AIG Failure Would Have Meant Big Losses For Goldman Sachs, Documents Show

New York Times:

Since the United States government stepped in to rescue the American International Group in the fall of 2008, Goldman Sachs has maintained that it would have faced few if any losses had the insurer failed. Though it was the insurer's biggest trading partner, Goldman contended that it had bought credit insurance from financial institutions that would have protected it, but it declined to identify the institutions.

A Congressional document released late Friday lists those institutions and shows that Goldman was exposed to losses in an A.I.G. default because some of the investment bank's trading partners, such as Citibank and Lehman Brothers, were financially unstable and might have been unable to make good on large claims from Goldman.

Read the whole story: New York Times

Comments

[yukon cornelious]

10:36 AM on 09/20/2010

It's sad how we stop arresting criminals once they make over so much a year, the folks who screwed us over are still wandering the streets, many of them with new jobs.

www.marketstar.com

[lizjoycee]

11:09 AM on 07/26/2010

What do you think of Goldman's "conviction buy" list? It seems like it goes both ways as far as being right:

http://www.wallstmemo.com/news/2010/7/26/research-goldmans-conviction-buy-list.html

[arlandbaee]

01:54 AM on 07/26/2010

I don't believe anyone anymore. It's all lies.

[venusvictrix]

01:47 AM on 07/26/2010

Only a fool would believe that GS had 90 counterparties for only $1.7 billion in CDSs against AIG, and yet they had (SUPPOSEDLY) 1 (ONE) counterparty that they bought ($18 - $20 billion? ) in CDSs against the CDOs that they "insured" with AIG-FP?!?!?!?!?!?!/

Tim Geithner and Hank Paulson engineered the biggest fraud in history. They sold the American public on a fanciful story about CDSs against subprime mortgages that never existed. But we all paid , , , , ,

[themodernleader]

09:51 PM on 07/25/2010

This New York Bank President Tim Geithner backstopped 85 billion dollars to bailout crooked banking CEOs. Then he covered it up. Is this a crime? Yes, the most despicable of crimes for it destroys our constitution. Only Congress has the power over the purse. Geithner subrosa arrogated to himself the power to illegally benefit his colleagues. Last, he covered it up, evidently with the connivance of the President. There is not a murmur of judicious enquiry. Such criminals are dangerous.

[Mr Hankey]

09:38 PM on 07/25/2010

Individuals can not take out $10,000 from their bank account at a time without filing a form FinCEN Form 104.

Currency Transaction Report (CTR): A CTR must be filed for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through or to a financial institution, which involves a transaction in currency of more than $10,000. Multiple currency transactions must be treated as a single transaction if the financial institution has knowledge that: (a) they are conducted by or on behalf of the same person; and, (b) they result in cash received or disbursed by the financial institution of more than $10,000. (31 CFR 103.22)

And

Monetary Instrument Log (MIL) -

Cash purchases of monetary instruments, such as money orders, cashier's checks and travelers checks, totaling from $3,000 to $10,000, inclusive. This form is required to be kept on record at the financial institution, and produced at the request of examiners or audit to verify compliance. A financial institution must maintain a Monetary Instrument Log for 5 years.

How it affects American citizens:
CTRs include the individual's bank account number, name, address, and Social Security Number.

See Bank Secrecy Act:
http://en.wikipedia.org/wiki/Bank_Secrecy_Act
----------------------------------

This means, if you'd decide to pay your mortgage for example, via any other type of transaction other than typical "financial institution to financial institution", it would be regarded as suspicious activity and logged every time, and kept on record for 5 years.

[tjconkster]

08:29 PM on 07/25/2010

What Goldman Sachs and the banksters don't want you to know..

http://www.youtube.com/watch?v=hYIC0eZYEtI

What the republicans don't want you to know...who their real base.....
http://www.youtube.com/watch?v=mn4daYJzyls

[Ron333wood]

08:57 AM on 07/26/2010

Thanks for the George Carlin. I've never heard my feelings expessed so clearly or the "F" word used so appropriately.

[Mr Hankey]

07:15 PM on 07/25/2010

http://behind-the-matrix.blogspot.com/2009/04/how-goldman-sachs-rothschilds-took-over.html

[Mr Hankey]

08:42 PM on 07/25/2010

AIG committee names Rothschild adviser
12 May 2010

A four-member AIG committee has hired its financial adviser, Rothschild, as independent adviser, The Wall Street Journal reports.
------------------

American International Group Hires Rothschild Inc. as its Independent Adviser
05/13/2010

American International Group Inc.'s special board committee hired Rothschild Inc. as its independent adviser as the insurer prepares to repay funds borrowed under the Treasury Department's TARP. AIG's special board committee, which was formed in April by nonexecutive chairman Harvey Golub to oversee the insurer's capital restructuring, consists of Robert Miller, former executive chairman of Delphi Corp.; Henry Miller, managing director of Miller Buckfire & Co.; Douglas Steenland, former CEO of Northwest Airlines Corp.; and Morris Offit, chairman of Offit Capital Advisors LLC. Steenland heads the special committee.

http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=1010608

[OSCPJ]

06:42 PM on 07/25/2010

Heh Liberals, what is new here? What didn't you understand.

[WoodyCPM]

06:32 PM on 07/25/2010

This is not new information. We've known this almost from the beginning of the debacle that began in September '08.

[Fiscalprudence]

05:32 PM on 07/25/2010

I know Ia am going to be attacked as a troll but here goes...

This story relates to GS losing money on default protection only. They have repeatedly said that they were "covered". They did not say they were covered by CDS only. It may be splitting hairs but all they have to do is prove "reasonable correlation". For example, AIG fails (much like Lehman) causes a flight to quality. Any US Treasury security held may be deemed to be a hedge against a financial meltdown.

So, those saying this was a direct taxpayer payment into their bonus pool, and there would be NO bonuses without it, is simply not true. As the article states, GS would have had less than a 1bln shortfall against AIG exposure. Assuming they had no other direct or indirect hedges, this would have lowered the bonus pool from 13+ bln to 12+ bln. Less than 10%.

Please note, I am just referring to this article and some of the posts. I am saying NOTHING about the legal, ethical or moral issues the banking model poses.

[jmdziuban1]

06:33 PM on 07/25/2010

It does seem odd that if GS exposure to AIG defaulting was so low, a few billion is a pittance to them, why was there such a priority to save them. it would seem there is more there, AIG also sold such insurance to others, and covered contracts between different parties, say GS and JPM, which all would have been irredeemable. Or something.

[DiogenesOfAlaska]

06:50 PM on 07/25/2010

First of all: the real ridiculous thing is here is that NOT EVEN NOW a fully comprehensive analysis of this is available, and that alone speaks volumes. If you were still in need for any flowers on the grave of the notion that markets are informationally efficient, this fact alone should suffice.

But you're also telling even more jokes. The fact that only one billion was insured via other banks doesn't mean that there was only one billion of exposure. It means that van Praag isn't telling anything that makes sense. Because it is known that GS received bailout money to the tune of 10 billion when AIG was found falling into a knife.

Finally, about the 10 percent of bonus pool. Are you kidding? Even if it WERE the case that 'only' these 10 percent were undeserved. It's still a billion. It's still one billion too much. Are you unaware of the fact that if it had been a bonus pool of 100 billion of undeserved profits, then it would be only 1 percent? You're totally kidding yourself here.

and still one more: your notion of hedge may be a very elaborate one. And I can even bring myself to agree with it. But this makes sense only if you are looking at the positions before, at, and after the relevant events, provided with full information about the market environment. To merely put out a guess that maybe, just maybe they had some treasuries somewhere is ... again, kidding.

[Fiscalprudence]

08:31 PM on 07/25/2010

Point 1: Agreed
Point 2: You need to avail yourself a primer on Securities lending and Swap collateralization. You may not like it but GS would have kept the collateral and demanded more (per ISDA) which would have triggered a default which would have then triggered the CDS follow through. Thus , in theory, covering all but approx 700mm-900mm of EXPOSURE to AIG. Those are numbers coming from the article...Not Van Praag.
Point 3: I have to go under the premise that there is truth to the numbers being tossed about. Unless you believe their is an audit conspiracy as well. As I said, I was commenting on the article not the "deservedness" of the bonus pool. I'm not kidding myself.
Point 4: I was not guessing. People on this site were making claims of perjury and I tried to explain what is considered to be a hedge. Reasonable correlation. All firms will argue that they hedge to total risk, not one specific situation. In this case AIG.

Again, I'm not defending GS. I just wan people to understand that it is not as simple as 13bln check directly to GS.

[US1st2009]

04:37 PM on 07/25/2010

our country has been owned by a small wealthy neocon elite for decades which is why millions of us agreed with Michelle when she said it was the first time she was proud of our country.

then Barak put geithner, summers, bernanke, and rubin in control of completing the rape and pillage of our country and economy by the banksters and all the change we believed in went pffft.

the bush supreme court sealed the deal by making corporations supreme citizens, they have more rights than citizens and never die.

our country is owned by an extremely small supremely wealthy and positioned elite of corporatists and zionists.

indentured servitude 2.0.

[zitlight73]

06:34 PM on 07/25/2010

The Democratic versus the Republican party is just a puppet show to us the US the illusion of choice. The ever revolving door between the Department of the Treasury, Goldman Sachs and the Federal Reserve doesn't change with whichever party is in office.

[US1st2009]

04:33 PM on 07/25/2010

thank you once again Gretchen. yours is a clear and consistent voice for the people in a corporatist B$ fog.

[US1st2009]

04:31 PM on 07/25/2010

"The issue of the rescue’s beneficiaries surfaced again last Wednesday in hearings sponsored by the Senate Finance Committee. Elizabeth Warren, the chairwoman of the Congressional panel that oversees the government’s responses to the credit crisis, testified that Goldman Sachs had declined to supply her staff with information about the insurance it had bought to protect itself from an A.I.G. failure.

Because the Congressional panel cannot issue subpoenas, Mr. Grassley suggested that his committee request the information from Goldman, subpoenaing the firm if necessary. Goldman quickly submitted the materials.

“It’s as if the New York Fed used A.I.G. as a front man to bail out big banks all over the world,” Mr. Grassley said in a statement. “It took nearly two years for the public to learn these details, and they only were revealed because Congress wouldn’t take no for an answer. Taxpayers deserve to know what happened with their money.”"

having caucused for Obama and "change we could believe in" he lost me right out of the gate by appointing wall street tools to the top economic positions; geithner, summers, rubin, and rham is one as well.

Warren has been a true, clear, consistent and honest voice for the citizens of this country from the beginning.

not long ago i believed in voting for abb; anyone but bush.

Elizabeth came up with the idea of a Consumer Protection Agency. If she doesn't get the job i will work to elect anyone but Obama.

[WoodyCPM]

06:37 PM on 07/25/2010

All these deals between the Fed, the NY Fed, the TARP money, GS and AIG as well as all the other ones were laid down by Paulson, Bush's Sec. of the Treasury, Bush and the Congress before Obama ever took office.

[altohone]

04:00 PM on 07/25/2010

So, perjury charges are being filed tomorrow right?
I seem to recall an oath at the hearings.