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Update: Unredacted AIG Schedule A Released And Initial Data Spread

Tyler Durden's picture




 

Update: here is a first run of the data, with a focus on Goldman Sachs. 

It appears that of the roughly 38 Goldman CUSIPs which have data available, there are exactly zero rated A or higher by Moody's (we ignore the rating from the other rating agency as they apparently have long stopped rating most of these securities). There are 9 CUSIP issued after 2006, 21 between 2005 and 2006, and 8 issued before 2005. As Matt Goldstein points out, of the 25 or so deals that had CDS written on them after January 1, 2006, Goldman accounts for 40% of this late (post 2005) issuance. Goldstein notes: "that’s critical because in December 2007, former AIG Financial Products
head Joseph Cassano had said AIG largely got out of the CDS business by
the end of 2005." Some more reasons to finally indict the man who, more so than anyone, cost taxpayers hundreds of billions with horrendous risk management practices.

Another observation is that of Goldman's roughly $15.7 billion in original issues, the current amount outstanding on the underlying securities is only $11.7 billion as of January 2010, a factor of about 75%. Yet, based on paid down amounts, Goldman had the benefit of having almost the full contractual notional on the CDS: recall per BlackRock the firm had exposure of roughly $14.5 billion. In other words: even though Goldman was on the hook for about $11.7 billion in actual outstandings (as of January 2010, the current amount in November 2008 was likely higher), the amount that it received between collateral and ML III presumed almost an unamortized exposure. We are backing into the data to determine what the actual amount as of November 2008 was: we estimate it was about ~$13 billion, which unless we are misreading the data, means that Goldman likely got the extra benefit of amortization on the underlying, which could have amounted to over $1.5 billion.

Yet the critical question is: since there is not one security rated A, and in fact the median rating is a high C, and since we know that Soc Gen had parked its securities with the Fed in November 2008, just what standards does the Federal Reserve have when accepting securities in the discount window to lend against? And the implication is that Bernanke will allow any toxic crap to be eligible collateral, likely at par.

We will continue analyzing the other firms' securities as well, and solicit reader input in ideas on how to steer this analysis.

 


 

The previously top-secret Schedule A has been released and is attached. We are currently going through the data, focusing on prices, ratings, LTVs and other taxpayer critical data. Stephen Friedman saying, as we type, that revealing Schedule A will injure the taxpayer interest, as when the Fed will try to sell these CUSIPs, sophisticated buyers will have an advantage. Of course, we note, these sophisticated buyers will exist only because this list was offloaded to the taxpayers in the first place.

 

 

h/t Shahien Nasiripour

 

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Wed, 01/27/2010 - 16:04 | 208149 bugs_
bugs_'s picture

Hurray!  Trust but verify.

Wed, 01/27/2010 - 18:41 | 208388 ATG
ATG's picture

So it may not be outside the realm of possibility

that the 20:1 leveraged Fed may choke on its

own portfolio unless it can offload toxic junk

to the next musical chair alphabetic taxpayer

funded agency...

http://www.jubileeprosperity.com/

 

Thu, 09/09/2010 - 03:11 | 571253 qrs521
qrs521's picture

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Wed, 01/27/2010 - 16:22 | 208174 -273
-273's picture

"The way the AIG bailout was engineered was to specifically benefit Goldman Sachs and its trading partners," said Janet Tavakoli, a Chicago-based derivatives expert and founder of Tavakoli Structured Finance.

Yup.

Wed, 01/27/2010 - 16:41 | 208208 JohnKing
JohnKing's picture

I wonder how much was indirectly paid to Goldman through SocGen and the other characters, my guess is "all your bailout belongs to us".

Wed, 01/27/2010 - 18:41 | 208387 Anonymous
Anonymous's picture

Hell of a stick save, Llyod!!! That's one way to avoid those nasty write-downs of 25% of the asset's value.

-berlinjames02

Sat, 11/06/2010 - 18:16 | 705643 sohbetme
sohbetme's picture

I like your ideas and thoughts. While chat and sohbet with my friends talking about it.

Wed, 01/27/2010 - 19:01 | 208410 berlinjames02
berlinjames02's picture

Hell of a stick-save, Llyod! That's one way to avoid a 25% writedown on the value of the asset.

Wed, 01/27/2010 - 20:16 | 208475 Careless Whisper
Careless Whisper's picture

Paulson actually told Congress today that if he didn't bail out AIG the unemployment rate would have gone to 25% !!! LMAO Let's give that song and dance man one of these:

http://www.oscars.org/awards/academyawards/about/awards/images/side_oscar.jpg

 

Thu, 01/28/2010 - 01:56 | 208844 tom a taxpayer
tom a taxpayer's picture

Wow, what a guy! Paulson must have saved or created 15 million jobs.

Wed, 01/27/2010 - 16:24 | 208178 Anonymous
Anonymous's picture

Go! Go! Go! ZH, get the facts out before the hearing ends!!!

Thu, 01/28/2010 - 08:49 | 208912 blindfaith
blindfaith's picture

Congressmen and Senators do not listen to or read facts. Only contributions are facts to them, and the very one they are 'investigating' are the one who finance their runs for office.
NOTHING will happen to any of them.

Wed, 01/27/2010 - 16:27 | 208186 Bubby BankenStein
Bubby BankenStein's picture

I'm curious to see this grouped by bank issuing the CDO.

Why would the FEDS pay 100% (FED funded collateral plus subsequent CDS tear up funding) for the CDO's when they could accomplish the same benefit to AIG (Taking AIG off the hook) by an assignment of AIG CDS obligations to Maiden Lane III?  At least Maiden Lane III could collect any CDS premiums due, and not have to immediately fund the counter party payout.  There would also be a stronger basis for fair negotiation of future settlement.

Not that I think AIG should have been bailed out in any way.

I guess I'm missing half a brain.

Wed, 01/27/2010 - 17:56 | 208320 jswede
jswede's picture

that's a GREAT question, bubby.  they needed to do something, fine.  but why the rush to terminate the contracts?

Wed, 01/27/2010 - 18:02 | 208333 TimmyM
TimmyM's picture

The collateral was deteriorating. Wait till you see the credit ratings before and after...

Wed, 01/27/2010 - 18:33 | 208380 Bubby BankenStein
Bubby BankenStein's picture

Had Maiden Lane III taken assignment of the CDS, demand for return of all collateral in excess of contractual minimums to Maiden Lane III would be expected.  This is because Maiden Lane III is as good as golden.

Wed, 01/27/2010 - 16:28 | 208188 Mazarin
Mazarin's picture

11+

Wed, 01/27/2010 - 16:44 | 208191 waterdog
waterdog's picture

I await the fallout with gleeful anticipation.

Great job by great people.

I read the prior post and realize now who released it.

 

Wed, 01/27/2010 - 16:34 | 208195 Cistercian
Cistercian's picture

 I LOVE Zerohedge.

 You guys ROCK!!!!

 The epicness is breathtaking!

Wed, 01/27/2010 - 16:36 | 208197 -273
-273's picture

Epicurus is a key figure in the development of science and the scientific method because of his insistence that nothing should be believed except that which was tested through direct observation and logical deduction.

Wed, 01/27/2010 - 19:40 | 208438 Cistercian
Cistercian's picture

 Indeed...and how appropriate, now that we can see the data!

 An Epic win for ZH.

Wed, 01/27/2010 - 16:38 | 208202 Anonymous
Anonymous's picture

OK, I have printed my screen 4 times now to capture this info. Can Tyler tell me how to front run the Fed for profit, please? How do we know when they put this crap up for sale, and how does one position oneself to profit from the sale?

Wed, 01/27/2010 - 16:45 | 208212 Anonymous
Anonymous's picture

"The biggest single gift was the AIG rescue. No one has ever provided a good argument for why we did it other than we were bailing out Goldman Sachs."
-Joseph E. Stiglitz Nobel Economics Prize Winner

Wed, 01/27/2010 - 19:29 | 208432 Anonymous
Anonymous's picture

The Crux

Debt: (transferred in bulk to public balance sheet, or mismarked via gimmick accounting) must be paid off or defaulted. Debt service demands most of nation's net income in variety of forms.

Debt saturation has been so effective, that further debt adds nothing to GDP but may in fact diminish.

Demographics: Babyboomers own or control 70% of assets which they wish to begin devoting to retirement uses and downsizing. Delivering these to market for liquidity purposes will swamp thin demand as later generations are credit constricted and onerously debt burdened.

Demand: aggregate demand has collapsed. Balance sheet repair is in full force by those able to pay down and service debt. Marginally disposable income is saved or used to pay debt, not to increase consumption. Gov't seeks to meet gap by military spending (not a good sign). Large assets and illiquid assets will be impaired for decades.

Dilution: Fed printing dilutes work ethic as counterfeit competes with bona fide. Market agents power is diluted as counterfeit dollars mimic investor's currency votes. This mismarks, misprices, and distorts market signals. Printed dollars have greater political utility too as they target political goals and not the aggregate goals of the collective marketplace.

Finance functions best in terms of time. Compressing time to meet funding needs, or dilating time to span out panic, instability, discovery of fraud, or raiding the public purse.

Eventually the four D's must make their claim. But the Fed/Treasonry are very adept at control of the timing.

Thu, 01/28/2010 - 01:37 | 208830 hbjork1
hbjork1's picture

+10 And my scale only goes to 10.

Wed, 01/27/2010 - 23:07 | 208648 bchbum
bchbum's picture

Its almost nice to know that they couldn't just give gs 13.5 B, but they had to give other people money as well.  Which leads me to believe gs got more than 13.5B.

Wed, 01/27/2010 - 16:47 | 208213 DaveyJones
DaveyJones's picture

just called issa's district office to thank him and encourage him

Wed, 01/27/2010 - 17:02 | 208215 DaveyJones
DaveyJones's picture

"these sophisticated buyers will exist only because this list was offloaded to the taxpayers in the first place"   - and that makes all of us the non consenting unsophisticated crime victim seller? 

Wed, 01/27/2010 - 16:47 | 208217 nonclaim
nonclaim's picture

In time to torpedo Bernake's reappointment tomorrow? Maybe not but we will sure put the sign of the beast on those who vote yes.

Wed, 01/27/2010 - 16:55 | 208229 John McCloy
John McCloy's picture

I showed my support for Kanjorski and mailed him his Shill of the year award today. It's a bowling trophy with the bowler replaced with Bernanke, the ball replaced with money sack and the pins replaced with American citizens.

Incredibly to receive one so early in 2010 is quite an achievement.

Thu, 01/28/2010 - 02:07 | 208848 tom a taxpayer
tom a taxpayer's picture

Ouch! I just got hit between the legs with Ben's bowling ball. 

Signed

A Pinhead

Wed, 01/27/2010 - 16:48 | 208220 Anonymous
Anonymous's picture

CATS: ALL YOUR BA{NK'S CRAP}SE ARE BELONG TO U.S.

YOU HAVE NO CHANCE TO SURVIVE. MAKE YOUR TIME.

...unexpectedly...

Wed, 01/27/2010 - 16:55 | 208231 Jim in MN
Jim in MN's picture

 

Furriners!  It went to furriners and Golden Slacks! 

 

That's my kids' money you fucks!  Lazy fucking bad bets on mortgage derivatives...bets in the billions, many of them.  They should be paid ZEEEEEEEEEE-RO for this shit.

 

Fuck you!

 

 

Wed, 01/27/2010 - 18:15 | 208347 VegasBD
VegasBD's picture

Its going to cost you more (in devalued currency) than your kids.

"using our kids money" is a political phrase used to make you look the other way when gas hits $5/gallon.

 

Wed, 01/27/2010 - 19:02 | 208412 calltoaccount
calltoaccount's picture

it wasn't just "bad bets"-- it was FRAUD.  All of these pigs should be indicted.

 

 

excerpted from: http://market-ticker.org/

?The essence of all asset bubbles is fraudulent credit creation.

  While the form of these fraudulent securities vary from one bubble to another the essence of the scam never does, because in order to screw people in the sale of securities you must lie in some fashion (whether by omission or commission) about their value.

...the warnings were clear as early as 2004 and included the FBI, HUD and private credit analytic firms all issuing loud and strident warnings that the non-conforming mortgage market was rife with fraud and that in one classification of this paper (ALT-A mortgages), nine in ten mortgages were not properly underwritten - that is, the income and assets claimed did not match reality.

 

Thu, 01/28/2010 - 01:39 | 208835 hbjork1
hbjork1's picture

"FRAUD".  At last we are getting a handle on the basic problem.

Wed, 01/27/2010 - 16:59 | 208238 ayanni
ayanni's picture

So GS and the FRBNY get through the day in good shape and the market looks to close green.  One part of the story that doesn't get nearly enough attention in this scam and coverup that Fiderer pointed to in his Monday article the simple fact that GS did all of their business with AIG and only AIG.  A $22 billion CDO portfolio exclusively with AIG in the summer of 2007?  New Century had already failed, the Bear Sterns Hedge Funds had gone down, the shit had hit the fan - many on this board were likely short up to their eyeballs AIG - and yet the smartest guys in the business were long up the their eyeballs exposure to AIG CDO counterparty exposure?  I guess GS can argue there was no other options and they had to hedge risk somewhere etc.  Everyone knew AIG was going down.  Normally that would cause one to reduce counterparty risk with that firm.  Whatever...

Wed, 01/27/2010 - 17:17 | 208263 nonclaim
nonclaim's picture

Now that this is out, GS has an opportunity to prove they were really "fully hedged" and that AIG could sink without leaving a stain in the water.

Wed, 01/27/2010 - 19:47 | 208443 Cistercian
Cistercian's picture

 Now that is funny.And the likelihood GS was protected is zero....unless they were referring to their boy Hank "the felon".

 Just when you thought politicians had the market cornered on lying every time their lips move!

Wed, 01/27/2010 - 16:59 | 208239 phaesed
phaesed's picture

Truly wish I was better versed in CDO pricing, thank you for your effort on this.

Wed, 01/27/2010 - 17:09 | 208241 Sancho Ponzi
Sancho Ponzi's picture

Among those who would have been hit the hardest:

Max 2007,2008: Deutsche Bank

Triax 2006-2A: Goldman (we don't need no stinkin' money) Sax

What a shocker

Wed, 01/27/2010 - 17:08 | 208250 Anonymous
Anonymous's picture

This is a pretty funny slideshow from fox about Bernankes next job.

http://www.foxnews.com/slideshow/opinion/2010/01/27/photo-op-bernanke-jo...

Wed, 01/27/2010 - 17:10 | 208253 Anonymous
Anonymous's picture

What does all this mean? That the taxpayer paid $62 billion for stuff worth only $30 billion?

Wed, 01/27/2010 - 18:15 | 208349 Bubby BankenStein
Bubby BankenStein's picture

SIGTARP said today that Treasury reported to be $30B in the hole.  Depends on ultimate recovery on the CDO's.  Like who knows.

Wed, 01/27/2010 - 18:43 | 208392 Anonymous
Anonymous's picture

In the end taxpayer paid some $184B to bailout AIG. But we indirectly bailed out Goldman, SocGen etc. Instead we could have carved out rotten AIG division out instead of bailing out the whole firm. The other insurance divions were doing fine.
Read more here. Huffington post link Huff-Post

Wed, 01/27/2010 - 17:14 | 208256 Anonymous
Anonymous's picture

UBS is the one to look at, Marla.
UBS - Oct '09 - Wealthy U.S. tax cheats caught in gov program

UBS - Feb '09 - UBS fined $780 million for aiding tax cheats

AIG - Mar '09 - AIG Bailout good for Goldman Sachs, other Banks, but not Investors

UBS - Mar '09 - Recipient of $3 Trillion of U.S. taxpayer dollars.

UBS - Jan 9, '10 - Tax Cheats go FREE, Whistleblower Goes to Jail

Wed, 01/27/2010 - 21:11 | 208513 asteroids
asteroids's picture

Now we know why UBS rolled over on all US citizens!

Wed, 01/27/2010 - 22:23 | 208576 milbank
milbank's picture

And guess where Phil Gramm, former Senator from Texas and author of the Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, the law that negated the Glass-Steagall Act, got a job after he left the Senate. . . . Hmmmmmm?

 

Wed, 01/27/2010 - 17:14 | 208257 ATG
ATG's picture

The doubletalk from every witness in today's

AIG panel, including Barofsky, was palpable.

There is no John Dean or Sam Ervin at least yet.

meanwhile, securities a sinkhole, CUSIPs or no...

http://www.jubileeprosperity.com/

Wed, 01/27/2010 - 17:15 | 208259 SuitablyIronicM...
SuitablyIronicMoniker's picture

If you just look at Triax - Listed value $3.2 billion. Fair Value $1.7 billion (Fed report). That's an easy $1.5 billion

Plus another $13 billion listed in the schedule, makes a taxpayer funded profit of over $6 billion!

http://www.newyorkfed.org/aboutthefed/annual/annual08/MaidenLaneIIIfinst...

Wed, 01/27/2010 - 17:16 | 208261 dot_bust
dot_bust's picture

From the people who brought you the bank bailout -- the Federal Reserve -- comes iPonzi. 

This brilliant new product transfers ALL the worthless mortgage-backed securities to the U.S. Dollar via the Fed's bank loan programs.

Yes, it's true! You too can be the proud recipient of the brand new iPonzi. It's better than the iPod or the iPhone. With the iPonzi, you get to watch your hard-earned savings evaporate through hidden inflation and massive unemployment.

The iPonzi comes complete with $23 trillion of mortgage-backed security storage space known as Federal Reserve Notes (U.S. Dollars).

Hurry! You must act now because foreign governments don't want the iPonzi. It is only you, the hard-working American taxpayer, who is eligible to receive the iPonzi. 

The first 300 million American callers also get...no Social Security or Medicare. That's right, you can pay for the lovely iPonzi with your social programs.

Safety net? Who needs a safety net. You have the iPonzi!

This message has also been sponsored by...AIG.

Wed, 01/27/2010 - 18:02 | 208331 waterdog
waterdog's picture

And do not try to get to your money markets, they are no longer yours.

 

Wed, 01/27/2010 - 18:45 | 208397 dot_bust
dot_bust's picture

True. Scary but true.

Wed, 01/27/2010 - 17:23 | 208271 SuitablyIronicM...
SuitablyIronicMoniker's picture

$6 billion just for the squid, of course.

Wed, 01/27/2010 - 17:23 | 208272 lizzy36
lizzy36's picture

Seriously, i don't believe the "implication" is that Bernanke will allow any toxic crap to be eligible collateral, likely at par.

I think one can safely say "it is FACT that Bernanke will allow any toxic crap to be eligible collateral, likely at par.

 

Wed, 01/27/2010 - 17:24 | 208274 max2205
max2205's picture

And why socgen, why did we save France for the 3rd fing time in 100 years....nobody cept BB likes those MF's

Wed, 01/27/2010 - 18:20 | 208355 VegasBD
VegasBD's picture

haaaaaaaaaaa! =)

Wed, 01/27/2010 - 17:25 | 208278 Anonymous
Wed, 01/27/2010 - 18:28 | 208370 Anonymous
Anonymous's picture

Great!

Now, if this would be published in every voter pamphlet before an election...

Wed, 01/27/2010 - 19:00 | 208409 Screwball
Screwball's picture

Wow!  Thanks for the link.

Wed, 01/27/2010 - 17:28 | 208285 deadhead
deadhead's picture

Thank you very much ZH for being all over this.

Wed, 01/27/2010 - 17:29 | 208286 Anonymous
Anonymous's picture

Need to know who issue/structured each of the tranches - that would say a lot.

I wonder how much of the stuff was placed by GS???

Wed, 01/27/2010 - 17:54 | 208311 suteibu
suteibu's picture

From what I heard today, nobody issued or structered it.  I think GS had a key to the back door and was just told to hit the lights and lock up when they were done.

Wed, 01/27/2010 - 17:32 | 208289 Anonymous
Anonymous's picture

Why the hell did "GEORGE QUAY" get paid?

Wed, 01/27/2010 - 17:33 | 208291 Anonymous
Anonymous's picture

"Timmy, Hank, Ben and the rest of you fuc@ers, you can sleep better now. You are with AIG."

Wed, 01/27/2010 - 17:48 | 208304 Anonymous
Anonymous's picture

Wow. Amazing reporting, ZH.

Spent part of my day listening to Geithner being garroted and Paulson doing his best Sgt Schultz imitation: "I know nossing, nossing!" When will they learn it's not the bailout, it's the cover-up that will burn them every time?

Wed, 01/27/2010 - 18:03 | 208334 spekulatn
spekulatn's picture

Great stuff TD,and Zer0Hedge. Beauty.

Wed, 01/27/2010 - 18:20 | 208356 Anonymous
Anonymous's picture

This is the ULTIMATE in holding America hostage!!!!!!

Ben Bernanke being reelected so that the markets don't crash is the ultimate in BEING HELD HOSTAGE!!!

Obama--We just have one question. When are these criminals going to be led out in handcuffs????

They are like an anchor around the neck of your administration---Your support of these criminals tells us everything we need to know about YOUR credibility and character!!!!!

Wed, 01/27/2010 - 20:50 | 208498 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

You ask Obama when the criminals will be led out in handcuffs?!  Puhleeze.  Obama saw fit to appoint an obvious tax-cheat to head the US Treasury.  Obama isn't concerned about criminality, he is concerned about and focused on satisfying the needs of an enormous ego, the ego of that most peculiar fellow who stares back at him from the mirror.

Wed, 01/27/2010 - 18:25 | 208359 Missing_Link
Missing_Link's picture

Yet the critical question is: since there is not one security rated A, and in fact the median rating is a high C

Finally, proof that the pirates were indeed sailing on the high C's.

Wed, 01/27/2010 - 23:51 | 208740 Jim in MN
Jim in MN's picture

Isn't that also the note struck when kicked in the groin?

Wed, 01/27/2010 - 18:24 | 208360 Anonymous
Anonymous's picture

Check out Matt Goldstein's article on this. He has been about the only other journalist (I use that term in the REALS sense of the word) sniffing around this topic with the tenacity it merits.

100,000 kudos to Matt Goldstein and Zero hedge -- keep pounding away

PJ Albemarle

Wed, 01/27/2010 - 18:27 | 208365 Anonymous
Anonymous's picture

I'm a rather educated person and can't make head nor tail of this piece. I wonder how easy it was to sell The Dumb One (His Obamaness) on this scam.

Wed, 01/27/2010 - 20:15 | 208472 Anonymous
Anonymous's picture

The Dumb One who was sold this scam (the bailout) was W, not Obama. Not that there is much difference.

Wed, 01/27/2010 - 18:41 | 208389 Bubby BankenStein
Bubby BankenStein's picture

I think the bank's issuing the CDO's should be required to eat their own dog food, especially if they themselves held it with AIG CDS cover.

Wed, 01/27/2010 - 20:03 | 208466 laughing_swordfish
laughing_swordfish's picture

Bubby:

It's not "dog food" it's USED DOG FOOD"!

Wed, 01/27/2010 - 20:57 | 208504 Bubby BankenStein
Bubby BankenStein's picture

They need to eat it anyway.

Thu, 01/28/2010 - 03:30 | 208881 Anonymous
Anonymous's picture

Found on craigslist:

130 million metric tons of used dog food
price: $140 billion

Also, does anyone know how to crack TurboTax2009? If so, I will throw in an extra 5 million metric tons of the UDF.

Wed, 01/27/2010 - 18:54 | 208407 Anonymous
Anonymous's picture

So why didn't the FED just take the insurance contracts or guarantee AIG's insurance contracts, split the London unit off and let the AIG CDS default?

Oh now I remember Timmy said that he needed to save AIG in part to protect all of the individuals, governments, etc from failure. If they would have split the Company then they lose that protection excuse.

Wed, 01/27/2010 - 19:52 | 208450 Anonymous
Anonymous's picture

Where's the indictments before these crooks helicopter outta' here?

Wed, 01/27/2010 - 19:56 | 208456 GlassHammer
GlassHammer's picture

The problem I have and the problem others have mentioned is that GS is the majority of this list and its garbage is only rated at C. This means Bernanke had no standards when it came to paying for this junk and allowed everything to be paid at par.

Wed, 01/27/2010 - 19:56 | 208457 buzzsaw99
buzzsaw99's picture

I sense a wiff of impropriety here but nothing that rises to unmitigated fraud. [/sarcasm]

Wed, 01/27/2010 - 20:19 | 208477 Anonymous
Anonymous's picture

Folks,

Here is a review of the AIG timeline, beginning in the summer of 2007. The graphic summarizes Goldman's collateral calls.

http://www.propublica.org/article/article-aigs-downward-spiral-1114

Wed, 01/27/2010 - 20:23 | 208480 SpartanTnT
SpartanTnT's picture

absolute fraud, there should be criminal charges filed

Wed, 01/27/2010 - 20:29 | 208485 Blurtman
Blurtman's picture

Folks,

Here is the AIG timeline, beginning in the summer of 2007, for your review.  The graphic indicates the Goldmens' collateral calls.

http://www.propublica.org/article/article-aigs-downward-spiral-1114

Wed, 01/27/2010 - 21:27 | 208519 Transor Z
Transor Z's picture

I think the U.S. Taxpayers want to lick the tears of unfathomable sadness off somebody's face.

Wed, 01/27/2010 - 21:44 | 208537 wesa
wesa's picture

I watched quite a bit of the Geithner/Paulson testimony and never heard anyone ask what I consider to be the single most important question. Question: Who authorized the action to make GS and SG whole? Someone at the Fed authorized it, so who was it if it wasn't Geithner? If he says he doesn't know then fire him, because it was clearly done on his watch.

Thu, 01/28/2010 - 03:08 | 208877 tom a taxpayer
tom a taxpayer's picture

 

Like mob bosses, Paulson and Bernanke made the decisions and gave the orders. The underlings at the Fed, FRBNY, and Treasury carried out the orders. 

Intially, the government was hesitant to bailout AIG because of public anger about the series of Wall Street bailouts beginning with Bear Stearns. But AIG counterparties warned the Fed, FRBNY, and Treasury about the systematic risk of an AIG failure...systematic risk meaning cascading failures and ruin facing AIG counterparties (a.k.a. systematic crooks of Wall Street and big banks)

So, Paulson and Bernanke made the decision to bailout AIG counterparties by bailing out AIG. Of course, Paulson and Bernanke  do not handle the details of the payments, haggling with the Wall Street crooks over a few billions dollars here and there. Hank and Ben's culpability is far greater than a lowly bag man. Paulson and Bernanke are the Grand Architects of the payments to the counterparties. 

The Fed made the decision for a 100% bailout of AIG counterparties. Ben, as Chairman of the Fed, is 100% responsible for the 100% bailout of AIG counterparties. 

 

Wed, 01/27/2010 - 21:45 | 208539 Anonymous
Anonymous's picture

Maybe we can get them all on a coal fired train and send them trough the tunnel. Hey Ben! hey Kip it's getting awfully smoke in here.

Wed, 01/27/2010 - 21:48 | 208541 BoeingSpaceliner797
BoeingSpaceliner797's picture

My, my, my this sure appears to be evidence of intentional debasement of US currency.  Consult the US Constitution for relevant punishment.

Wed, 01/27/2010 - 22:17 | 208568 JR
JR's picture

Taking Their Cut…at shareholders’ expense…

“Even now, after all those big bonus numbers, the pay-to-profit ratio for the financial industry might come as a surprise to many people. The five largest banks on Wall Street — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley — earned a combined $147.4 billion before paying compensation and taxes last year. They plowed back a combined $31.2 billion into their companies and returned a total of $2.1 billion to shareholders in the form of dividends. They paid $114.1 billion to their employees.” --NY Times

 

AILING BANKS FAVOR SALARIES OVER SHAREHOLDERS | The New York Times | Eric Dash | January 27, 2010  (excerpted)

A handful of big banks that are struggling in the postbailout world are, by some measures, the industry’s most magnanimous employers. Roughly 90 cents out of every dollar that these banks earned in 2009 — and sometimes more — is going toward employee salaries, bonuses and benefits, according to company filings.

…To compete with well-heeled rivals, banks like Citigroup are giving their employees an unheard-of cut of the winnings. Citigroup paid its employees so much in 2009 — $24.9 billion — that the company more than wiped out every penny of profit. After paying its employees and returning billions of bailout dollars, Citigroup posted a $1.6 billion annual loss…

Goldman, that highest of highfliers, is doing the unthinkable. It is giving its employees an unusually small cut of its profits — about 45 cents out of every dollar — even though its paydays will, in dollar terms, rank among the richest of all time… If compensation were spread evenly among the bank’s 36,200 employees, each would take home about $447,000.

But to keep up with the Goldmans, laggards like Citigroup are handing out fat slices of their profits, leaving little left over for their shareholders. Citigroup is, in effect, paying its employees $1.45 for every dollar the company took in last year...

Bank of America, meantime, is spending 88 cents of every dollar it made in 2009 to compensate its workers. At Morgan Stanley, that figure is 94 cents.

JPMorgan Chase, which has fared better than those three, paid out 63 cents of every dollar…

[S]ome analysts and investors say these and other banks are rewarding their employees at shareholders’ expense...

“The investor in America sits at the bottom of the food chain,” said John C. Bogle, the founder and former chairman of the Vanguard Group, the mutual fund giant. “The financial industry gets paid before their clients, and we get paid whether times are good or bad.”

...While banks are increasing salaries and bonuses for many employees, many have yet to restore dividends that were cut during the financial crisis.

http://www.nytimes.com/2010/01/27/business/27pay.html

Wed, 01/27/2010 - 22:29 | 208581 MsCreant
MsCreant's picture

I may be queen of paranoid, but if we are looking at and talking about this one, isn't it possible that they are throwing the dogs meat to satiate their hunger, but more importantly to divert us dogs from something far, far, worse.

I did something really, really, bad as a kid. I was not where I was supposed to be and my folks found out. I asked my pregnant girlfriend who I was not allowed to hang out with to say I was staying at her house. It worked. I got punished, but not nearly as bad as if they knew the truth about what I was up to.

This looks like it could be "spending the night at Patti's," when really you were out "vandalizing the whole neighborhood with the boys."

Wed, 01/27/2010 - 22:44 | 208602 Cistercian
Cistercian's picture

 It is safe to say in this environment that the darkest stuff you can think up is probably true.Money laundering and equities market manipulation are a good start down the road to financial armageddon.Just the current stock market control is so outrageous and blatant one wonders why there are no arrests!The simple answer is that TPTB are conspiring to prop  up the ongoing gonzo ponzi.The fact the currency has zero value could be............problematic!

Wed, 01/27/2010 - 23:34 | 208711 Jim in MN
Jim in MN's picture

 

Well, somebody reminded me about all the illegal weapon-running and drug money the other day...can we get an update on that?  I think that's more Citibank's department but maybe Goldman has diversified into letters of credit for, say, Israeli-South African-Iranian smuggling, or diamonds, or sex slaves, or children.

Think of the children...in shipping containers...

Thu, 01/28/2010 - 02:16 | 208852 Cistercian
Cistercian's picture

 I can only say...think of the poppies in Afghanistan.So...much...cash......

Wed, 01/27/2010 - 22:34 | 208585 Anonymous
Anonymous's picture

Working man works until he dies
working man don't deserve no pack of lies
riding on the back of the working man

everyman a law unto himself
something true in the midst of a garden
the sword of time turning every which way
he's got to find his way home

-MobBarley

Wed, 01/27/2010 - 23:38 | 208720 Jim in MN
Jim in MN's picture

He hears the silence howling --
catches angels as they fall.
And the all-time winner
has got him by the balls.
He picks up Gideons Bible --
open at page one --
God, he stole the handle and
the train it won't stop going --
no way to slow down.

--Jethro Tull

Thu, 01/28/2010 - 00:27 | 208776 MsCreant
MsCreant's picture

Meanwhile back in the year One --- when you belonged to no-one ---you didn't stand a chance son, if your pants were undone.

`Cause you were bred for humanity and sold to society ---
one day you'll wake up in the Present Day ---
a million generations removed from expectations
of being who you really want to be.

--Jethro Tull

Thu, 01/28/2010 - 01:16 | 208813 MsCreant
MsCreant's picture

No, you're never too old to Rock'n'Roll if you're too young to die.

--Jethro Tull

Thu, 01/28/2010 - 02:53 | 208873 hidingfromhelis
hidingfromhelis's picture

Now, they say they gave me compensation...
That's not what I'm chasing. I was a rich man before yesterday.
Now all I have left is a broken-down pickup truck.
Looks like my farm is a freeway.

Jethro Tull-Farm on the Freeway

 

Anyone else feel like TPTB are exercising eminent domain writ large?  As in Kelo v. New London, it was for corporate/private benefit, rather than public.  This time, they're just taking our money & giving it away.  Pfizer's little nickel & dime seizure pales in comparison, huh?

Wed, 01/27/2010 - 22:53 | 208619 Anonymous
Anonymous's picture

Data in sitemason link takes the breath away. Better get your savings away from the crooks and unload your stock now. You only have a short time....

Wed, 01/27/2010 - 22:59 | 208634 glenlloyd
glenlloyd's picture

Dear Mr. Friedman,

I have a right to know what kind of trash you've attached to my wallet. The idea that the tax payer would be hurt by knowing is utter nonsense. Tax payers have a right to know what their representatives have saddled them with. What's happened so far only further supports the fact that we're being conned.

Something smells like it's about to implode....am I wrong?

 

Thu, 01/28/2010 - 02:18 | 208854 Cistercian
Cistercian's picture

 Re: are you wrong...No.

Wed, 01/27/2010 - 23:19 | 208677 Anonymous
Anonymous's picture

For whoever asked who originated the CDOs, for most of Goldman's exposure the underwriter is either GS or Merrill. This is strange for those who know the CDO market because typically large banks with large balance sheets and favorable funding costs funded these assets and bought protection from the likes of AIG or the monolines, taking advantage of the negative basis between the coupon on the asset and the cost of protection (e.g. get paid L+30 bps on the asset, pay AIG 10 bps for protection and you are "hedged" and lock in a 20 bps "arbitrage"). The funders in the CDO market were banks like Citi, UBS, SocGen and Calyon, while Merrill funded through their MLBUSA bank sub. Broker dealers like Goldman, MS, Lehman and Bear did not have attractive enough funding rates to do this in size and had a tough time competing, relying on the SocGen's and the Calyon's of the world to fund. Of course, SocGen & Calyon could also fund deals brought by Citi, UBS, Wachovia, etc. Getting the super senior funded at low rates was the key to making deals work (and booking fees) so those who could fund their deals had a huge advantage in the market. Based on the Fed and BlackRock Solutions presentation, GS was not funding but merely sold protection to the funder and then bought protection from AIG to hedge this exposure (the "back-to-back"), obviously taking out something between the two.

This raises a couple of questions:
1."If GS's exposure was in place since the inception of these deals, why would Merrill let GS get between the funder and AIG and take out a cut, rather than go to AIG or a monoline directly?" These deals were so tight from an execution standpoint that underwriters guarded their capacity on the funding side and the wrap side tightly. Also, GS would provide no benefit to deal participants given their higher funding costs and lower ratings than the funders and the wrappers.

2."If this exposure was put in place later (e.g. through ML novating their AIG protection to GS to limit ML's exposure to AIG), what kind of discount did GS get?" This is pertinent since GS got paid par on the exposure - is it possible their basis was lower? If so, they should have been willing to take a haircut...if asked.

3."Given Goldman's much vaunted "risk management", who thought that selling protection on ML originated CDOs was a good idea, hedged or not?" I understand that they were aggressive on making collateral calls to ensure they were always fully collateralized, but if AIG pulled the plug and filed BK early on in the process before they could post enough cash (if, say, another division got in trouble) they would be on the hook to the counterparty they sold protection to but be naked on the other side. Merrill was notorious in the industry as a boiler room CDO factory that churned out deal after deal with suspect managers and suspect collateral - Goldman surely knew this when entering into this trade.

All the above are related: I find it hard to believe that Goldman agreed to wrap these at issuance, because there was just not enough juice in these deals to warrant them taking the risk that their hedge was ineffective (keep in mind that delta hedging counterparty exposure can be very expensive - especially in a volatile market with high jump-to-default risk) and any fees would be detrimental to the deal. That makes it likely that GS did this in the secondary, at attractive pricing. It may be that ML wanted to take down their AIG exposure and GS extracted a pretty penny to do so, making their basis low enough that their true exposure to AIG was acceptable. If not, it looks like GS was willing to accept much more AIG risk than anyone else - which doesn't reflect kindly on Goldmans risk culture.

So. . . either Goldman took an extremely stupid risk and got lucky that AIG was bailed out and saved them. Or, for conspiracy theorists, they KNEW that AIG would be bailed out so they (and they alone) knew this was a good risk to take. Or they priced in the risk that AIG was going to go bad and the bailout was an absolute windfall since they got paid par on exposure that they paid much less for.

Not sure what the truth is but should be pretty easy to find out by finding out when Goldman put on each of these exposures and what their notional or basis was. Regardless, based on the "back-to-back" nature of Goldman's exposure and their total exposure, letting AIG fail would likely have resulted in Goldman's failure, which means the counterparty that bought protection from Goldman would likely go. So AIG may have been the domino that toppled it all. Of course, GS may have put on this sized exposure figuring that this was the case and AIG would have to be saved so the risk wasn't all that great. . . the very definition of moral hazard, but a gutsy and crafty play nonetheless.

Thu, 01/28/2010 - 00:33 | 208783 Anonymous
Anonymous's picture

Does anyone know what basis the Fed is carrying much of the "AAA" paper acquired via TSLF might be? Did they apply a reasonable haircut or are they participating in mark-to-fantasy as well? I'm sure I can make a guess, but anyone with firsthand knowledge please shine some FOIable light...

Thu, 01/28/2010 - 01:22 | 208817 Anonymous
Anonymous's picture

Wow, this is even worse than I already knew.

Not that I'm surprised, of course...

Thu, 01/28/2010 - 04:33 | 208891 Anonymous
Anonymous's picture

Wall Street believes that anyone who does not have a view of central park is a moron and is too stupid to understand what they are getting.

Thu, 01/28/2010 - 08:41 | 208909 blindfaith
blindfaith's picture

I might as well go fishing, NOTHING will ever happen to anyone except the thieves will be living better than all YOUR childern.

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shawnlee's picture

Given Goldman's much vaunted "risk management", who thought that selling protection on ML originated CDOs was a good idea, hedged or not?" I understand that they were aggressive on making collateral calls to ensure they were always fully collateralized, but if AIG pulled the plug and filed BK early on in the process before they could post enough cash (if, say, another division got in trouble) they would be on the hook to the counterparty they sold protection to but be naked on the other side. Merrill was notorious in the industry as a boiler room CDO factory that churned out deal after deal with suspect managers and suspect collateral - Goldman surely knew this when entering into this trade.
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