Did AIG Insure Dodgy Mortgage Products for Goldman Sachs?

Discussion in 'Wall St. News' started by Greg Richards, Mar 25, 2009.

  1. I found the follow-up story from Tavakoli's web site:

    Did AIG Insure Dodgy Mortgage Products for Goldman Sachs?
    TSF - March 53, 2009 (Click above for file as pdf)
    by Janet Tavakoli

    In the video below, Janet Tavakoli, president of Tavakoli Structured Finance, explains that AIG had a lot of cliff risk in some of their credit derivatives linked to mortgage backed products, and she questioned these trades in August of 2007. Goldman Sachs was a key trading partner. Some of the mortgage products coming out of Goldman Sachs Alternative Mortgage Products looked dodgy. AIG seems to have done most of its trades with Goldman during Hank Paulson's tenure as CEO at Goldman, and tough questions should be asked about the nature of the risk that AIG put on with Goldman Sachs

    According to the Wall Street Journal’s Serena Ng ("Goldman Confirms $6 Billion AIG Bets" March 21, 2009) prior to AIG’s September 2008 bailout, Goldman had insured $20 billion of chiefly mortgage backed products, and Goldman had already received $7.5 billion in collateral that contributed to AIG's cash problems. From the time of the bailout until the end of 2008, Goldman received another $8.1 billion in collateral from AIG for a total of $15.6 billion before the end of 2008 (the remaining exposure was said to be hedged with credit default swaps among other hedges).

    The key question is whether Goldman asked AIG to insure products that were as dodgy as the deal from Goldman Sachs Alternative Mortgage Products exposed by Fortune’s Allan Sloan in his October 16, 2007 Loeb Award winning article: “Junk Mortgages Under the Microscope.”

    Was the lack of disclosure at the time of the bailout to save Goldman from embarrassment or is there a perfectly innocent explanation?

    An explanation is due because one could argue that Hank Paulson as former Treasury Secretary (prior to that he was Goldman's CEO) was an interested man. Another interested man, Lloyd Blankfein, Goldman's current CEO, had discussions with Treasury Secretary Geithner, although it was denied the discussions were about AIG.

    Notice I said these were interested men, not persons of interest. Yet a detailed explanation of the underlying risk that AIG insured for Goldman Sachs--and others--is in order.

    VIDEO: Early Warning on AIG and Questions on Goldman's Role – Fox Business – March 18, 2009.<embed type='application/x-shockwave-flash' src='http://foxnews1.a.mms.mavenapps.net/mms/rt/1/site/foxnews1-foxbusiness-pub01-live/current/videolandingpage/fullPlayer/client/embedded/embedded.swf' id='mediumFlashEmbedded' pluginspage='http://www.macromedia.com/go/getflashplayer' bgcolor='#000000' allowScriptAccess='always' allowFullScreen='true' quality='high' name='undefined' play='false' scale='noscale' menu='false' salign='LT' scriptAccess='always' wmode='false' height='275' width='305' flashvars='playerId=videolandingpage&playerTemplateId=fullPlayer&categoryTitle=Latest Video&referralObject=3837063&referralPlaylistId=1292d14d0e3afdcf0b31500afefb92724c08f046' />
  2. Of course they did.

    The 'bailout,' originally two pages of bullshit, drafted by Paulson, and pushed on Congress under the pretense that the Apocalypse would happen if they didn't pass it immediately, was Paulson's way of saving Goldman and other members of the inner circle's ass.

    If you think I'm only on to some conspiracy theory, you're way too naive.

    Paulson not only belongs to that fraternity, his pension, 401(k) and other benefits, including his annuities, etc, depended on Goldman surviving.

    Paulson thanks all Americans for their generosity, and their representatives for their corruptness or naivete'.
  3. Preaching to the choir. It seems she was on to it and spoke out about it in public in August 2007 (to the WSJ).
  4. You're an idiot. Paulson SOLD HIS STOCK in June of 2006 for $500,000,000. With a half billion banked-he wasn't required to pay taxes on the sale-do you think Hank Paulson GIVES TWO SHITS about his "his pension, 401(k) and other benefits, including his annuities, etc,"

    You display ZERO knowledge with the implication that Goldman was dependent upon Paulson or TARP for "survival." Certainly without the injection into AIG, Goldman would have suffered huge losses but nothing fatal. And if you saw the list of AIG counter parties you'd see that dozens of them were pension funds not just the Goldman's of the world.

    I'm not necessarily pro-bailout but the amount of stupidity and misinformation surrounding AIG is mind-boggling.

    I'll put in laymen terms. They were a put seller. If you were long a bunch of BSC puts and your broker said "sorry we can't credit your account because the Options Clearing Corp is broke, they got stiffed by another clearing member", not ONE OF YOU wouldn't scream bloody murder. The same way if your insurance carrier went broke in a hurricane or earthquake and couldn't pay you the damage to your home you'd be asking for a "bailout". In the ultimate irony the AIG bailout was almost to the penny what the Federal government laid out for Katrina.

    How much you want to bet if I started a poll: Katrina or AIG,which cost the taxpayers more? 99% of respondents would say AIG.

    You may THINK you're an outside the box seeker of truth but in reality you're just another mouthpiece for the full of shit mainstream media.


  5. WTF are you, then?

    Do you support Paulson's actions or not?

    Quit equivocating, Adolf.

    And you are truly one naive dumb ass if you honestly believe Paulson had no vested interest in doing a solid for Goldman.

    Keep drinking the kool aid.
  6. It's not Goldman's fault AIG decided to pull the biggest-ever Niederhoffer.
  7. I would say out of all the institutions who accessed TARP, AIG was the most worthy because the bulk of funds went to exposed counter parties.

    Since YOU DON'T TRADE issues like clearing house insolvency don't need concern you. Like I say replace the symbol AIG with CME and see how many folks here would suddenly be VERY pro-bailout......

  8. Too funny RC. I came real close to using Niederhoffer as an analogy but figured most of the dopes reading this had never heard of him......
  9. Michelle Malkin nails it.


    Pabst, you are an ignorant slut if you actually believe 'Paulson gives two shits about GS.' You must dream of Paulson's bald head giving you a reach-around.

    Rightsidenews also nails it:


    Goldman Sachs is known as one of the most opportunistic and predatory firms on Wall Street. When Goldman Sachs identifies companies in distress it has a long history of rushing in and providing assets in return for majority equity stakes, thereby earning the upside for this risk ahead of the existing management or owners. Paulson was the direct beneficiary of Goldman Sachs business practices while CEO at Goldman. He made more than $500 million selling Goldman Sachs stock, tax-free, when he accepted the job as Secretary of the Treasury. Now that Goldman Sachs has a problem, Paulson wants to hand Goldman Sachs taxpayer money without demanding a controlling equity stake for tax payers from Goldman Sachs in return. The public should ask Paulson who he is really working for. Paulson should resign or be fired.

    Instead of getting an honest explanation about what is occurring, we are now being sold a story manufactured by government officials who have been complicit in irresponsible behavior. The question is; are the American people gullible enough to buy it?

    Note: This morning we woke to one of those headlines I just dread. Right there, on the front page of the New York Times, "Breakthrough Reached in Negotiations on Bailout."

    "We have made great progress toward a deal, which will work and be effective in the marketplace," announced Treasury Secretary Henry M. Paulson Jr.

    That's the same Paulson who this past July told us that "It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation."

    It's also the same Paulson who told Chinese officials last year "The reality of the situation is that an open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention..."
  10. The point Tavakoli makes is that Goldman knew or should have known that Goldman Sachs Alternative Mortgage Products sold products where the risk was misstated. While AIG is sophisticated (and cannot use that argument to get compensation), it does not excuse Goldman's actions nor does it absolve Paulson of liability.

    That is why Paulson is an interested man (if not yet a person of interest).
    #10     Mar 25, 2009