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Subpoenaed Documents Show Goldman Sachs Offered to 'Tear Up' AIG Derivatives Contracts at 'Right Price' Before NY Fed Took Over Negotiations


This is not without complexity.  Let us go over what we know.

AIG has said they were negotiating "tear-ups" with counterparties at 50 cents on the dollar before the NY Fed told them to 'stand down' in negotiations with counterparties.  'Stand down' was the exact language from emails unearthed last week by Hugh Son of Bloomberg.

Goldman openly admits that they were willing to tear up contracts with AIG for the 'right price,' as you will see below.

But Goldman CEO Lloyd Blankfein told Angelides and the FCIC panel last week that they were 'never asked' by the the New York Fed negotiators, working on behalf of AIG, to accept any haircut, or less than 100 cents on the dollar.

The only logical conclusion is the following -- somebody's lying. 

Either New York Fed officials lied to investigators and reporters when they said that they had worked for a week to extract haircuts from AIG counterparties.


Goldman Sachs CEO Lloyd Blankfein was lying when he testified under oath that haircuts were never proposed by NY Fed negotiators.

Considering that Goldman has been forthright about the many discussions it had with AIG (pre-bailout) attempting to reach agreement on a tear-up price, it doesn't make sense for them to falsely claim that the NY Fed officials never asked them to take a haircut.

It sounds like Goldman Sachs just threw the New York Federal Reserve, or at least the portion devoted to managing the AIG bailout, squarely and directly in front of a 10-ton House Oversight committee bus, named ISSA.


From Bloomberg

Jan. 26 (Bloomberg) -- Goldman Sachs Group Inc. was the most aggressive bank counterparty to American International Group Inc. before its bailout, demanding more collateral while assigning lower values to real estate assets backed by the insurer, documents obtained by lawmakers show.

A month before the September 2008 rescue, Goldman Sachs approached AIG about tearing up contracts protecting the bank against losses on collateralized debt obligations, or holdings backed by mortgages, according to a BlackRock Inc. presentation dated Nov. 5, 2008. Goldman Sachs was the only counterparty willing to cancel the credit-default swaps and bear the risk of further CDO losses, provided that AIG make payments based on the bank’s larger-than-average estimate of market declines.

“Goldman Sachs is the least risk-averse counterparty,” according to the presentation, which was prepared by the asset manager for AIG and later given to the Federal Reserve Bank of New York. The firm is “the only counterparty willing to tear up CDS with AIG at agreed-upon prices and retain CDO exposure.” The document was obtained by the Congressional panel scheduled to hold a hearing tomorrow on AIG’s $182.3 billion bailout.

The presentation offers the clearest picture yet of the negotiations between AIG and its counterparties before a rescue that fully reimbursed banks including Goldman Sachs for $62.1 billion in CDOs. The BlackRock materials indicate that Goldman Sachs, which has been pilloried by lawmakers for its dealings with AIG, may have been betting that the securities would rebound from the values it assigned to them.

“We had always made it clear that we were prepared to tear up contracts, it just had to be at the right price,” Lucas van Praag, a spokesman for Goldman Sachs in New York, said in an interview. “We’d had many discussions over a long period of time about doing it, I don’t know why BlackRock chose August” as a specific example.

BlackRock indicated that Goldman Sachs might be willing to accept less money than it was entitled to under its AIG contracts because the bank hadn’t received all of the collateral it requested.

“Because Goldman prices have been consistently lower than third-party prices, Goldman and AIG have negotiated a collateral posting protocol in which Goldman’s prices are given a 12 percent positive haircut for collateral posting,” the document says.

AIG posted about $6 billion in collateral to Goldman Sachs on the contracts before the bailout, according to the BlackRock document, a third of the sum that the insurer turned over to banks. Goldman Sachs’s bets accounted for about 22 percent of the assets insured by AIG through the swaps.

Goldman Sachs, the most profitable securities firm in Wall Street history, was allowed to keep collateral, including $2.5 billion posted after the bailout, and given $5.6 billion from Maiden Lane III in exchange for the CDOs in the deal to retire the swaps.

Goldman Sachs’s portfolio was expected to experience larger losses than the overall AIG portfolio because of so-called Alt-A residential mortgage-backed securities, BlackRock says in the document. While 38 percent of the assets covered by AIG’s agreement with Goldman Sachs were rated AAA, 25 percent were below investment grade, the document says.

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Reader Comments (30)

The Satanors' systems are up and running again. Just wrote Bayh telling him to vote "No" on cloture, and to dump Bernanke.
Jan 26, 2010 at 12:48 PM | Unregistered CommenterJames H
Top Economists - Another Economic Disaster Coming





seekanddestroy, we are already paying higher rates to the banks. These banks that lost a ton of cash jacked up rates on credit cards and other loans, then dropped interested on CD's and Savings. That is one reason they made money last year. It don't matter what the gov does in the form of new taxes, when ever a bank needs money they are going to bleed it from the people who do business with them.
Jan 26, 2010 at 12:51 PM | Unregistered CommenterKen


Founding Fathers of Our Republic:An Oath once taken must live for Eternity!

"Revolution is brewing", sounds like a fine
business to get into right now.
Jan 26, 2010 at 3:16 PM | Unregistered CommenterKen
Gobias says...$25 million to consult on the law, how the rich get richer. Obama got a Jimmy Buffett concert during his campaign and good old Vinnie the Donor is going to get paid.

My father always said that there's no free ride
You've got to make a sacrifice
With so many prophets on the Lord's side
Even your soul has got a price
But talk is cheapIt takes money to buy your freedom
And the tax man's knockin' on your door
Chorus:Spend it while you can
Money's contrabandYou can't take it with you when you go
Spend it while you can
Befoer it's taken from your hand
There's no free ride in this carnival world
Too many hawkwe on this traveling show
Everybody's got something to sell
Bootleg Swatches, cardboard Gucci gear
Watch your step at the wishing well
What's mine is mineIt's only one thin dime
My cash has always meant to flow


Despite President Obama's long history of criticizing the Bush administration for "sweetheart deals" with favored contractors, the Obama administration this month awarded a $25 million federal contract for work in Afghanistan to a company owned by a Democratic campaign contributor without entertaining competitive bids, Fox News has learned.

The contract, awarded on Jan. 4 to Checchi & Company Consulting, Inc., a Washington-based firm owned by economist and Democratic donor Vincent V. Checchi, will pay the firm $24,673,427 to provide "rule of law stabilization services" in war-torn Afghanistan.

A synopsis of the contract published on the USAID Web site says Checchi & Company will "train the next generation of legal professionals" throughout the Afghan provinces and thereby "develop the capacity of Afghanistan's justice system to be accessible, reliable, and fair."
Jan 26, 2010 at 5:54 PM | Unregistered Commentergobias
What an accurately DESCRIPTIVE title for the United States of America; "CLUSTERFUCK NATION".

Let us take a brief moment in order to carefully analyze this word and its meaning:

"CLUSTERFUCK (plural clusterfucks)(alternate spelling 'cluster fuck')

Reportedly coined by the hippie poet Ed Sanders in the 1960s, in the form "Mongolian clusterfuck"; it was frequently used in the military.
1.(vulgar) A chaotic mess that might be compared to group sex, in which participants are so intertwined and intermingled that they might penetrate each other rather than their intended target. Its more precise usage describes a particular kind of Catch-22, in which multiple complicated problems mutually interfere with each other's solution. The looser usage, referring to any chaotic situation, probably prevails."

So there you have it. From now on, whenever you hear another debate between those who claim this country is a "democracy" and those who contend it's a "republic", YOU can now proudly hold your head up high and say aloud "you're BOTH wrong!" and then you can chime-in with the CORRECT response;

Jan 26, 2010 at 6:38 PM | Unregistered CommenterRecoverylessRecovery
PS: Again I would like to draw everyone's attention to the UNCANNY resemblance between Henry Paulson & Lex Luthor.

Coincidence? I think NOT.
Jan 26, 2010 at 7:27 PM | Unregistered CommenterRecoverylessRecovery
Timmy is about to get a lesson in Goldman back stabbing. Goldman feeling the heat, protected their boy Hank Paulson, and pushed/shoved/kicked little Timmy in front of an investigation. Dear Tim, you sleep with snakes, your goiing to get bit
Jan 26, 2010 at 8:58 PM | Unregistered CommenterBenny and the Talibanks
Federal Reserve Bank conflict of interest and FRAUD

1. How is it that the Federal Reserve Bank was negotiating with AIG when it was not a counterparty to the CDSs? (or was it?)
2. How is it that the Federal Reserve Bank was negotiating on behalf of AIG with its owner banks?
3. How is it that the Federal Reserve Bank demanded that the Treasury pay off its owner banks at 100% on the dollar after it was the Fed itself that agreed to the 100% payment?
4. How is it that the Federal Reserv Bank charged the Treasury interest to pay off its owner banks at 100%?

Who the hell does the Federal Reserve Bank think it is? Does it think it is the government/dictator of the US? Does it think it owns the US and the US government? No one elected the Fed to run the US!

Too interconnected? YES! Too interconnected to fail? I think not! Kill the Fed and put the power to create money back with Congress!

Is it true that prior to the criminal Federal Reserve Bank that no other fake-o fiat currency lasted more than 64 years?

Jan 26, 2010 at 9:32 PM | Unregistered CommenterKen

Inside Wells Fargo action....CRIMINAL MEDIA WILL NOT BROADCAST These events


Duck Tales Inflation Lesson

clearing house dtc swaps and no real cash its a polished turd like wamu

Jan 26, 2010 at 9:44 PM | Unregistered CommenterKen
this is HUGE. If Blankfein perjured himself under oath, he could theoretically face prison!
Jan 27, 2010 at 12:21 AM | Unregistered Commenteradam
EBAY to list Little Barry statue...okay...not yet...but it could happen...hope hope!!!

Indonesia mulls tearing down Obama statue
(AFP) – 1 day ago

JAKARTA — Indonesian authorities said Monday they are considering a petition to tear down a statue of US President Barack Obama as a boy, only a month after the bronze was unveiled in Jakarta.

The statue of "Little Barry" -- as Obama was known when he lived in the capital in the late 1960s -- stands in central Jakarta's Menteng Park, a short walk from the US president's former elementary school.

Critics say the site should have been used to honour an Indonesian and 55,000 people have joined a page on social networking website Facebook calling for the statue to be removed.
Jan 27, 2010 at 12:59 AM | Unregistered Commentergobias
Indonesians are just a bunch of right-wing, racist, tea-bagging rednecks who want America to fail. (Right?)
Jan 27, 2010 at 1:03 AM | Unregistered CommenterJames H
So when it is on Ebay, you will be bidding?
Jan 27, 2010 at 1:25 AM | Unregistered Commentergobias
Gobias, wouldn't you love to have a Little Barry statue out on your front lawn? Oh, think of the possibilities...
Jan 27, 2010 at 1:29 AM | Unregistered CommenterJames H
I don't want to get my hopes up but yes, many possibilities.
Jan 27, 2010 at 1:31 AM | Unregistered Commentergobias
decent feather in our cap...

time magazine's finance blog and the Financial Times both picked up this story independently...i did not send it to them


Jan 27, 2010 at 9:11 AM | Registered CommenterDailyBail
Gobias, Here is a little present for you--a laugh (you like fun, don't you?): http://www.youtube.com/watch?v=druQ6olIfm4&feature=player_embedded
Jan 27, 2010 at 9:38 AM | Unregistered CommenterSonic Ninja Kitty
Congrats on the feathers, DB.
Jan 27, 2010 at 9:41 AM | Unregistered CommenterJames H
SNK...I agree with the basket bunch...he is a stinking liar.

Thanks for the laugh.
Jan 27, 2010 at 6:44 PM | Unregistered Commentergobias
cheyenne...jeez dude...this is pretty freaking cool...had you already told me about this site and i overlooked it somehow.?.i just found it thru a retweet from months ago...

Bailout The Movie...


for regulars...this is cheyenne's movie...still in production, but soon to dominate cineplexes...
May 26, 2011 at 1:53 AM | Registered CommenterDailyBail
I be loving me some CLUSTERFUCK NATION EVERY Monday.
May 26, 2011 at 2:12 AM | Unregistered CommenterTR
May 26, 2011 at 2:16 AM | Unregistered CommenterDaily Bail
The Fed Does It Again: $80 Billion Secretive "Bank Subsidy" Program Uncovered, Providing Bank Loans At 0.01% Interest



Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, tapped the program most in December 2008, when data on the New York Fed website show the loans were least expensive. The lowest winning bid at an ST OMO auction declined to 0.01 percent on Dec. 30, 2008, New York Fed data show. At the time, the rate charged at the discount window was 0.5 percent." Yes, that Goldman Sachs. The same one that perjured itself when it said before the FCIC that it only used de minimis emergency borrowings. Just how many more top secret taxpayer subsidies will emerge were being used by the Fed to keep the kleptocratic status quo in charge?
May 26, 2011 at 9:17 AM | Unregistered Commenterjohn
saw that john...unfuckingbelievable
May 26, 2011 at 10:52 AM | Registered CommenterDailyBail
"Unfuckingbelieveble" is being too polite.
May 26, 2011 at 11:09 AM | Unregistered Commenterjohn

No, I hadn't mentioned it. I'm still recovering from the 16-day production trip, which was rife with 16-hour work days. I'll snap out of my lacuna here in a few days and start posting on the site. But after being away for that long, the signs of deseutude abound around me. My well in Vietnam, for example, is shot, necessitating vile acts on my overgrown lawn.

I think we stand a good shot at making Sundance. We'll see. For sure there's never been a documentary that does what we do. I interviewed Denninger last week, which was just dynamite. Karl is flat-out the smartest person I've ever met, and he's a chill dude to boot. Interviews with Marcy Kaptur (D, OH-9) and Noam Chomsky and Tom Morello (RATM) to come. I feel like we're catching a wave.
May 26, 2011 at 11:47 AM | Unregistered CommenterCheyenne
unless you send me a text otherwise, i'm linking to your website in today's front page links...let me know...
May 26, 2011 at 12:07 PM | Registered CommenterDailyBail
The trailer of Cheynnes' movie is dynamite and love the animation. This is going to be interesting..... I can't wait for the finished product.
May 26, 2011 at 12:15 PM | Unregistered Commenterjohn
Thanks, DB, go ahead. No time like the present. The movie's gonna be kickass.

And btw, DB readers, DB himself is gonna have a key role in the film. As for timing, our goal is Sundance 01/12. Private screenings before that, of course, for regular DB readers. Stay tuned...
May 26, 2011 at 12:21 PM | Unregistered CommenterCheyenne

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