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Arsonists With Fire Insurance: Goldman And The Collapse Of AIG (Janet Tavakoli)

Janet Tavakoli will not break scent.  She's been pounding similar themes for the last few weeks; first calling for a 95% windfall profits tax on Goldman's ill-gotten, taxpayer-enhanced earnings; then delving last week further into the tangled hedge that was the AIG-Goldman relationship.  This week she's back with another shot at Paulson, Blankfein and crew and the work of God that Goldman does so well.

TSF – Opinion Commentary – November 10, 2009 (last of a series)

Submitted by Janet Tavakoli

Goldman wasn’t the only contributor to the systemic risk that nearly toppled the global financial markets, but it was the key contributor to the systemic risk posed by AIG’s near bankruptcy.  When it came to the credit derivatives American International Group, Inc. (AIG) was required to mark-to-market, Goldman was the 800-pound gorilla.  Calls for billions of dollars in collateral pushed AIG to the edge of disaster.  The entire financial system was imperiled, and Goldman Sachs would have been exposed to billions in devastating losses.

A Goldman spokesman told me its involvement in AIG’s trades was only as an “intermediary,” but that isn’t even close to the full story.  Goldman underwrote some of the CDOs comprising the underlying risk of the protection Goldman bought from AIG.  Goldman also underwrote many of the (tranches of) CDOs owned by some of AIG’s other trading counterparties. 

Even if all of Goldman’s CDOs had been pristine, it poisoned its own well by elsewhere issuing deals like GSAMP Trust 2006-S3 that—along with dodgy deals issued by other financial institutions—eroded market trust in this entire asset class and drove down prices. 

By September 2008, Goldman had approximately $20 billion in transactions with AIG.  Goldman was AIG’s largest counterparty, and its trades made up one-third of AIG's approximately $62.1 billion in transactions requiring market prices.   Societe Generale (SocGen) was AIG’s next largest counterparty with $18.7 billion.  SocGen, Calyon, Bank of Montreal, and Wachovia bought several (tranches) of Goldman’s CDOs and hedged them with AIG.

END OF EXCERPT (Full Document Embedded Below)





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Reader Comments (9)

AMEN Folks


Here is your Treason crime lie Chicago Mob Shill

President Banks Obama: There Will Be No More Secrecy, Unless It Benefits Wall Street Or Nancy Pelosi

Video: President Banks Obama On Transparency -- '08 Campaign Speech

Considering what happened in the dead of Saturday night, this clip seemed quite appropriate. Sounds like Banks Obama also didn't anticipate that this particular $25 Billion AIG secret would ever see the light of day. Clip runs less than 2 minutes.

Watch (don't click unless you're coming from our email newsletter -- video is below)

While you're listening, read how Speaker Pelosi broke her promise to allow taxpayers a minimum of 72 hours to read the House's version of healthcare reform before any vote would be called.

Video: President Banks Obama On Transparency -- '08 Campaign Speech
7 Lies In Under 2 Minutes


Peter Costa: "The US Government Will Be Totally Bankrupt In A Year And A Half"

Not much optimism from one of CNBC's favorite bulls. Yet even Costa is wrong about today's market direction as 7 shares of SPY move the market up by almost half a percent. In the meantime, the gold creep higher continues.
Nov 10, 2009 at 11:45 AM | Unregistered CommenterKen
Tavakoli is a Wall Street wash-out who thinks that her incindiary verbiage is reality
Nov 10, 2009 at 12:09 PM | Unregistered Commenterjj
JJ...Fuck off you goldman shill...and it's spelled incendiary...
Nov 10, 2009 at 12:25 PM | Registered CommenterDailyBail
Nov 10, 2009 at 4:19 PM | Registered CommenterDailyBail
Tavakoli's article specifically states: "Goldman was right to question the prices, make calls for collateral, and protect itself. Goldman’s activity was NOT the same as that of an arsonist buying fire insurance." (emphasis mine)

Yet you title this post, "Arsonists With Fire Insurance." Nice life. Seriously, get a grip — this site has a tenuous relationship with reality.

Just remember: you're the reason people on Wall Street are condescending.
Nov 11, 2009 at 10:31 AM | Unregistered CommenterPE
PE...you're another goldman apologist....and your act wears thin...headlines are used in this way and have been used in this way since the beginning of journalism...they bring people in...you should see some of the mis-leading headlines at Clusterstock for example...they've made it an art...

And yet I submit that this headline is not misleading...in my view they were arsonists...their collateral calls on AIG lit the fire...and their underlying CDOs were the woodstock.
Nov 11, 2009 at 11:00 AM | Registered CommenterDailyBail
Soooo all this time & money spent on invading the WRONG countries while waging wars of aggression and torturing people and bombing woman & children and creating clandestine jails worldwide and spying on your own citizens and ignoring international treaties and rule of law was all for NAUGHT because your REAL ENEMIES were RIGHT THERE among you ON WALL ST all along eating away at your internal organs leaving the US only a hollow shell of a nation held together only by fraudulent promissory notes, some Elmer's Glue while teetering on the edge of complete fiscal implosion? The irony.

Now, the global worldwide community's heart goes out to you poor bastards. ...**NOT**!!!.
Hello again Change You Can't Believe In ..nice new name. I can still tell it is you, same ignorance.
Nov 11, 2009 at 7:41 PM | Unregistered Commentergobias
"Hello again Change You Can't Believe In ..nice new name. I can still tell it is you, same ignorance. "

Gobias, that is actually funny, LOL...
Nov 11, 2009 at 10:08 PM | Unregistered CommenterS. Gompers

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