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Tuesday
Sep282010

European Pressure On Hank Paulson: New Details On Why AIG Was Bailed Out After Lehman Had Been Allowed To Fail

lloyd blankfein talks to hank paulson

lloyd blankfein points a gun at henry paulson

New information from German Finance Minister Peer Steinbruck on private AIG crisis discussions with Paulson.  Panic would be an understatement.

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The obvious answer is Government Sachs, which we've covered in detail:

However, remember that outside of Goldman Sachs, Deutsche Bank and Societe Generale received more than any other banks in the AIG bailout pulling in $12 billion each versus $14 billion for Goldman.

According to German Central Banking Chairman Peer Steinbruck, it was as a result of direct pressure on Paulson from European leaders.

 

Excerpt:

In a SPIEGEL interview, former German Finance Minister Peer Steinbrück talks about his role in fighting the financial crisis, how he pressured America to stop a second Lehman Brothers and why Greece is not out of the woods yet.

#

SPIEGEL: It's been almost two years since the financial crisis reached its climax. Has the worst been overcome?

Steinbrück: No one knows. There are still deep-seated structural problems that threaten the economic balance in the world: Between the United States and China, for example, but also within Europe. We have taken a few steps toward taming the financial markets, but we haven't come nearly far enough to rule out a repetition of the crisis. The most important question hasn't been answered yet: Who's in charge, politicians or the financial industry?

SPIEGEL: In your new book "Unterm Strich" ("The Bottom Line"), you clearly have no doubt that the politicians were not in control, at least not in those dramatic fall days in 2008.  How close did the world come to a total crash?

Steinbrück: The investment bank Lehman Brothers collapsed on Sept. 15, 2008, and the world's largest insurance company, AIG, was threatened with the same fate.  I'm convinced that if AIG had gone under, the financial sector would have reached a melting point.  The world was indeed at the brink of disaster.

SPIEGEL: Were you alone in your assessment?

Steinbrück: No, my European counterparts agreed with me: Christine Lagarde from France, Alistair Darling from Great Britain, Wouter Bos from the Netherlands and, not least, the central bank governors from (Bundesbank President) Axel Weber to European Central Bank President Jean-Claude Trichet.  Then, in a coordinated telephone campaign, we implored then-US Treasury Secretary Henry Paulson not to risk a second case like Lehman Brothers under any circumstances.

SPIEGEL: Are you saying that without European intervention there would have been a crash?

Steinbrück:  We had a frank talk with Paulson in any case.  The Lehman decision had triggered an earthquake worldwide. We wanted to know: What on earth are you trying to do?  Does it have something to do with the presidential election campaign, or are you trying to set an example?  We tried to make it clear to our US counterpart, disregarding all diplomatic conventions, that it would be a disaster if AIG failed.

SPIEGEL: Did Paulson know that the Lehman bankruptcy was a huge mistake?

Steinbrück: He never admitted it to me -- or to anyone else, I believe.  But there have been signs from the Americans that make me think they completely underestimated the consequences of the Lehman crash.  They didn't think it possible that its bankruptcy would trigger such an unimaginable shock wave.

SPIEGEL: How often did you speak with Paulson on the phone during that week?

Steinbrück: Twice.

SPIEGEL: For how long?

Steinbrück: Not long. Paulson himself was under enormous stress at the time.  He was constantly going from one meeting to the next, so you don't waste time with chitchat.  The conversations might have lasted five or 10 minutes -- no more.

SPIEGEL: Did you raise your voice?

Steinbrück: Never.

 

 

 

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Reader Comments (17)

Goldman Sachs Wins Big In Secret Bailout Via AIG

http://www.businessinsider.com/henry-blodget-goldman-sachs-wins-big-in-secret-bailout-via-aig-2009-3#ixzz10oGqfioj

Complete list of AIG counterparties and amounts received from taxpayers...
Sep 28, 2010 at 4:12 AM | Registered CommenterDailyBail
Suspicious Timing Surrounding The "De-risking" of AIG's Toxic Obligations

http://www.huffingtonpost.com/david-fiderer/suspicious-timing-surroun_b_460327.html

By David Fiderer...he's the author of the Jester-Liddy-Paulson piece above...
Sep 28, 2010 at 4:13 AM | Registered CommenterDailyBail
The Times Story On Goldman's Role in AIG's Downfall Is More Damning When Placed In Context

http://www.huffingtonpost.com/david-fiderer/the-times-story-on-goldma_b_454135.html
Sep 28, 2010 at 4:14 AM | Registered CommenterDailyBail
The CDOs That Destroyed AIG: The Big Short Doesn't Quite Reveal What They Knew and When They Knew It

http://www.huffingtonpost.com/david-fiderer/the-cdos-that-destroyed-a_b_499875.html

More great analysis from David Fiderer...
Sep 28, 2010 at 4:15 AM | Registered CommenterDailyBail
Bloomberg Takes a First Step at Piercing the Veil of Secrecy Surrounding Goldman CDOs

http://www.huffingtonpost.com/david-fiderer/bloomberg-takes-a-first-s_b_525991.html
Sep 28, 2010 at 4:16 AM | Registered CommenterDailyBail
Goldman's Blueprint for Dumping Toxic Assets: How These CDOs Were Designed to Fail

http://www.huffingtonpost.com/david-fiderer/goldmans-blueprint-for-du_b_542176.html
Sep 28, 2010 at 4:18 AM | Registered CommenterDailyBail
Hard Evidence of Goldman's Corrupt Intent and the Myth of the Sophisticated Investor

http://www.huffingtonpost.com/david-fiderer/hard-evidence-of-goldmans_b_550057.html
Sep 28, 2010 at 4:19 AM | Registered CommenterDailyBail
To sidestep these issues, Goldman and other major banks found a solution that subverted the laws of supply and demand, and escaped the price discovery of a transparent marketplace. They fabricated synthetic CDOs, such as Abacus 2007 AC-1. These toxic assets, invented out of thin air, made the meltdown worse than it otherwise would have been.

http://www.huffingtonpost.com/david-fiderer/goldmans-cdos-had-nothing_b_552485.html
Sep 28, 2010 at 4:21 AM | Registered CommenterDailyBail
How Goldman Got the S.E.C. to Back Off

The risk to Goldman is that more of its dirty laundry would be exposed. As we learned from David Viniar's testimony before the Financial Crisis Inquiry Commission, the company remains in lockdown mode. And once again, the S.E.C. shows little appetite for digging deeper, especially since its new COO of the Enforcement Division is a 30-year-old kid from Goldman.

http://www.huffingtonpost.com/david-fiderer/why-goldman-got-the-sec-t_b_648439.html
Sep 28, 2010 at 4:23 AM | Registered CommenterDailyBail
Goldman's Half Trillion With a Hedge Fund Is Too Big to Ignore

http://www.huffingtonpost.com/david-fiderer/goldmans-half-trillion-wi_b_658380.html
Sep 28, 2010 at 4:23 AM | Registered CommenterDailyBail
An S.E.C. Lawsuit Does Little to Strip Away the Secrecy Surrounding Certain AIG CDOs

http://www.huffingtonpost.com/david-fiderer/an-sec-lawsuit-does-littl_b_663490.html

Last one...believe it or not, all those links are different...david fiderer has been all over this story...
Sep 28, 2010 at 4:25 AM | Registered CommenterDailyBail
Ah memories - that's my photoshop of Blankfein with the gun on Paulson....

Found Lloyd with the look I wanted, but the top of his head was missing. Had to paste in the top of his dome from another pic, then cheese in the background to cover Mel Gibson's hair (from "Lethal Weapon"). Seeing it today makes me wish I'd spent more time on it then.....
Sep 28, 2010 at 9:01 AM | Unregistered Commentermark mchugh
I'm re-posting this here, just in case anyone missed it above:

Suspicious Timing Surrounding The "De-risking" of AIG's Toxic Obligations
http://www.huffingtonpost.com/david-fiderer/suspicious-timing-surroun_b_460327.html
By David Fiderer
---
READ THIS ARTICLE^
If you've ever wondered why the ratings agencies weren't strong-armed into holding off on their downgrade of AIG (which triggered those firm-killing collateral calls), this might explain it.

More to the point, it suggests that the ratings agencies used the downgrades (at whose behest?) to ensure that AIG functioned as a back-door bailout conduit for the banks -- both European and American ones.

I've read most of the stuff that DB has read over the past two years -- which is a ton, but this seems to be the first time that there was clear evidence of criminality rather than mere panic involved in the bailouts. I mean, wow. And it's as opaque as hell -- all the better for the ones trying to get away with it.
Sep 28, 2010 at 11:08 AM | Registered CommenterDr. Pitchfork
Let me just put a fine point on this.

The downgrades of AIG triggered all manner of collateral call, which killed the firm (as a private entity).

Had the ratings agencies laid off, or been asked to by Fed, Treasury, whoever, AIG may have been able to limp along without pumping in quite as many taxpayer dollars.

Instead of laying off of AIG -- we're talking November 2008 and after -- the ratings agencies kept turning the screws, thereby causing more money to flow to the banks in the form of collateral and swap terminations. Why? Because, who the f*** are the ratings agencies, anyway? They're govt-regulated entities that SCREWED UP MASSIVELY in the years leading up to the crisis period -- and our govt. let them wreak more havoc by downgrading a firm that was rescued and backstopped by the US of A????

After it was rescued, AIG should have been upgraded to AAA because the gov. made it clear they weren't going to let it fail, and they had already made it clear that they were never going to negotiate any concessions with swap counterparties. (I'm sure Joe Donnelly (D-IN) and Eric Holder will get to the bottom of this.)
Sep 28, 2010 at 11:17 AM | Registered CommenterDr. Pitchfork
After it was rescued, AIG should have been upgraded to AAA because the gov. made it clear they weren't going to let it fail, and they had already made it clear that they were never going to negotiate any concessions with swap counterparties.

----

You got it Pitchfork...and in this LONG piece from David Fiderer, all the details are exposed..he puts the onus on Dan Jester's failure to get the rating agencies to play ball...Fiderer implies it was done on purpose...that Jester was as useless as "tits on a mule"...all so that the downgrades would trigger and Goldman would get the full amount owed...internal sabotage by jester to benefit goldman...

read this story very carefully...all the detail of what jester failed to do is in here...and also there was the $18 billion paid out to counterparties by newly installed ceo Edward Liddy...that $18 billion changed the tone of negotiations...the banks now held a majority of the collateral and could call the shots...Fiderer implies that this $18 billion should not have been paid out...

http://dailybail.com/home/how-paulson-appointees-former-gs-employees-dan-jester-ed-lid.html

I summarize these details at the beginning of this link...but the details themselves are discussed at length in this story...
Sep 28, 2010 at 11:54 AM | Registered CommenterDailyBail
Ah memories - that's my photoshop of Blankfein with the gun on Paulson....

Found Lloyd with the look I wanted, but the top of his head was missing. Had to paste in the top of his dome from another pic, then cheese in the background to cover Mel Gibson's hair (from "Lethal Weapon"). Seeing it today makes me wish I'd spent more time on it then.....

---

I had no idea you did it...i found the image somewhere on google...your work is getting around...so it was from lethal weapon...that's hilarious...

Your story on elmo and the national debt is coming up later today...
Sep 28, 2010 at 12:07 PM | Registered CommenterDailyBail
Interesting dialogue in which specific European agents of the Global banking dictatorship pressure Paulson. But probably only a tidbit of similar discussions going on simultaneously around the developed world. The discussions we may never hear about are the ones where not Paulson, but the European actors pressuring him, were receiving THEIR marching orders. Including the discussion to eliminate Lehman (Goldman's competition) as the sacrificial lamb to shake up the planned panic reponse ... So as to accelerate the bailout looting.

I wasn't always a conspiracy theorist, and I think that term is undergoing change as we speak, but 2 years ago when I first started researching article links for letthemfail you would hardly EVER see anything like this ANYWHERE on the web:

http://ampedstatus.com/the-road-to-world-war-iii-the-global-banking-cartel-has-one-card-left-to-play

Maybe a little something here and there, like on Rense or some Zionist pulp-site. But today, the assumptions in this article, backed more and more by respectable sources, are proliferating. The bigger picture is coming into focus thanks to sources with the courage to question the motives of the global financial elite and their central banking cabal.

DB is one of those sources.
Sep 28, 2010 at 12:43 PM | Unregistered CommenterWil Martindale

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