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Author Topic: AIG, Goldman, and Crony Capitalism  (Read 1121 times)
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WhiskeyGirl
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« on: April 12, 2010, 05:00:00 AM »

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The derivatives unit of American International Group  Inc. has unwound most of its soured mortgage trades with Goldman Sachs Group Inc. still left after the insurer was bailed out by the U.S. government in 2008, according to people familiar with the matter.

The move by AIG Financial Products to terminate credit-default swaps insuring about $3 billion of mortgage-asset pools arranged by Goldman caused AIG to realize a $1.5 billion to $2 billion loss last year, the people said. But the insurer is no longer exposed to declines in the value of these asset pools, called "Abacus," which could have forced AIG to make payouts upon defaults or triggered a costly collateral call.

http://online.wsj.com/article/SB10001424052702304846504575177953123007536.html?mod=WSJ_Heard_MoreInMarkets#articleTabs%3Darticle

How much did this cost taxpayers?  Was Goldman 'taken care of' elsewhere?

Just like the Obama administration uses that phrase in relation to the poor - they are 'taken care of' elsewhere when taxes are discussed, where has Goldman been taken care of?

IndyMac?
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WhiskeyGirl
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« Reply #1 on: April 12, 2010, 05:03:44 AM »

From the comment section -

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The headline should read. THE MONEYLENDER, FULLY GORGED ON THE OLEAGENOUS FLESH OF THE TAXPAYER IS NOW SATED. The search for new desperate victims can begin.

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Time for some civil law suits against Teflon Goldman aside from the ones they have already quietly settled. What has happened to fiduciary responsibility? The true story if and when it comes out it will then be realized that Goldman stiffed a lot of institutions and retirement programs. The trustees and officers of these firms, along with their highly paid Dependent Accountants, keep this junk hidden on the books at face value.

Take a look at the Fed's balance sheet that is issued every Thursday and explain to me what those assets actually are and who is supplying the funds for the 50:1 leverage. It is clear to me that the Federal Reserve System should be required to open it books so the trillions of dollars of paper they hold can be evaluated. Their secrecy serves no one but the elites. A slight increase in interest rates would wipe out the 2% equity of the Fed.

The "Beltway/NYC cabal has been ripping off the hard working citizens for decades. And to throw sand in our face the Treasury pays a commission to the chosen few ( for kickback political contributions) government bond dealers for putting future generations in hock. The fact of the matter is Bob Rubin was the architect of this in the nineties and the powers that be know that if their was a true audit this house of cards would collapse like Freddie Mac and FNMA, another fraud going back to Franklin Raines and the Clinton Administration. The effete Republicans went along to get along (and get wealthy). Political fraud is definitely bi-partisan which is why we need a Referendum for Congressional Term Limits as we all know that the incumbents have the money and power and are not about to give it up without a fight.

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So AIG locked in a 66% loss. Now we know what the nadir of the subprime debt is. Goldman "agreed" to tear up the contracts when they sucked all they blood out of them that they could.

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Income tax is how Our government collects the Interest on Our National Debt.
The I.R.S. is the Collection Agency.

This is Very Weird! Why do “We the People” pay Interest to International Bankers?
We are NOT their slaves. They are Not needed. They are a BIG Problem – Worldwide!

The Federal Reserve Bank is Set Up as a Privately Owned Banking Cartel Controlled by a Small Elitist Group of Powerful International Bankers.

Do you Get It Yet?

The Interest “We the People” pay on our National Debt is now over 700 Billion Dollars a Year.

Over $700,000,000,000.00 a Year Interest on Money Created AS DEBT --- Out Of Thin Air!

It’s OUR money. Why are we paying this? Wake Up America!

"We the People" should NOT pay this Anymore!

We need to do what Abraham Lincoln did and direct the Treasury Department to issue U.S. Notes to pay off all our national debt. Remember the “Greenbacks”?

We must never again allow private banks to create or control Our money! Why should we pay interest on OUR money! We must never again allow our “public servants”, to keep any secrets about OUR money! Our big mistake was to trust our government. They can not be trusted! History has taught us this, over and over again. We have been warned over and over again. Why do you think we have so many economic problems now?

Complete Accountability to “We the People” who hold the True Power prevents Fraud, Abuse and Corruption. Good government must ALWAYS be kept In Check.

The Only Real Financial Crisis of the U.S.A. Is Hiding In The Audit Of “The Fed Scam”!

“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” –Abraham Lincoln

WE DON’T NEED TO JUST AUDIT “THE FED SCAM”

WE NEED TO CUT OFF ITS UGLY HEAD ONCE AND FOR ALL!

Where is our Missing Trillions?

http://www.tomdavidd.com/blog/

All the debt only benefits bankers.  Nothing for Main Street.
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #2 on: April 12, 2010, 05:08:33 AM »

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CEO Lloyd Blankfein signed a letter to shareholders for the Goldman Sachs annual report to shareholders, explaining the company’s position on issues that have been giving it public relations heartburn. It says Goldman Sachs acted properly in its dealings with AIG. And it says that it wasn’t betting against its clients on securities related to residential mortgages. The explanations aren’t new, but….

There were a number of reports that Goldman Sachs was betting against its clients, including this one by Gretchen Morgenson in the New York Times last December. There is a brief explanation of one way to do this, used by the hedge fund Magnetar, in this post, and a longer discussion here. Magnetar denies that it did anything wrong, and specifically denies that it would make more money if the CDOs tanked.

Blankfein tells his investors that the market for residential mortgage related products and subprime securities was volatile in the first half of 2007. Its customers all had their own views of the future, positive and negative. Clients

    … came to Goldman Sachs and other financial intermediaries to establish long and short exposures to the residential housing market through RMBS, CDOs CDS and other types of instruments or transactions.
    …
    Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a “bet against our clients.” Rather, they served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits.

The NYT article describes Goldman Sachs’ use of CDOs to bet against the housing market. Some of these CDOs were designed to hedge against losses in the company’s inventory of residential real estate backed mortgage securities. One of the CDOs, called Abacus, was a synthetic CDO. Morgenson explains:

    Abacus allowed investors to bet for or against the mortgage securities that were linked to the deal. The C.D.O.’s didn’t contain actual mortgages. Instead, they consisted of credit-default swaps, a type of insurance that pays out when a borrower defaults. These swaps made it much easier to place large bets on mortgage failures.

    Rather than persuading his customers to make negative bets on Abacus, Mr. Egol kept most of these wagers for his firm, said five former Goldman employees who spoke on the condition of anonymity. On occasion, he allowed some hedge funds to take some of the short trades.

There is nothing there that would be inconsistent with the Magnetar strategy. Among other things, the Magnetar strategy works best if the CDO fails, and the Abacus deals were flops.
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Goldman Sachs creates a new definition of “market maker”, someone who enables speculation. Blankfein thinks his company has no responsibility to share information it gathered in its position as “market maker” with the people it invites to the new casino. Evan Newmark, a columnist in the Wall Street Journal, nails the issue: are the investors customers or counterparties?

more here - http://firedoglake.com/2010/04/11/goldman-sachs-explains-itself-we-weren%E2%80%99t-betting-against-customers-just-betting-differently/
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #3 on: April 12, 2010, 05:10:01 AM »

From the comments -

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Synoia April 11th, 2010 at 10:50 am

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    Of course, it knew what kind of assets were in the Abacus deals, which probably helped it have an opinion.

Is this insider information? I know of no public source for such information.

And you can guess where I’m going with that question.

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masaccio April 11th, 2010 at 11:16 am
4
In response to Synoia @ 2

Remember, GS created the Abacus deals so it knew exactly what was in them. Investors may have known what was in them; that depends on the disclosure they got. I assume they got some kind of offering circular or other sales literature.
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
WhiskeyGirl
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« Reply #4 on: April 12, 2010, 05:12:31 AM »

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readerOfTeaLeaves April 11th, 2010 at 11:22 am
6
In response to masaccio @ 4

But here’s the way that I’m thinking of it:

I’m a ‘market maker’.
I set the specs for the derivative — just as an engineer sets the specs of a desired widget.

Then I pay someone to create the derivative according to my specs.

The fact that my specs are specifically designed to bet against the mortgage market, and that I’m deliberately putting in just enough AAA in one tranch to be able to cover up the stench of the subprimes in the lower tranches, suggests that I know **exactly** what I’m doing.

If I can design the specs, and pay someone to create CDOs that I can then bet against with swaps, I’ve gamed the system.

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masaccio April 11th, 2010 at 11:34 am
9
In response to readerOfTeaLeaves @ 3

The S&L crisis is a good parallel for the Great Crash, but remember, after it happened, people like Bill Black were put in to do some enforcement work, and got a lot of convictions. Now we live in the post-accountability society, as Frank Rich says.

I don’t think we should call it global finance. I think we live in the age of speculation. There are trillions of dollars trying to make outsized returns through speculation instead of from productive investment. Betting against governments has been around for a long time. Remember that is how Soros made money.

The 'post-accountability' society.  That sounds a lot like the Obama administration.  We'll put everything from the healthcare debate on CSPAN.  You'll get to see the lobbyists at the table...
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All my posts are just my humble opinions.  Please take with a grain of salt.  Smile

It doesn't do any good to hate anyone,
they'll end up in your family anyway...
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