On Sunday, the New York Times wrote another story about certain aspects of the relationship between Goldman Sachs and AIG titled "Testy Conflict With Goldman Helped Push A.I.G. to Edge." This is the third theory the paper has put forward since September 2008. The theories are contradictory and many of the supporting "facts" don't stand up to serious scrutiny. ‪‪
Here are some of the errors:
NYT assertion: "Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities."
The facts: We would have been happy to consult with third parties. In fact, on numerous occasions we attempted -- unsuccessfully -- to agree on a process with AIG to obtain third-party values.
NYT assertion: "Goldman's demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash."
The facts: Relative to the size of AIG's overall business, Goldman Sachs was a small counterparty. We don't believe our marks were "aggressive," they reflected market prices at the time. We requested the collateral we were entitled to under the terms of our agreements. The idea that AIG collapsed because of our marks is not credible. In any event, the story later asserts that, by the spring of 2008, AIG's dispute with Goldman Sachs was just one of its many woes.
NYT assertion: "In addition, according to two people with knowledge of the positions a portion of the $11 billion in taxpayer money that went to Societe Generale, a French bank that traded with A.I.G, was subsequently transferred to Goldman under a deal the two banks had struck."
The facts: The assertion is false and misleading. Goldman Sachs provided financing to many counterparties, but in that role we would not have known whether a counterparty had obtained credit default protection, let alone from whom or in what amount.
NYT assertion: "Goldman Sachs stood to gain from the housing market's implosion because in late 2006, the firm had begun to make huge trades that would pay off if the mortgage market soured."
The facts: This statement is misleading and mischaracterizes how we positioned ourselves at the start of 2007. Goldman Sachs, like most other financial firms, was long the mortgage market at the end of 2006. In order to bring our exposure closer to flat, we began hedging our mortgage holdings in the first quarter of 2007. Those hedges certainly limited our exposure to the declining housing market, but we also recorded substantial writedowns on our residential mortgage holdings. Moreover, in most of the trades with AIG described in the article, Goldman Sachs was hedged by an offsetting position and did not have a short directional bet on the mortgage market.
NYT assertion: "It's not just who was right and who was wrong," Mr. Brown said. "I also want to know their motivation. There could have been an incentive for Goldman to say, 'AIG, you owe me more money.'"
The facts: Our only motivation was to provide marks that represented fair market value and to enforce the rights we had in our contracts with AIG in order to protect Goldman Sachs and its shareholders.
NYT assertion: "A November 2008 analysis by BlackRock, a leading asset management firm, noted that Goldman's valuations of the securities that AIG insured were consistently lower than third-party prices."
The facts: We believe that the marks we supplied to AIG represented fair market value for the underlying securities. We understand that the marks supplied by other AIG counterparties ultimately moved closer to ours, proving that we were at the forefront of taking realistic marks on our positions. Subsequent events in the housing market proved our marks to be correct.
NYT assertion: "Perhaps the most intriguing aspect of the relationship between Goldman and AIG was that without the insurer to provide credit insurance, the investment banks could not have generated some of its enormous profits betting against the mortgage market. And when the market went south, AIG became its biggest casualty -- and Goldman became one of the biggest beneficiaries."
The facts: As we've already said, we were far from the biggest beneficiaries of the mortgage market's decline. Through prudent hedging, we limited our losses, rather than generating "enormous profits." AIG was only one of many counterparties with whom we had hedging arrangements.
NYT assertion: "...the insurer's executives believed that Goldman Sachs pressed Societe Generale to also demand payments."
The facts: That's not correct. We did not encourage other counterparties to issue collateral calls.
NYT assertion: "Mr. Sherwood said he did not want to ask other firms to value the securities because it would be embarrassing if we brought the market into our disagreement, according to an e-mail message from Mr. Cassano that described the call."
The facts: It is not true that we were unwilling to agree to a dealer poll. On the contrary, AIG would not agree on a process to obtain third-party values. Michael Sherwood doesn't know why someone might have suggested he thought it would be embarrassing to have third-parties value the securities.
All "legal," of course...
Because, if NO legal action is forthcoming from GS, then it just proves the Times allegations were completely correct and on the money.
Once the bailout of Goldman (via AIG) is established as a fraud given Hank Paulson and many other Goldman cronies were managing the process...is there any reason we can't reclaim the payments that were made to Goldman via AIG? Seems perfectly analogous but in this case instead of Bernie's investors being defrauded it is the US taxpayer.....
The people at Goldman Sachs are expert in this area.
"The bailout of AIG was not merely about the counterparty financial exposure of the large dealer banks, but was also about the political exposure of the insurance industry and the state insurance regulators, who literally missed the biggest act of financial fraud in US history."
Neither prop trading nor the size of the largest banks are the causes of the financial crisis. Instead, opaque OTC markets, deliberately deceptive structured financial instruments and a general lack of disclosure are the real problems. Bring the closed, bilateral world of OTC markets into the sunlight of multilateral, public price discovery and require SEC registration for all securitizations, and you start down the path to a practical solution. But don't hold your breath waiting for President Obama or the Congress or former Fed chairmen to start that conversation.
http://us1.institutionalriskanalytics.com:80/pub/IRAMain.asp
http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1168292
The Year of the Great Vampire Squid
$24 trillion in Equity owned by the many disappeared... looted & sent out the back door, and turned up in Asia owned by the few.
http://www.scoop.co.nz/stories/print.html?path=HL1001/S00012.htm
http://www.takeitbackday.org/
You really do not get it. The wider public thinks that you are criminals, Mr von Praag (oder sollte ich sagen "Herr von Praag" Your text reflects the same disdain for the public as your aristocratic name and your company.
I do not understand why it is that I should name the achievement of Goldman Sachs and not start with "those who intentionally participated in the distraction of the financial system of the USA, which the people of the USA saved from utter demise. Are you getting my hint. You owe us! Big time! Instead you insult our intelligence (I have worked with Big Wigs before, if everybody knows what many say about normal people ... but you know what I mean). Goldman has lived out it's usefulness. Sooner or later the justice system will judge you. Most like the European Commission will get you first anyway. In Europe you must understand, CEO's who make more than $1.2 Million are highly suspicious of not fulfilling their social responsibility.
You don't have to be obscene to express yourself, I wasn't. Of course my first post hasn't made it past the moderator yet....
From the Office of the Comptroller of the Currency.....
A pocket guide to detecting red flags in board reports. http://www.occ.gov/rf_pock.pdf
One of the 'Red Flags'...
• A large ratio of derivative notional amounts to total assets.
Goldman Sachs quarter ending Sept 2009. (in millions, of course)
Assets: 114,868
Derivatives: 41,971,848
Total Risk Based Capital: 21,320
Total Credit Exposure to Capital: 858%
How's that for a ratio?
Why aren't these guys in jail?
so if our 'Harvard educated leader, with a mother in a history of finance or Ben Bernanke himself could not figure this out....WHY don't we just resolute to having 5th graders run this country, probably would do an honest and far better job...
That's short for "Master of Business Administration", dear.
Goldman Sachs banked on their reputation and got the Bush Administration when they convinced everyone that the only way to prevent catastrophe was to bail out AIG with 100 cents on the dollar.
They have over-drafted on their reputation and is now banking on the gullibility of the American people to believe them with more spin on what happened.
The only credible part from the mouthpiece of Goldman Sachs is that they were entitled to act the way they did, because they were the smartest people on Wall Street who gamed everyone, including the Bush Administration.
Now that the American People demand transparency and accountability, the only way Goldman Sachs can stay afloat is to come clean. You can fool some of the people some of the time. You can even fool all of the people some of the time. You can never fool all of the people, all of the time. The time of reckoning is here.
When it comes the privatization of social security, what financial firm WOULDN'T jump at the opportunity to LEGALLY skim 13% off the top of every American's paycheck?
Think about it...
Forewarned is forearmed.
But for banks actively participating in the derivatives market – admittedly, still a relative handful -- trading income is but one of the benefits they derive -- icing on the cake, as it were. In a recent speech that deserved more attention than it received, Federal Reserve Board Chairman Alan Greenspan endorsed the view that much of the credit for the resilience of the financial system during the economic turbulence of past three years may belong to the improvements in risk measurement and management techniques in use at our leading banks.
http://www.occ.gov/toolkit/newsrelease.aspx?Doc=DEA4O8AY.xml
And take Mr. van Pragg's assessment of the GS view as 'the truth'. After all GS's Total Credit Exposure to Capital was just 858% as reported Sept 30, 2009. That's certainly in the best interests of 'Us Americans'.....Jeesh!
People are not fools and can not be fooled.