"Of Goldman Sachs, AIG, and a backdoor bailout"

[WhiskeyGirl]

I often wondered if we would see any civil or criminal prosecution for what, in my opinion, was immoral, unethical and possibly criminal behavior.

In one particular security that was hotly questioned by senators, hedge fund owner John Paulson's firm hand-picked the mortgages to be bundled in one RMBS -- marketed through Goldman -- planning to bet on the securities' failure. He made a billion dollars on this investment alone, and reportedly $3.7 billion dollars in 2008.

Not bad work if you have the connections. The investment banks continued to fuel the debt and capital markets with bad instruments destined to destroy the housing market, and profited by billions.

And that $15 billion back-door bailout? AIG had sold 30 times more insurance in CDOs than it could pay off when real estate crashed -- the precursor of the $186 billion in bailout funds AIG received.

I laughed when Goldman chief executive Lloyd Blankfein told senators that his company made $500 million in real estate-related investments in 2006, but lost $1.7 billion the following year.

Even though AIG bond- and stockholder's saw the value of their investment reduced to pennies on the dollar, AIG paid off the CDO holders fully from the insurance payoff. For Goldman, it was a $15 billion payoff.

Market maker or market destroyer?

more here - http://www.heraldtribune.com/article/20100510/COLUMNIST/5101010/2055/NEWS

Is this like Toyota knowingly selling cars with breaks that fail after two weeks?