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.
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Reader Comments (9)
HOUSE OF "DECEPTION AND LIES" NOW PLAYING IN WHITE HOUSE
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
http://www.youtube.com/watch?v=UErR7i2onW0&feature=player_embedded
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.
http://www.zerohedge.com/article/peter-costa-us-government-will-be-totally-bankrupt-year-and-half
http://www.businessinsider.com/henry-blodget-mishkin-its-cool-that-the-fed-is-blowing-another-asset-bubble-because-this-kind-of-bubble-is-harmless-2009-11
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.
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.
Now, the global worldwide community's heart goes out to you poor bastards. ...**NOT**!!!.
Gobias, that is actually funny, LOL...