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<h1>Would You Co-sign a Loan?</h1><br />by Donald Fishgrab<br /><p>I'd like to buy a new car.  The bank said they'd loan the money if I could get sombody qualified to co-sign for the amount.  Would you co-sign the loan for me?</p>
<p>I hope you said no.  When you cosign a loan, you agree to pay off the loan if for any reason the primary borrower or maker does not.  The fact that the bank requires a co-signer implies that they are not sure the maker can or will pay his share. </p>
<p>The bank can reposess the car if he does not pay.  As a co-signer, you would have to set up a separate agreement with the maker to be able to get the vehicle.  Whether you get the vehicle or not, you are liable for the balance of the loan.</p>
<p>A Credit Default Swap(CDS) is basically an agreement to co-sign a comercial loan. Most are agreements between the bank and an insurer.  AIG, The world's largest insurance company, has been the world's largest provider of Credit Default Swaps.  They would take on the responsibility for a relatively small fee, since the risk appeared minimal, and the profit very high as they were doing very little.</p>
<p>Most loans are sold for a discount, so that the bank can recover their money quickly and loan it out again.  There appears to be nothing to prevent the purchaser of the loan getting another CDS on the loan.</p>
<p>Depending on the banks to check their clients, AIG did not bother to do so.  Because the bank had a co-signer, they did not need to be so careful.  As a result, the risk of default increased dramatically.</p>
<p>The program began in 1995, and over the years, changing economic conditions have changed the creditworthyness of various companies, and management has changed.  Corporate takeovers have occurred in which raiders, interested only in taking out a quick profit have stripped out most of the financial strength of the companies.  No provision was made to recoup defaults.  Fed Chairman Bernanke has said AIG  was irresponsible in their actions.</p>
<p>Because several CDS's could be written on a single loan, it is frequently in the loan owners interest to have a default, as they will make more than the balance owed in such a case.  Unscrupulous loan owners can get rumors started and take actions to cause the company to default.  Management can see it as in their best interest to default for several reasons.  It is believed that manipulation of the companies they held CDS's on is what forced Lehman Brothers into bankruptcy,   </p>
<p>Because of the sheer volume of their liabilities and the impact their failure would have, 4 bailouts of AIG have already occurred, totalling nearly 180 billion dollars.  The Federal government is now responsible for 80% of the total.  </p>
<p>While you would not co-sign my car loan, you are now the co-signer on an unspecified number of loans to companies in the U.S. and 140 other countries, thanks to the bailouts.  The loans covered by CDS's total nearly 60 trillion dollars, and no one knows how many are covered by more than 1 CDS.</p>
<p>Don't you wish you'd said no?  Unfortunately, you didn't get the choice.  The Federal Reserve, Congress, and George Bush and Barak Obama signed for you.  Your tax money will be used to pay it off, no matter how large the liability turns out to be.</p>
<br /><h2>About the Author</h2><p>Donfishgrab is owner of <a href="http://www.debtmanagement.dobettertoday.com">www.DebtManagement.DoBetterToday.com</a>, and <a href="http://www.investing.dobettertoday.com">www.Investing.DoBetterToday.com</a>, where information about investing and debt can be found.</p>
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<body><h1>Would You Co-sign a Loan?</h1><br />by Donald Fishgrab<br /><p>I'd like to buy a new car.  The bank said they'd loan the money if I could get sombody qualified to co-sign for the amount.  Would you co-sign the loan for me?</p>
<p>I hope you said no.  When you cosign a loan, you agree to pay off the loan if for any reason the primary borrower or maker does not.  The fact that the bank requires a co-signer implies that they are not sure the maker can or will pay his share. </p>
<p>The bank can reposess the car if he does not pay.  As a co-signer, you would have to set up a separate agreement with the maker to be able to get the vehicle.  Whether you get the vehicle or not, you are liable for the balance of the loan.</p>
<p>A Credit Default Swap(CDS) is basically an agreement to co-sign a comercial loan. Most are agreements between the bank and an insurer.  AIG, The world's largest insurance company, has been the world's largest provider of Credit Default Swaps.  They would take on the responsibility for a relatively small fee, since the risk appeared minimal, and the profit very high as they were doing very little.</p>
<p>Most loans are sold for a discount, so that the bank can recover their money quickly and loan it out again.  There appears to be nothing to prevent the purchaser of the loan getting another CDS on the loan.</p>
<p>Depending on the banks to check their clients, AIG did not bother to do so.  Because the bank had a co-signer, they did not need to be so careful.  As a result, the risk of default increased dramatically.</p>
<p>The program began in 1995, and over the years, changing economic conditions have changed the creditworthyness of various companies, and management has changed.  Corporate takeovers have occurred in which raiders, interested only in taking out a quick profit have stripped out most of the financial strength of the companies.  No provision was made to recoup defaults.  Fed Chairman Bernanke has said AIG  was irresponsible in their actions.</p>
<p>Because several CDS's could be written on a single loan, it is frequently in the loan owners interest to have a default, as they will make more than the balance owed in such a case.  Unscrupulous loan owners can get rumors started and take actions to cause the company to default.  Management can see it as in their best interest to default for several reasons.  It is believed that manipulation of the companies they held CDS's on is what forced Lehman Brothers into bankruptcy,   </p>
<p>Because of the sheer volume of their liabilities and the impact their failure would have, 4 bailouts of AIG have already occurred, totalling nearly 180 billion dollars.  The Federal government is now responsible for 80% of the total.  </p>
<p>While you would not co-sign my car loan, you are now the co-signer on an unspecified number of loans to companies in the U.S. and 140 other countries, thanks to the bailouts.  The loans covered by CDS's total nearly 60 trillion dollars, and no one knows how many are covered by more than 1 CDS.</p>
<p>Don't you wish you'd said no?  Unfortunately, you didn't get the choice.  The Federal Reserve, Congress, and George Bush and Barak Obama signed for you.  Your tax money will be used to pay it off, no matter how large the liability turns out to be.</p>
<br /><h2>About the Author</h2><p>Donfishgrab is owner of <a href="http://www.debtmanagement.dobettertoday.com">www.DebtManagement.DoBetterToday.com</a>, and <a href="http://www.investing.dobettertoday.com">www.Investing.DoBetterToday.com</a>, where information about investing and debt can be found.</p>
<br /><h3><a href="http://www.content4reprint.com/finance/credit/would-you-co-sign-a-loan.htm" title="Would You Co-sign a Loan?">Article Source:</a> <a href="http://www.content4reprint.com" title="Free high quality articles">Content for Reprint</a></h3></body></html>