Goldman Sachs Fueled AIG's Risky Gambles

Wall Street Journal:

Goldman Sachs Group Inc. played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American Insurance Group Inc.

Goldman was one of 16 banks paid off when the U.S. government last year spent billions closing out soured trades that AIG made with the financial firms. A Wall Street Journal analysis of AIG's trades, which were on pools of mortgage debt, shows that Goldman was a key player in many of them, even the ones involving other banks.

Read the whole story: Wall Street Journal

Comments

[sonofsamphm1c]

07:50 AM on 12/14/2009

"sonofsamphm1c
AND WHEN YOU FINSH PEELING THE ONION YOU WILL FIND GEITHNER AND SUMMERS WHO WAS WITH THE NEW YORK FED IN THE THICK OF IT, GEITHNER NEW JUST WHAT AIG, GOLDMAN SACH AND THE REST OF THE CROOKS WAS DOING. ..."

This is yet another example of why the radical progressive case is garbage. First, it's outrage so it's shouted by people whose brains are temporarily impaired. From there, it only gets worse.

[Carolab]

03:19 PM on 12/14/2009

You have nothing to stand on, so you resort to insults.

[Siebenstein]

04:13 AM on 12/14/2009

http://www.jwj.org/recovery/bankcrimes/chase.pdf

[Carolab]

02:51 AM on 12/14/2009

Take Action: Tell Congress "Jail the Wall Street con men"

Goldman Left Foreign Investors Holding the Subprime Bag

In all, Goldman sold more than $57 billion in risky mortgage-backed securities during a 14-month period in 2006 and 2007, including nearly $39 billion issued from mortgages it purchased. Meanwhile, the firm peddled billions of dollars in complex deals, many of them tied to subprime mortgages, in the Caymans and other offshore locations.

Many of those securities later soured, but the sales allowed Goldman to become the only major U.S. investment bank to escape the brunt of the subprime meltdown.

One bond analyst who reviewed the 2006 Cayman deal dismissed it in a report to clients as "a not so cleverly disguised way for Goldman Sachs & Co. to unload its unwanted exposures to the subprime real estate market onto foreign investors."

http://pdamerica.org/articles/news/2009-11-04-08-51-09-news.php

[sonofsamphm1c]

06:30 AM on 12/14/2009

So what? Read the prospectuses. They are literally screaming risk.

The con men were at AIG.

[sonofsamphm1c]

07:58 AM on 12/14/2009

This idiocy from McClatchy:

"The swaps contracts would pay off big, especially those with AIG. When Goldman's securities lost value in 2007 and early 2008, the firm demanded $10 billion, of which AIG reluctantly posted $7.5 billion, Viniar disclosed last spring. ..."

How do AIG swaps pay off bigger than the swaps with other companies - like the ones that actually knew what they were doing and hedged their swap portfolio and didn't need a government bailout to pay their contractual obligations? Lol.

A CDS can be a bet, but the GS swaps with AIG were not bets. They were insurance of capital. The 7.5 billion was recovery of capital, not winnings.

[Carolab]

03:11 PM on 12/14/2009

The con men were everywhere.

[sonofsamphm1c]

08:06 PM on 12/13/2009

"As this onion gets peeled it’s beginning to look more and more as if the whole Street was involved in a massive con game. Consider this from the article:
Trying to bu-ry this onion would be a mistake.

http://seekingalpha.com/article/177875-the-truth-about-goldman-and-aig-becomes-clearer?source=article_lb_articles ..."

As the "onion gets peeled" what becomes ever more apparent is there is nothing there. The whole Saddam Sachs is the evil hidden hand of the man behind the curtain is conspiratorial stupidity of a majestic level.

[jcole]

12:41 AM on 12/14/2009

sonofsamphm1c
AND WHEN YOU FINSH PEELING THE ONION YOU WILL FIND GEITHNER AND SUMMERS WHO WAS WITH THE NEW YORK FED IN THE THICK OF IT, GEITHNER NEW JUST WHAT AIG, GOLDMAN SACH AND THE REST OF THE CROOKS WAS DOING.

[Carolab]

02:24 AM on 12/14/2009

How Goldman Sachs helped create, then betted on the U.S. housing cra sh - McClatchy

http://www.youtube.com/watch?v=URxqytFp1Oc

[Carolab]

02:24 AM on 12/14/2009

How Goldman Sachs helped create, then betted on the U.S. housing crash - McClatchy

http://www.youtube.com/watch?v=URxqytFp1Oc

[blueskybigstar]

05:51 PM on 12/13/2009

They are one company masquerading as two. They both knew they were too big to fail. They both knew enough people in gov who would bail them out. What a charade.

[jcole]

12:44 AM on 12/14/2009

blueskybigstar
I WONDER WHY HAVE NO ONE GONE TO JAIL, THE HEAD OF THESE COMPANIES SHOULD BE JUST WHERE MADDOX IS IN JAIL, BUT THEY ARE TO BIG TO GO TO JAIL.

[Carolab]

01:39 AM on 12/14/2009

AIG's bailout was prompted by fear mongering and deliberate strategies and manipulation on the part of Goldman and a few select others, to make sure that AIG would be bailed out to protect their trades in shorting ABS CDOs.

Paulson benefited from this bailout, on his $5 billon or so of ABS CDOs with AIG. But not as much as Goldman benefited themselves, via Abacus and, perhaps, other deals.

AIG, Goldman and ABS CDOs were tied together at the center of the crisis. From Goldman’s perspective, all of the other participants were secondary – they had no exposure to the monolines and they were probably hedged against the other banks. The only loose end was the collateral posted by AIG.

The final question that this raises: would it have been cheaper for the government and the taxpayer to have bailed out the bond insurers instead of AIG? The total amount of CDOs and credit default swaps that would have needed to be guaranteed would have been smaller. In the number of investors across the market that would have benefited would probably have been larger. The auction rate securities market, the muni market, the investors that held bond insurer exposure to MBS and ABS would have all benefited. None of these markets were aided by AIG’s bailout.

A bond insurer bailout would not have helped Goldman much and the AIG bailout did.

http://seekingalpha.com/article/175078-aig-goldman-sachs-and-the-paulson-connection-more-grist-for-the-conspiracy-mill

[Carolab]

01:48 AM on 12/14/2009

*The "Paulson" referred to above is John Paulson.

Mr. Paulson, known as J.P., bet that the housing market would collapse and risky mortgages would tumble in value. The moves put the fund manager from Queens, N.Y., alongside Warren Buffett, George Soros, and Bernard Baruch in Wall Street's pantheon of traders. And as one rival fund manager later would say, with equal parts envy and respect, "Paulson's not even a housing or mortgage guy.... Until this trade, he was run-of-the-mill, nothing special."

Paulson & Co. eventually bet against about $5 billion of CDOs. Months later, they had made more than $4 billion of profits from these trades—including $500 million from a single transaction—according to the hedge fund's investors and an employee of the firm.

http://online.wsj.com/article/SB10001424052748703574604574499740849179448.html

[CanadianBeef]

02:27 PM on 12/13/2009

About $40 billion of mortgage-backed junk peddled by Goldman Sachs and other U.S. investment banks ended up stranded in my country, where our courts will take years trying to figure out what, if anything, it is worth. Some individual investors have seen their retirement savings evaporate.
The public pension in Quebec also took a huge hit. Either the provincial government must now eat the loss and raise its government debt, or else retirees will receive smaller pensions, thanks to the greed and recklessness of Wall Street.
If America does not clean up its investment sector, why would foreign investors buy a "safe" American investment ever again?

[sonofsamphm1c]

03:39 PM on 12/13/2009

Have they read the prospectuses for the MBS in question?

[Carolab]

02:23 AM on 12/14/2009

You're kidding, right?

[MadeandBakedintheUSA]

02:20 PM on 12/13/2009

So-

ALL GOP do not care

Some DEMS do not care

Why will no one address the roots of the problems?

[MadeandBakedintheUSA]

02:22 PM on 12/13/2009

National Homeownership Month, 2003

June 13, 2003

For Immediate Release
Office of the Press Secretary National Homeownership Month, 2003

By the President of the United States of America
A Proclamation

Homeownership is more than just a symbol of the American Dream...

The Department of Housing and Urban Development is leading an Administration-wide effort to bring new tools and resources to would-be homeowners.

What was the ‘Administration-wide effort' to bring new tools and resources to would-be homeowners…’ after June 13, 2003?

2003-‘Administration-wide effort'?

ONE YEAR LATER......


March 8, 2004

AIG, Citigroup Battle Unions on Political Donation Disclosure
http://www.bloomberg.com/apps/news?pid=10000103&sid=arBbK7iUfgPM&refer=us

Merrill Backs Bush

Bush derives much of his campaign donations from executives at publicly traded companies, with employees at Merrill Lynch & Co., UBS AG and MBNA Corp. among those making up 13 of his top 20 donors last year, contributing $2.9 million.

Six of the top 20 donors to Senator John Kerry, who has clinched the Democratic Party's presidential nomination, were employees of listed companies, and they gave $275,000 since he began campaigning in January 2003, according to the Center for Responsive Politics.


$2.9 million- Bush

$275,000 - Kerry

[jcole]

12:51 AM on 12/14/2009

MadeandBakedintheUSA

MONEY AND POLITIC AND TO BIG TO GO TO JAIL AND FAIL.

[World Citizen]

01:12 PM on 12/13/2009

WAKE UP PEOPLE. What is this? The dumbing of america?

Think about it.

If AXA a big insurance company in France which also has a global presence screwed up like AIG did and had to settle risk contracts with, let's say Bank of America or Citibank, do you think that the French government would have considered using french taxpayers money to bail out AXA so it would be able to settle with BofA and Citibank? If you don't know a thing about france, the answer is NO EFFING WAY.

What excuses do we hear about this AIG bailout? That the global financial market would have collapsed without an american bailout? Does anyone know of any country that did a similar bailout that essentially resulted into a country's treasury buying financial firms' toxic assets? Surely, our Geithner is unique in 'negotiating' a dollar for dollar bailout/settlement by using taxpayers money.

What excuses do we hear against reinstating Glass-Steagall? Because the investment banking side will not be able to use the current deposits and assets of its commercial banking side? That our investment banks will not be as competitive as foreign banks? I highly doubt the latter but if this happens, let them - they are taking risks that we know now should not have been taken.

The refusal to reinstate Glass-Steagall is certainly not the appropriate response and this option should not be put under the rug.

[MadeandBakedintheUSA]

02:22 PM on 12/13/2009

The USA does not even rank within the top 25 countries in the world for education!

The fact that most Americans do not own a passport- cannot read a map- FAIL in Geography- is not a secret.

Nor is the fact that WE- USA- suck at Science and Math a secret!

Look at the murdoch crowd- all hung up over a teleprompter!

I guess they prefer watching Bush's head- reading what was written for him at whatever speaking event he attended!

We were warned:

Australians warned us not to allow Rupert Murdoch to infiltrate our free press standards

England warned us not to allow Rupert Murdoch to infiltrate our free press standards

Sir Richard Branson said something like "if we let him, Murdock will destroy democracy".

We ignored Australia and England- look at the dumb down we got!

WSJ- Dumb it Down Mr. President!

We got LOTS and lots of Americans to entertain!

[sonofsamphm1c]

03:48 PM on 12/13/2009

The glass seagull is a provincial antique. Only dummies think a provincial antique will work in a modern world.

We need modern regulations that will allow competitiveness in a globalized economy.

[World Citizen]

08:18 AM on 12/14/2009

"Provincial antique" is not a convincing argument. They are your concocted two words that do not mean a thing.

[invest in jobs]

11:15 AM on 12/13/2009

The whole system is corrupt
Lets be real. Today's society is all about about less jobs. Less employees means more profit. Its all about productivity. Employers dont want to have more employees when they can have less. They will be high unemployment for a while. In capitalism it's all about profit not job creation. When a company lays off employees the stock price goes up! Unfortunately the way things are the economy can prosper with 10% unemployment and the little guy gets shafted.

good articles: http://financeopinionss.blogspot.com/
Solution: suspend free trade. A 2nd jobs stimulus

[Melinda Gopher]

10:20 AM on 12/13/2009

The problem with Goldman Sachs is it controls too much of the American and global economies. It failed in the 1929 for its closed end funds, which led to the Great Depression. This is a telling sign of where we are headed. Post 1933, FDR put in a regulatory schema, the SEC and combined with Glass Steagall--protected the market, basically from itself. Congress has chipped away at these protections, it has taken fifty years to do it.

Goldman Sachs losses in 1970 led to the creation of credit rating companies--they have all overinflated the value of many companies--resulting in the mess we have now. Congress will only fix this system when Goldman Sachs is busted up for good into smaller companies, and the protections of Glass Steagall are restored. The credit rating companies must also be busted up--they have a monopoly on their side of commerce.

[kmk04]

10:51 AM on 12/13/2009

I would be interested to hear how you believe the restoration of Glass Steagall will impact Goldman and Morgan Stanley? I have a fair idea of what it's impact would be on companies like JP Morgan, Citi and Bank of America (who have large deposit taking arms and also do a large amount of underwriting). But other than the obvious (their status of as a Bank Holding Company/ceasing to take deposits) I am curious what the impact would be on the former investment banks.

[MadeandBakedintheUSA]

02:23 PM on 12/13/2009

National Homeownership Month, 2003

June 13, 2003

For Immediate Release
Office of the Press Secretary National Homeownership Month, 2003

By the President of the United States of America
A Proclamation

Homeownership is more than just a symbol of the American Dream...

The Department of Housing and Urban Development is leading an Administration-wide effort to bring new tools and resources to would-be homeowners.

What was the ‘Administration-wide effort' to bring new tools and resources to would-be homeowners…’ after June 13, 2003?

2003-‘Administration-wide effort'?

ONE YEAR LATER......


March 8, 2004

AIG, Citigroup Battle Unions on Political Donation Disclosure
http://www.bloomberg.com/apps/news?pid=10000103&sid=arBbK7iUfgPM&refer=us

Merrill Backs Bush

Bush derives much of his campaign donations from executives at publicly traded companies, with employees at Merrill Lynch & Co., UBS AG and MBNA Corp. among those making up 13 of his top 20 donors last year, contributing $2.9 million.

Six of the top 20 donors to Senator John Kerry, who has clinched the Democratic Party's presidential nomination, were employees of listed companies, and they gave $275,000 since he began campaigning in January 2003, according to the Center for Responsive Politics.


$2.9 million- Bush

$275,000 - Kerry

[Carolab]

02:09 AM on 12/14/2009

It won't matter because Citi, Morgan and Goldman will be the three mega banks left. They operate the ICE Trust exchange and clearinghouse to corner the market in worldwide commodities derivatives trade. And they are in a fight with the EU for global dominance.

Geithner's phone records and broader calendar, obtained by the AP, indicate that most of his contacts with the financial sector in the first seven months of this year were in fact with Goldman, Citigroup, and JP Morgan.

http://www.thedailybeast.com/blogs-and-stories/2009-10-08/timmys-telephone-travesty

The plan is now clearly part of a project to create three colossal global financial giants—Citigroup, JP Morgan Chase and, of course, Goldman Sachs, now conveniently enough a bank. Having successfully used fear and panic to wrestle a $700 billion bailout from the US taxpayers, now the big three will try to use their unprecedented muscle to ravage European banks in the years ahead.

Not only will the present crisis lead to further consolidation in the US by cru-shing local and regional banks which do not have an umbilical chord connecting them directly to the vault at the US Treasury; it could also throw the European financial system into an “every man for himself” frenzy ultimately leading to the breakup of the EU which would allow the US banking cartel to extend its tentacles to the continent as it has with its equities markets.

http://rinf.com/alt-news/contributions/no-more-investment-banks/4739/

[World Citizen]

06:54 AM on 12/13/2009

What gets me is this : "Goldman officials said the company believed it would have been fully protected had AIG been allowed to fail because of collateral it had amassed and the additional insurance it had bought against an AIG default." And Geithner says that Goldman would have failed without it. Guess who I believe?

The AIG counterparties bailout effectively paid for the high risks taken by foreign Banks such as Societe General and Credit Agricole. What's unfair about this is that AIG, considered to be a global company isn't considered a GLOBAL entity when it comes to bailing it out. This freaking bailout wasn't shared by other countries. Risk and profit taking in investment banking has indeed been globalized but when this PONZI scheme/bubble bursted, bailout became a US-only problem. And Geithner had the cheek to nominate Christine Lagarde, french minister of economy as one of the most influential people in the world.

[sonofsamphm1c]

07:50 AM on 12/13/2009

Geithner is talking about a situation that never happened: no government intervention; Saddam Sachs is talking about a situation that never happened: an AIG banruptcy

So they are both are speculating, and the both are probably right.

Had the government done nothing at all to intervene in the financial crisis a very deep death spiral would have ensued, and it is probable that Goldman Sachs, and its 112 billion in cash on hand, would eventually have been consumed. Goldman Sachs has consistently stated that they, along with all Americans, benefitted from the bailout in this regard.

But that is not the situation that would have existed at the moment of an AIG bankruptcy, which is what Goldman Sachs is talking about. They had 5.9 billion in AIG collateral in hand for CDS protection, 4.8 billion of AIG collateral on hand for a loan, and they had purchased additional protection in event of an AIG bankruptcy. It is likely they would have been made whole after an AIG bankruptcy as the death spiral Geithner is talking about would be just beginning, not ending. Since they had 10.7 billion in their pocket already, and backup protection, their argument is on pretty solid ground.

It is wonderful that people are agreeing with Geithner that the situation for the global economy was extremely dire - so dire that GS and its astonishing 112 billion in cash were in danger of ultimately going under.

[Melinda Gopher]

10:26 AM on 12/13/2009

Its 1929 and 1970 all over again.....all GS has done is create the ponzi scheme that created the Great Depression. Does Congress and the Exec. Branch control Goldman Sachs or does Goldman Sachs control Congress and Exec. Branch/Dept. of Treasury. It is a private corporation with free reign over a governnent treasury.

[sonofsamphm1c]

03:42 PM on 12/13/2009

Sigh. Not.

[PhilipTaylor]

03:17 AM on 12/13/2009

IT HELPS TO HAVE YOUR EX-CEO AS TREASURY SECRETARY TO GIVE YOU HIDDEN BAILOUTS!

G0LDMAN played a bigger role in fueling A1G Mortgage Foreclosure bets even Acted as Middle-Man between A1G and other banks = $33 Billion or 41.25% of BETS

G0LDMAN piled RISK onto A1G’s books = A1G Crisis and G0LDMAN Pass-Through Bailout

G0LDMAN avoided $22 Billion in LOSSES from A1G with Bailout.

G0LDMAN’S South Coast Funding VIII bonds backed by homeowners' mortgages payments= CDOs

G0LDMAN fronted A1G by taking massive FEES to insured other Banks securities and then passed on RISK to A1G far exceeding their capacity!

G0LDMAN was first to demand collateral on LOST BAD FROM A1G and was fully aware A1G was over its HEAD in RISK!

G0LDMAN even bought protection against a default of AIG itself from other banks.

All the CALLS for Payment by A1G led the September 2008 bailout and NY FED later fully cover $62 billion of A1G contracts including with Goldman.

G0LDMAN also underwrote sub-prime and other CDOs that other banks invested in that A1G insured.

Société Générale was the largest beneficiary of the NY FED’s 100% pay off to banks and G0LDMAN was second at $14 Billion..

TARP auditor says Goldman would have had a difficult time selling collateral to collect on A1G has NY FED not paid.

[Carolab]

04:18 AM on 12/13/2009

As this onion gets peeled it’s beginning to look more and more as if the whole Street was involved in a massive con game. Consider this from the article:

A Goldman spokesman says that up until AIG was rescued by the government, the insurer “was viewed as one of the most sophisticated financial counterparties in the world. It wasn’t until the government intervened in September 2008 that the full extent of AIG’s problems became apparent.”

“What is lost in the discussion is that AIG assumed billions of dollars in risk it was unable to manage,” the Goldman spokesman added.

That’s hard to swallow. Goldman may play the game as if it were zero sum but they make damn sure that the loser in the game is someone other than Goldman. If they were indeed as intimately involved in the underwriting of the securities upon which they were purchasing protection, it stretches credulity to assume that they weren’t aware of the potential risks and perhaps more to the point the runaway insurance train that AIG had become.

If Goldman and their cohorts were truly just playing ring-around-the-rosie with all of this paper then a hammer needs to come down. It might be time to stop leaving the discovery process to journalists and call in some high level prosecutors. Trying to bury this onion would be a mistake.

http://seekingalpha.com/article/177875-the-truth-about-goldman-and-aig-becomes-clearer?source=article_lb_articles

[MadeandBakedintheUSA]

02:23 PM on 12/13/2009

National Homeownership Month, 2003

June 13, 2003

For Immediate Release
Office of the Press Secretary National Homeownership Month, 2003

By the President of the United States of America
A Proclamation

Homeownership is more than just a symbol of the American Dream...

The Department of Housing and Urban Development is leading an Administration-wide effort to bring new tools and resources to would-be homeowners.

What was the ‘Administration-wide effort' to bring new tools and resources to would-be homeowners…’ after June 13, 2003?

2003-‘Administration-wide effort'?

ONE YEAR LATER......


March 8, 2004

AIG, Citigroup Battle Unions on Political Donation Disclosure
http://www.bloomberg.com/apps/news?pid=10000103&sid=arBbK7iUfgPM&refer=us

Merrill Backs Bush

Bush derives much of his campaign donations from executives at publicly traded companies, with employees at Merrill Lynch & Co., UBS AG and MBNA Corp. among those making up 13 of his top 20 donors last year, contributing $2.9 million.

Six of the top 20 donors to Senator John Kerry, who has clinched the Democratic Party's presidential nomination, were employees of listed companies, and they gave $275,000 since he began campaigning in January 2003, according to the Center for Responsive Politics.


$2.9 million- Bush

$275,000 - Kerry

[Carolab]

04:19 AM on 12/13/2009

As this onion gets peeled it’s beginning to look more and more as if the whole Street was involved in a massive con game. Consider this from the article:

A Goldman spokesman says that up until AIG was rescued by the government, the insurer “was viewed as one of the most sophisticated financial counterparties in the world. It wasn’t until the government intervened in September 2008 that the full extent of AIG’s problems became apparent.”

“What is lost in the discussion is that AIG assumed billions of dollars in risk it was unable to manage,” the Goldman spokesman added.

That’s hard to swallow. Goldman may play the game as if it were zero sum but they make da-mn sure that the loser in the game is someone other than Goldman. If they were indeed as intimately involved in the underwriting of the securities upon which they were purchasing protection, it stretches credulity to assume that they weren’t aware of the potential risks and perhaps more to the point the runaway insurance train that AIG had become.

If Goldman and their cohorts were truly just playing ring-aroun­d-the-rosi­e with all of this paper then a ham-mer needs to come down. It might be time to stop leaving the discovery process to journalists and call in some high level prosecutors. Trying to bu-ry this onion would be a mistake.

http://seekingalpha.com/article/177875-the-truth-about-goldman-and-aig-becomes-clearer?source=article_lb_articles

[PhilipTaylor]

04:22 AM on 12/13/2009

A1G is staffed by G0LDMAN Executives who set up this GIG!

[PhilipTaylor]

04:24 AM on 12/13/2009

$5 Billion to BEEF UP FBI for coming WAVE OF INVESTIGATIONS!

[Carolab]

11:41 PM on 12/12/2009

Um hmm. And in fact GS shorted AIG's stock and made $5.9 Billion in collateral calls, leading to their demise.

[Carolab]

11:48 PM on 12/12/2009

They made BILLIONS shorting AIG and NOW are shorting them again!

http://www.businessinsider.com/goldman-sachs-made-billions-shorting-aig-2009-3


Not to mention they are also now shorting Wells Fargo, PNC and Mastercard!!!

http://www.ibankcoin.com/peanut_gallery/index.php/2009/11/19/goldman-sachs-shorting-wells-fargo-mastercard-pnc-and-aig-long-live-the-evil-empire/

[Carolab]

11:50 PM on 12/12/2009

They made BILLIONS shorting AIG and NOW are shorting them again!

http://www.businessinsider.com/goldman-sachs-made-billions-shorting-aig-2009-3


Not to mention they are also now shorting Wells Fargo, PNC and Mastercard!!!

[stargazer13]

09:44 PM on 12/12/2009

I mean the head line should read as above !!

[stargazer13]

09:39 PM on 12/12/2009

the pillaging will continue until morale improves around here !!!

it would be closer to the truth if they did !!