BOMBSHELL REPORT: Goldman Sachs Got Billions From Taxpayers Thru AIG For Its OWN Account, Crisis Panel Finds; Contradicting SWORN Testimony From Execs
Editor's Note: Republishing from January.
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Attention prosecutors: perjury dead ahead...
This is big. Viniar is busted for lying and the truth is finally out.
By Shahien Nasiripour
Goldman Got Billions From AIG For It's Own Account
Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account--as opposed to those of its clients or business partners-- has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.
The details underscore the degree to which Goldman--the most profitable securities firm in Wall Street history--benefited directly from the massive emergency bailout of the nation's financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.
- "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman's shareholders," said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public."
When news first broke in 2009 that Goldman had been an indirect beneficiary of the AIG bailout, collecting the full value of some $14 billion in outstanding insurance polices it held with the firm, the officials who brokered the deal justified these terms as a necessary stabilizer for the broader financial system. As the world's largest insurance company, AIG's inability to cover its outstanding obligations could have threatened the solvency of the institutions holding its policies, asserted the Federal Reserve Bank of New York, which oversaw the deal.
- Goldman fended off claims that the arrangement amounted to a backdoor bailout by asserting that none of the money from the AIG rescue landed in its own coffers. Rather, those funds went to compensate clients or institutions on the other side of its trades, Goldman said.
But the report from the financial crisis commission, obtained by The Huffington Post in advance of its release, appears to challenge that assertion: The report reveals another pot of money conveyed to Goldman--the $2.9 billion to cover trades the Wall Street investment house made for itself. That money went straight to the bank's bottom line, according to the report.
Over the last two years, Goldman has reported nearly $22 billion in profits, according to its official earnings statements. During those years, it has paid out $31.6 billion in compensation to its employees.
- According to the report, the financial crisis commission first learned that the $2.9 billion in AIG funds landed in Goldman's account through an e-mail the bank sent to the panel on July 15, 2010 in response to questions.
Previously, Goldman executives had testified that the AIG bailout funds the bank collected went to compensate its clients and institutions that held the other side of its trades.
- At a hearing on July 1, 2010--two weeks before Goldman sent the e-mail acknowledging how $2.9 billion in AIG funds wound up in its own account--the crisis panel questioned Goldman's chief financial officer, David A. Viniar and managing director David Lehman. Both said they knew nothing about AIG funds landing in the bank's private coffers, according to a transcript of the hearing.
The report concludes that Goldman collected the $2.9 billion as payment for so-called proprietary trades made for its own account--essentially successful bets on large pools of financial instruments.
- "The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
"At the time, the idea was the sucker could go down because there wasn't enough liquidity in the system, money wasn't moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.
- In reality, she contends, those fears were overblown: There was ample money in the financial system. Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
The details in the commission's report leave Goldman "naked," she added. "It doesn't have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that's doing stupid credit stuff is you let them eat it, but that didn't happen in the bailout."
Continue reading (there's more)...
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Here is more detail...
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Jul 29, 2011 at 10:50 AM
Reader Comments (21)
I'm sure Eric Holder is all over this one. [sarcasm]
http://www.rawstory.com/rs/2011/01/time-foreign-aid-israel-we-anymore-sen-paul-warns/
http://revolutionarypolitics.tv/video/viewVideo.php?video_id=13676
http://www.thestreet.com/story/10985108/1/panel-spreads-financial-crisis-blame-report.html
http://www.youtube.com/watch?v=4Xkw8ip43Vk
Posted with apologies to Ireland.
Eric Holder should be ashamed to breathe....captured, milquetoast...
I have lost such faith in the US and the Wall Street bankers are no better then the communists who took away my family land.
Scum, I spit on them all.
http://www.youtube.com/watch?v=wN0rcNJXFfI
I guess I'll just die DUMB.
http://www.commondreams.org/further/2011/03/30-0
[snip]
With radiation levels in Japan soaring, the enlightened executives at Goldman Sachs have made their priorities clear to employees inexplicably worried about nuclear plants exploding around them. Stay put, they say, or it will look bad for business. Meanwhile, Sachs analysts have cut growth forecasts for Japan and see "limited near-term upside from current market levels" for copper and other metals. What planet do these people inhabit, and can we move it further away from Earth?
Roger Clemens is currently engaged in a very high profile case where he has been charged with lying to Federal investigators.
Why haven't arrest warrants been sworn for these lying officers of the FED? Clearly they have been lying to investigators and the public since the very beginning of the phony crisis. It is high time these criminals were brought to justice. Or are they to big to fail like all the companies they secretly gave our money to?
I will take a pop at this and say that whatever they pass (debt deal) will somehow retroactively give banks (and others) immunity for the Mortgage Fraud scandal and probably a few other goodies as well (sometime after 5 pm local time wherever you are).....
It is a friday news cycle and thats when the horseshit always seems to goes down.
http://www.housingwire.com/articles/34763-goldman-sachs-to-pay-272-million-in-toxic-mortgage-lawsuit#.Vc4Q7USduLI.twitter
Goldman Sachs (GS) will pay $272 million to settle a lawsuit over losses suffered due to alleged misrepresentations of the quality of mortgage loans that backed crisis-era mortgage-backed securities.
According to a Reuters report, the settlement is with investors led by NECA-IBEW Health & Welfare Fund, an electrical workers' pension fund in Decatur, Illinois.
The lawsuit stretches back to 2008, when NECA-IBEW sued Goldman Sachs, arguing that Goldman made false statements or omitted key information regarding the nature of the mortgages it sold into 17 different trusts during 2007.
From the Reuters report:
NECA-IBEW accused Goldman of misleading investors about the underwriting of home loans backing the securities, including the quality of appraisals and whether borrowers were capable of repaying their loans.
The fund said the securities' prices collapsed during and after the financial crisis, while their credit ratings fell to low, "triple-C" junk grades from "triple-A."
HousingWire covered the lawsuit when it was originally filed.
Here’s HousingWire Publisher Paul Jackson writing about the lawsuit in 2008:
In the Goldman case, NECA-IBEW alleges that Goldman misled investors on the underwriting standards used by various originators, including -- who else? -- Countrywide Financial; other claims center on the use of inflated appraisals by originating entities for the trusts. Many of the loans in the trusts named in the lawsuit are of the reduced-doc, no-doc, stated-income variety, which NECA-IBEW says are rife with fraud.