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Goldman Sachs had up to $20 bln AIG risk-NY Times (Paulson protected GS with $85 B taxpayer bailout)

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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:21 PM
Original message
Goldman Sachs had up to $20 bln AIG risk-NY Times (Paulson protected GS with $85 B taxpayer bailout)
Source: Reuters

NEW YORK, Sept 28 (Reuters) - Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) had as much as $20 billion at risk had the insurer American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) collapsed, the New York Times said on Sunday.

Goldman was AIG's largest trading partner, the newspaper said, citing six people close to the insurer. A collapse of AIG threatened to leave a hole of as much as $20 billion in Goldman, the newspaper said, citing several of the people.

The Wall Street bank told the newspaper that it was never imperiled by AIG's troubles. Spokesman Lucas van Praag also disputed the $20 billion figure, saying it did not account for collateral and hedges that Goldman employed to reduce risk.

The AIG bailout came after the New York-based insurer saw losses spiral on credit default swaps, which are insurance contracts whose value is tied to underlying securities such as mortgages and corporate debt.

<snip>

David Viniar, Goldman's chief financial officer, told analysts on Sept. 16, hours before the bailout was announced, that Goldman's exposure to AIG was immaterial.

Read more: http://www.reuters.com/article/bondsNews/idUSN283400172...



here's the New York Times article

Behind Insurer’s Crisis, Blind Eye to a Web of Risk

Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.

As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.

The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.

Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.


:nuke:

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aquart Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:23 PM
Response to Original message
1. Can you say, "Conflict of interest"?
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:32 PM
Response to Reply #1
5. prison stripes and stripping of all financial assets is too small of a penalty
for these criminals.

Hard labor at the rocks with a pickaxe while wearing chains in the hot southern sun is too good for them.

:nuke:
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:38 PM
Response to Reply #5
6. A.I.G. Financial Products paid its employees $3.56 billion during the last seven years.
more from the link

Since A.I.G. itself was a highly rated company, it did not have to post collateral on the insurance it wrote, analysts said. That made the contracts all the more profitable.

These insurance products were known as “credit default swaps,” or C.D.S.’s in Wall Street argot, and the London unit used them to turn itself into a cash register.

The unit’s revenue rose to $3.26 billion in 2005 from $737 million in 1999. Operating income at the unit also grew, rising to 17.5 percent of A.I.G.’s overall operating income in 2005, compared with 4.2 percent in 1999.

Profit margins on the business were enormous. In 2002, operating income was 44 percent of revenue; in 2005, it reached 83 percent.

Mr. Cassano and his colleagues minted tidy fortunes during these high-cotton years. Since 2001, compensation at the small unit ranged from $423 million to $616 million each year, according to corporate filings. That meant that on average each person in the unit made more than $1 million a year.

In fact, compensation expenses took a large percentage of the unit’s revenue. In lean years it was 33 percent; in fatter ones 46 percent. Over all, A.I.G. Financial Products paid its employees $3.56 billion during the last seven years.


seven years - hmmmm.....

oh yeah! that's how long these assclowns have held our country hostage!
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:42 PM
Response to Reply #1
8. The ($85 bln bailout) plan saved the insurer&#8217;s trading partners but decimated its shareholders...
from further down in the NYTimes

Of course, as this intricate skein expanded over the years, it meant that the participants were linked to one another by contracts that existed for the most part inside the financial world’s version of a black box.

Goldman Sachs was a member of A.I.G.’s derivatives club, according to people familiar with the operation. It was a customer of A.I.G.’s credit insurance and also acted as an intermediary for trades between A.I.G. and its other clients.

Few knew of Goldman’s exposure to A.I.G. When the insurer’s flameout became public, David A. Viniar, Goldman’s chief financial officer, assured analysts on Sept. 16 that his firm’s exposure was “immaterial,” a view that the company reiterated in an interview.

Later that same day, the government announced its two-year, $85 billion loan to A.I.G., offering it a chance to sell its assets in an orderly fashion and theoretically repay taxpayers for their trouble. The plan saved the insurer’s trading partners but decimated its shareholders.
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Pete2069 Donating Member (301 posts) Send PM | Profile | Ignore Sun Sep-28-08 03:18 PM
Response to Reply #1
19. Bush Sr.'s Carlyle Group Is in the thick of this BS.
Carlyle Group is run by Bush Sr. ,, Baker
Bush's father's Carlyle Group has it's hands into just about
all of these Financial institutions.  The Carlyle Group has
connections with all these groups and have been investing into
them for years.  
Carlyle Group has many billions by Bush Jr.'s Iraq war and has
been investing and trying to buyout some of these financial
institutions.   Carlyle is on the verge of collapse , and this
is Bush Jr.'s family fortune which he has been building seem
he stole the election in 2000.
**
http://www.huffingtonpost.com/2008/09/25/jp-morgan-to-buy-wamu-ass_n_129451.html
JPMorgan Chase buys WaMu assets after FDIC seizure
Carlyle Group's David Rubenstein pledges to help investors in
fund
LONDON: David Rubenstein, co-founder of the Carlyle Group,
pledged Thursday to "make amends" to investors in a
fund that is facing collapse and has ties to his firm.
**
http://www.worldproutassembly.org/archives/2008/03/gold_and_oil_pr.html
Just two days after the Federal Reserve Board announced an
emergency $200 billion debt-relief plan for distressed Wall
Street finance houses, markets in the US and internationally
were shaken by the collapse of Carlyle Capital Corporation
(CCC), a publicly traded investment fund established by the
Carlyle Group private equity fund.
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Just-plain-Kathy Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 05:06 PM
Response to Reply #19
21. Something seems fishy about CCC collapsing. I mean how could that be?
Considering how many of their key players are Bushes, or members, or ex-members of our government. I'd like to find out whether or not CCC was taken over, and by whom.
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:24 PM
Response to Original message
2. more from the NY Times link:
Yet an exploration of A.I.G.’s demise and its relationships with firms like Goldman offers important insights into the mystifying, virally connected — and astonishingly fragile — financial world that began to implode in recent weeks.

Although America’s housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators — sometimes even beyond the understanding of executives peddling them.

Originally intended to diminish risk and spread prosperity, these inventions instead magnified the impact of bad mortgages like the ones that felled Bear Stearns and Lehman and now threaten the entire economy.

In the case of A.I.G., the virus exploded from a freewheeling little 377-person unit in London, and flourished in a climate of opulent pay, lax oversight and blind faith in financial risk models. It nearly decimated one of the world’s most admired companies, a seemingly sturdy insurer with a trillion-dollar balance sheet, 116,000 employees and operations in 130 countries.


"fashioned ... beyond the understanding of executives peddling time"

I call BULLSHIT!

:banghead:
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mbperrin Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:27 PM
Response to Original message
3. Gosh, what a surprise! Inside dealing and robbing the taxpayer to save
rich friends!! Who'da thunk!

And anyone who believes that a $700 billion welfare scheme for billionaires is not the same is delusional....
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lostnotforgotten Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:31 PM
Response to Original message
4. And Now We Have To Pay For Another Bailout - No *ucking Way!
eom
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chill_wind Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:41 PM
Response to Original message
7. To the GP
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jfkraus Donating Member (378 posts) Send PM | Profile | Ignore Sun Sep-28-08 12:42 PM
Response to Original message
9. This has gone way past the "appearance of impropriety"
It is, if fact, improper and illegal. Paulson should be sent packing.
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:50 PM
Response to Reply #9
10. "packing"???? charged, tried, convicted and imprisoned - this is the bastard that wants immunity
from his actions - don't forget - that's part of the new scamming bailout deal.

:grr:

July 4, 2006: Goldman Gives Ex-Chief (Henry Paulson) $18.7 Million Bonus

http://www.nytimes.com/2006/07/04/business/04goldman.ht...

The incoming Treasury secretary, Henry M. Paulson Jr., was awarded an $18.7 million cash bonus for half a year of work as the chief executive of the Goldman Sachs Group, the company said yesterday.

<snip>

Goldman filed with regulators last Thursday for a sale of Mr. Paulson's 3.23 million common shares, worth $491.6 million based on that day's closing price.

It said Mr. Paulson also owned restricted stock worth $75.2 million, plus options to buy 680,474 shares. His holdings were equal to 1.02 percent of Goldman's common shares, the investment bank said.

Goldman awarded Mr. Paulson about $38.8 million of compensation for its 2005 fiscal year, mainly in restricted stock, making him Wall Street's highest-paid chief executive.


If anyone thinks this sack of lying shit didn't "know" what was in that GS portfolio, they are too stupid to breathe.
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PatSeg Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 02:08 PM
Response to Reply #10
15. My God!
How much money is enough? That is absolutely obscene.
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chill_wind Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 02:10 PM
Response to Reply #10
16. Sirota was calling it out just days after his confirmation. Fell on very deaf ears.
Edited on Sun Sep-28-08 02:11 PM by chill_wind
Sirota wrote on July 4, 2006





The nonpartisan Project on Government Oversight (POGO) noted in a major 2002 study that Goldman Sachs is one of the largest beneficiaries of government contracts in America. It is also one of the contractors that POGO noted "have been found to have repeatedly broken the law or engaged in misconduct," yet still receives government contracts.

- MSN Money notes that Goldman Sachs main profit-makers is its offering of "investment banking services to corporate and government clients."

- The Associated Press reported in 2004 that "Goldman Sachs is being sued by investors who say the firm cost them money by trading on advance knowledge of the Treasury Department's announcement in October 2001 that the government was ending sales of new 30-year bonds." Goldman Sachs "previously settled government charges that one of its economists used an illegal tip to make millions for the firm in advance of the announcement."



Obviously, these factoids raise questions. Just off the top of my head, I'm wondering whether the Paulson payoff will mean he directs more government contracts to Goldman Sachs? I'm also curious whether the Paulson payoff mean Goldman Sachs analysts will have more insider information from the Treasury Department which they can bilk investors with?

Sadly, these kinds of conflict-of-interest questions -- obvious, even before the public found out about the $18.7 million payoff -- were never even asked of Paulson by either party when he was brought before the U.S. Senate for confirmation. In fact, he was roundly sucked up to by Senators at his confirmation hearing a few weeks ago. Then, in the ultimate act of complicity, Senators confirmed him on a unanimous voice vote in the Senate Finance Committee, and again by voice vote on the Senate floor, meaning not one U.S. Senator was even willing to call for a recorded vote -- true proof of Big Money's hostile takeover of our government.



("The Paulson Pay-Off at The Bush Treasury Department")

http://www.huffingtonpost.com/david-sirota/the-paulson-...


Senate Confirmation:

http://www.marketwatch.com/News/Story/Story.aspx?dist=n...

"Simply no equal to Hank!"

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lurky Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 12:55 PM
Response to Original message
11. I fully expect to see some people frog-marched over this crisis.
Both from Wall Street and from the regulatory agencies (not that there's much of a difference, given the revolving door). Another reason we need a Democrat in the White House.
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Baby Snooks Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 01:04 PM
Response to Original message
12. But Pelosi agrees with Mukasey...
Violating the law doesn't mean you have committed a criminal act. What he said. What she's said consistently although she's avoided saying it outright. She just keeps things off the table.

Congress is complicit in all of this although the Republlicans seem more concerned with the cost to the taxpayers than the Democrats do.
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bluesmail Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 01:06 PM
Response to Original message
13. The Feds for what it's worth have been investigating since
March. (Speaking of frog march) I hope it's The Feds who are on Main Streets side.
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shraby Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 01:24 PM
Response to Original message
14. Thieves of the first order! You all know what
Edited on Sun Sep-28-08 01:34 PM by shraby
thieves deserve. The NYT article at least needs sent to our congress critters if only to let them know that we know. AIG is under investigation now anyway.

Just sent the link to Senator Feingold asking that Paulsen step down until questions about his involvement in the meltdown are answered.

edited to add.
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MannyGoldstein Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 02:13 PM
Response to Original message
17. Couldn't See That Coming
Fucking assholes.
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McCamy Taylor Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 02:50 PM
Response to Original message
18. Just like Halliburton except we do not even get barbed wire fences for our money.
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2Design Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-28-08 03:57 PM
Response to Original message
20. how much was his and his buddies? n/t
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