•How New York Fed's Secret Decision on AIG Swaps Cost Americans $13 Billion

Discussion in 'Wall St. News' started by ByLoSellHi, Oct 27, 2009.

  1. New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers
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    By Richard Teitelbaum and Hugh Son


    Oct. 27 (Bloomberg) --
    In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

    Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

    Among AIG’s bank counterparties were New York-based Goldman Sachs Group Inc. and Merrill Lynch & Co., Paris-based Societe Generale SA and Frankfurt-based Deutsche Bank AG.

    By Sept. 16, 2008, AIG, once the world’s largest insurer, was running out of cash, and the U.S. government stepped in with a rescue plan. The Federal Reserve Bank of New York, the regional Fed office with special responsibility for Wall Street, opened an $85 billion credit line for New York-based AIG. That bought it 77.9 percent of AIG and effective control of the insurer.

    The government’s commitment to AIG through credit facilities and investments would eventually add up to $182.3 billion.

    Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations....


  2. jem


    from that link

    Goldman executive front runs government bailouts to Goldman.

    "Goldman Sachs

    The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article."
  3. Q12


    No worries... he knows too many people at "Goldman" so he's innocent. Nothing to see here, carry on.
  4. Looks like Buffett bought GS on the 24th.
  5. ammo


    the amazing part of all these lawbreaking posts is that no one is being prosecuted and we have learned to except this as the norm,the ruse that many seem to pay attention to is ,new regime verses old, the press prefaces all news with"the obama team", it used to be washington this and dc that, now its repubs vs. dems, all of america is talking obama vs bush, no one is clamoring for indictments and prosecutions, we have all quietly accepted that they are above the law, they threw us Madoff,whats the old saying, "divide and conquer"
  6. jem


    this is a very important observation.
    when the law does not work on behalf of the people - you lose confidence in the market, the government and the country.

    i thought about this.

    Could there be a more obvious case of insider trading.

    I was wondering if perhaps there was a government exception ... but then I remembered the federal reserve banks are owned by their bank shareholders.

    He should have no immunity from prosecution.

    If he does not get prosecuted it means that Goldman and its board is far above the law.

    I hope there is one prosecutor with the balls to pursue this.

    This type of systemic abuse makes me sick. These actions are truly un american.