During a March 5th, 2009 Senate Committee hearing, the Federal Reserve Vice-Chair, Donald Kohn, refused to disclose who is getting the money from AIG:

The Kansas Federal Reserve President, Thomas Hoenig, representing himself, just gave one hell of a speech, Too Big Has Failed. Calculated Risk, (who found this gem), said this is a call for nationalization. Is it?

In the speech, Hoenig states:

we have not defined a consistent plan and not addressed basic shortcomings and, in some cases, the insolvent position of these institutions.

Hoenig then acknowledges while the United States is trying to avoid nationalization, it's happening anyway, slow, painful and piecemeal. He also suggests the current series of actions are adding to market uncertainty.

Hoenig describes current actions on the financial crisis, the results and offers a road map of policy suggestions.

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Good Morning! Rise and Shine! Get that Cup O' Joe...
break out the O.J....hang out with the pooch...time to check out the Funnies!

It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

Earlier this week I took a first pass look at a flawed probability model behind various types of derivatives.

With that in mind I went looking for information on further mathematical follies which resulted in economic collapse.

Two films goes over Black–Scholes as well as the hedge fund debacle Long Term Capital Management and it's use of mathematical models, bounds and assumptions, which caused it's demise.

Like the scene from the The Return of the Secaucus 7, earlier I was asking for details on the actual mathematics upon which derivatives, CDOs (Collateralized debt obligations) are based.

Wired Magazine has answered the call in the article Recipe for Disaster. This article outlines the actual mathematical formula, a Gaussian copula, upon which so many derivatives are based.

In 2000, while working at JPMorgan Chase, Li published a paper in The Journal of Fixed Income titled "On Default Correlation: A Copula Function Approach." (In statistics, a copula is used to couple the behavior of two or more variables.) Using some relatively simple math—by Wall Street standards, anyway—Li came up with an ingenious way to model default correlation without even looking at historical default data. Instead, he used market data about the prices of instruments known as credit default swaps.

You must read the entire article, yes they mention mathematics, but they are explaining it all in layman's terms.

One thing I did not know, pointed out in the article, is that there are no limits on the number of CDS (credit default swaps) that can be issued against one borrower. CDSes are literally unconstrained by are subject to mark-to-market.