AIG Muddies the Waters for the Monolines

Who used this model? Who else? I am talking about the model AIG (AIG - commentary - Cramer's Take) used to measure the worth of the CDO exposure. You should go over the big disclosure document, all gussied up with professors and experts, last year, because you would have so much false comfort from this document.

The company was adamant first of all that it had very little toxic paper to begin with and insured very little paper either because it was basically frozen because of regulatory concerns that kept it out of the market. And the little exposure it had was either hedged or not that bad.

Now we have to believe that AIG is the STANDARD for those who own this stuff. It is hard for me to believe that MBIA (MBI - commentary - Cramer's Take) or Ambac (ABK - commentary - Cramer's Take) did anything different. No wonder they are both taking the segment down with them.

Cramer: AIG Got Cocky, Got Caught

I feel bad for the AIG shareholders. They were given so much more comfort than any other financial by this full-day teach-in they had that was supposed to give you total clarity for what they owned.

I am extrapolating this judgment because all of the financials hanging on by an MBI/ABK thread are getting killed even as they don't have much CDO exposure.

In the end it doesn't matter. The charade that is MBIA just tells me that there's no umpire here. They will just hang on and pay out what they can until they eventually run out of money. But given the ridiculous way they account for their losses, that can last for some time at least at MBI, because of the recently raised capital.

Still, AIG means more scrutiny as the analysts who follow any kind of insurer, where the SEC doesn't provide much oversight, have to question their models. After all, AIG was the gold standard for the group.

So much for that. One last thought on the AIG issue: if President and CEO Martin Sullivan were to step down, the company might be more of a buy than a sale!

At the time of publication, Cramer had no positions in the stocks mentioned.

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