Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search


(55,745 posts)
61. Right. Control Fraud along with repeal of Glass Steagall.
Tue Jun 21, 2016, 12:20 AM
Jun 2016
Goldman AIG To Become Obama's New Scandal

By William K. Black
New Economic Perspectives, June 9, 2015


The bailout of Goldman via AIG had two parts. The largely fraudulently-originated mortgages backing Goldman's CDOs suffered crushing defaults as the housing bubble burst and the bad loans could no longer be refinanced to delay the loss recognition. The credit rating agencies, whose managers became wealthy by selling enormously inflated ratings to toxic CDOs and mortgage-backed securities (MBS) finally began to recognize reality and engaged in, by far, the greatest and quickest rating downgrades in history. This should have triggered AIG's obligation to pay the CDS protection for vast amounts of toxic CDOs and MBS - but that would have rendered AIG insolvent and the CDO and MBS holders would have had to recognize vast losses. Other entities that sold CDS protection were in a similar position to AIG and they began negotiating deals to pay roughly 15 cents on the dollar of their obligation. It is better to get 15 cents on the dollar now than risk getting close to zero 18 months from now after the firm that sold you illusory CDS protection is liquidated in a bankruptcy proceeding. This kind of commercial workout is the norm in big finance.

Goldman had already received the twin direct bailouts provided by the Fed and Treasury (through the TARP program). Absent similar bailouts every one of the largest banks in the U.S. and the EU would have failed as the financial markets froze and the economy went into freefall.

But Goldman was the primary indirect beneficiary of two federal bailouts through AIG. The first bailout of AIG was the U.S. purchase of most of most of AIG's equity at a price far above market value. Absent this bailout AIG would have had to declare bankruptcy in Fall 2008. This bailout was strongly pushed by what became the U.S. bailout troika - Ben Bernanke (the Fed Chairman), Timothy Geithner (President of N.Y. Fed), and Hank Paulson (Treasury Secretary). Yes, the same Hank Paulson who was made even wealthier by leading Goldman's purchase of huge amounts of toxic CDOs and MBS and illusory CDS "protection" from AIG.

Goldman is known as "Government Sachs" because of its incestuous relationship with government. Bob Rubin had run Goldman before becoming President Clinton's Treasury Secretary. The Bush and Obama administration were infested with Goldman alums in key positions. The Obama administration also had Rubin protégés like Geithner controlling most of the top financial positions. Indeed, for extensive periods every top Obama economics official has been a Rubin protégé.

While Geithner is famous for his faux indignation that people believed from his slavish devotion to furthering the interests of the wealthiest and most criminal banksters that he had worked at a Wall Street firm, everyone knows that the NY Fed is Wall Street. It functions for Wall Street's CEOs, not the American people, regardless of what administration is in power. Geithner, who has now, formally, joined Wall Street and been made even wealthier, is one of the three most infamous financial regulators in U.S. history. He shares that dishonor with Bernanke and the worst-of-the-worst, Alan Greenspan. The Financial Crisis Inquiry Commission (and even the Fed's own external report) confirm what we all knew - even among the embarrassment that was "Fed Lite" regulation globally, the NY Fed stood out as uniquely terrible because of its servile approach to the elite banksters.



Even if AIG repaid every cent on the dollar, they were made whole courtesy of the US taxpayer, millions of whom were tossed from their homes in the process.
Great reminder. Thank you for posting! shakedown1970 Jun 2016 #1
Why Hillary R. Clinton, of course! 1StrongBlackMan Jun 2016 #2
No. Her husband, who works in UBS Wealth Management with Phil Gramm. Octafish Jun 2016 #5
And, Mr./Ms. Octafish should be held to account for your sins? 1StrongBlackMan Jun 2016 #6
And I haven't? Octafish Jun 2016 #7
If you have, you probably didn't like it ... 1StrongBlackMan Jun 2016 #9
Either converse and say something, or think of questions that have a point... MrMickeysMom Jun 2016 #21
1strongbackman likes to read things.... AlbertCat Jun 2016 #19
Funny ... I have said the same thing about you ... 1StrongBlackMan Jun 2016 #22
I have said the same thing about you . AlbertCat Jun 2016 #29
Okay ... I COULD say the same thing about you ... 1StrongBlackMan Jun 2016 #35
I can't figure out arikara Jun 2016 #38
I, initially, was asking how, or why, President Bill Clinton's signing the repeal of G-S ... 1StrongBlackMan Jun 2016 #40
Thank you for clarifying. arikara Jun 2016 #42
Or, maybe, that she had anything to do with the repeal. There is that possibly. No? 1StrongBlackMan Jun 2016 #43
Is this better? arikara Jun 2016 #44
Or, that she, perhaps, had NOTHING to do with the repeal of G-S ... 1StrongBlackMan Jun 2016 #45
Possibly arikara Jun 2016 #46
When did they ... 1StrongBlackMan Jun 2016 #47
Whether she did or did not, she's now on record as being against re-reinstating it as Bernie wants. whathehell Jun 2016 #51
the question is she for reinstating it? hollysmom Jun 2016 #54
No. She is not for reinstating G-S; however, ... 1StrongBlackMan Jun 2016 #55
Hillary says so. She says its the 2 for 1 presidency!! avaistheone1 Jun 2016 #58
She said that 18 years after G-S and with her election ... 1StrongBlackMan Jun 2016 #63
So it wasn't Hillary clinton ? gwheezie Jun 2016 #27
Isn't Bill the one that Sen Clinton says will be in charge of the economy? Winston.Smith Jun 2016 #52
Yup. avaistheone1 Jun 2016 #60
Do I detect that you don't care about the protections of Glass-Steagall? rhett o rick Jun 2016 #11
Glass-Steagall wouldn't have protected us from the 2007-8 crash, which was pnwmom Jun 2016 #14
Actually it would have AgingAmerican Jun 2016 #17
That is factually incorrect ... The shadow banks were unafected by G-S ... 1StrongBlackMan Jun 2016 #24
That's their story and they're sticking to it. seabeckind Jun 2016 #18
That is the corporate talking points. They desperately wanted Bill Clinton to sign rhett o rick Jun 2016 #25
I will respond, though it has been explained time, and time and time again ... 1StrongBlackMan Jun 2016 #23
You are defending those that made an easy $12 trillion dollars that came from the middle rhett o rick Jun 2016 #26
No, I'm not! I merely recognize that ... 1StrongBlackMan Jun 2016 #36
Why then was it so important to repeal it? Your rationalization comes directly from those that rhett o rick Jun 2016 #37
I have made no "rationalization" ... 1StrongBlackMan Jun 2016 #41
Those 25 people are much wealthier today. The rest of us not so much. We really have become floriduck Jun 2016 #3
Sheldon Adelson the casino operator saw his fortune grow $2 billion in one day. Octafish Jun 2016 #32
Looks like Bill may get to finish off any remaining regulations. djean111 Jun 2016 #4
Chicago School of Austerity Octafish Jun 2016 #33
k&r.. disillusioned73 Jun 2016 #8
Strange how it's OK for Banksters to loot trillions and toss millions from their homes... Octafish Jun 2016 #62
OMG, I never realized so many Democrats voted for that.. DianaForRussFeingold Jun 2016 #10
Thanks, Diana. We support Russ, too! Duval Jun 2016 #16
Thanks Octafish. rhett o rick Jun 2016 #12
It was the work of Phil Gramm, now with USB, of course. Zen Democrat Jun 2016 #13
Watch Bill Clinton, Larry Summers, and Phil Gramm Have a Love Fest Over Repeal of Glass Steagall Octafish Jun 2016 #34
I'm sure glad Hillary has kept Bill out of the limelight lately floppyboo Jun 2016 #15
OT but thanks for reminding me. Stryder Jun 2016 #20
I wish he'd be set free arikara Jun 2016 #39
I guess you never read this after I found it for you BootinUp Jun 2016 #28
Did you read my answer? You wouldn't need to guess. Octafish Jun 2016 #30
I did! Thank you for all the awesome history. ancianita Jun 2016 #31
Kicked and recommended. Uncle Joe Jun 2016 #48
K&R felix_numinous Jun 2016 #49
K&R Thanks for posting this. JEB Jun 2016 #50
Some wrongly imply this has been debunked. Octafish Jun 2016 #59
Did Clinton repeal this by executive order? The_Casual_Observer Jun 2016 #53
Gramm pushed bill to repeal Glass-Steagall through Senate... Octafish Jun 2016 #56
The result is far from an open and shut case of what caused the collapse and you know it. The_Casual_Observer Jun 2016 #57
Right. Control Fraud along with repeal of Glass Steagall. Octafish Jun 2016 #61
Latest Discussions»Retired Forums»Video & Multimedia»Who Repealed the Glass-St...»Reply #61