL wrote about the same amount of bull and bear instruments ---- and made their money on the say 5% off the top for creating the instrument.
AIG - alone - had massive exposure - and true to its insurance mind set was 100% bullish - costing them a fortune and a major reason that private market decisions - not the GOV - was the reason for their failure . F and F were targets of potential rumors and runs but had the cash to cover obligations (even if write downs of some assets (bonds) on a GAP basis had them Balance Sheet red) No way are they at all equivalent or