Goldman, Blackrock In Cross Hairs Again As Senator Grassley Digs Up Old Corpses

Just as Goldman's hope that the BP gusher's taking front page priority, especially in the aftermath of the rather amusing settlement between the firm and the SEC, was finally appearing to bear fruit as for the first time in over a year there was nothing relevant on the news front regarding the 200 West company, here comes Senator Chuck Grassley lobbing a grenade full of provocative and very much unanswered questions directed at the GAO, at Elizabeth Warren, and at Neil Barofsky that demand clear and prompt answers. We are also quite content that Blackrock and AIG once again manage to get themselves dirty.

Grassley submits questions for committee record about taxpayer dollars for AIG, Goldman Sachs counterparties

Question for the Record

Hearing before the Senate Finance Committee

July 21, 2010

Questions for Richard Hillman – Government Accountability Office

1. What does Treasury need to do to successfully exit from TARP?

2. Will Treasury reach its
goal for HAMP of helping 3 to 4 million borrowers? If not, how many
borrowers do you think will get help from the program?

3. To what extent were CPP investment decisions influenced by political considerations or other external factors?

4. Does the increasing number
of firms missing their CPP dividend payments indicate that more CPP
firms are at risk of failure? And does the number of missed dividend
payments show that Treasury made mistakes investing in these
institutions?

5. Will the government’s
equity stakes in Chrysler and GM be worth enough for the government to
make back its entire investment?  How long might it take for the
government to recoup this money? 

6. GM has announced that it
plans to launch an initial public offering (IPO) by the end of this
year.  Is an IPO the only, or the best, alternative for recovering the
taxpayer investment in GM, is an IPO on this timetable feasible, how
will an IPO impact the government’s equity stakes in GM, and what role
is Treasury playing in the IPO?

7. What work are you currently doing on Treasury’s aid to the auto industry?

8. GAO recommended last year
that Treasury ensure it has adequate staffing to manage its investments
in Chrysler and GM.  Where does Treasury stand on this?

9. What is the likelihood of AIG repaying the government?

10. How is Treasury helping small businesses?  Is Treasury meeting its goals for small businesses?

Questions for Elizabeth Warren, Congressional Oversight Panel

Several times in your Panel’s June report on the AIG bailout, you
indicated that Goldman Sachs failed to provide information requested by
the Panel.  In particular, you indicated that Goldman did not provide
information sufficient to identify entities you called the “indirect
beneficiaries” of the AIG bailout — financial institutions with whom
Goldman had hedged the risk of its exposure to an AIG default.  You
said, “And we want to know the identity of those parties partly just to
know where American taxpayer dollars went, but partly to assess
Goldman’s claim … that they had nothing at stake one way or the other
in the AIG bailout.”

Following my suggestion to the Chairman that the Committee issue as
subpoena if necessary, after the hearing, Goldman Sachs provided the
Committee with the following spreadsheets and a briefing (see Attachments 1 and 2).  My understanding is that Attachment 1
lists companies that wrote credit default swap protection on AIG for
Goldman, meaning that in the event of an AIG default in September 2008,
these entities would have been responsible for paying Goldman the
amount in the “Net” column.  Thus, these entities avoided losses in the
amounts listed on Attachment 1 as a direct result of the taxpayers’ bailout of AIG in September 2008.

1. The fifth largest amount
listed is about $175 million that Lehman Brothers would have owed
Goldman Sachs on CDS protection.  However, given Lehman’s financial
position at the time (September 15, 2008), isn’t it true that the real
value of this hedge to Goldman would have been much less than $175
million?  Wouldn’t it have only been worth the approximate value of any
collateral that Lehman had already posted to Goldman up to that date?

2. Similarly, is it possible
that financial health of the other institutions on the list may have
prevented them from being able to pay Goldman in the event of an AIG
default? Does this undermine Goldman’s claim that it was “fully
collateralized and hedged” with regard to the risk of an AIG default,
and thus demonstrate that Goldman did, in fact, receive a direct
benefit from the government’s assistance to AIG?

3. Will the Panel be seeking
additional details about these transactions in order evaluate Goldman’s
claim to have been indifferent to whether AIG went bankrupt?  If so,
please describe the scope of your additional requests and inform the
Committee if you do not receive complete cooperation.

As I understand Attachment 2,
it lists a series of entities that directly benefited from government
assistance through the Federal Reserve’s Maiden Lane III facility, in
that they received cash provided to AIG, which it owed to Goldman and
which, in turn, Goldman owed them.  The majority of these beneficiaries
appear to be foreign entities.

4. Can you please explain how
ensuring that these institutions were paid in full, rather than
required to suffer the consequences of the risks that they took,
benefited the U.S. taxpayer?

5. Will the Panel be seeking
additional details about these transactions?  If so, please describe
the scope of your additional requests and inform the Committee if you
do not receive complete cooperation.

Questions for Neil Barofsky, Special Inspector General, TARP

Last year it was estimated that although the TARP program itself
amounted to about $700 billion, the total government risk from other
programs at the Freddie Mac, Fannie Mae, HUD, and the Federal Reserve
amounted to about $3 trillion.  In the last year, this estimate has
increased to $3.7 trillion.  So, we’ve added a whole new TARP program
worth of risk in the last twelve months in the amount of $700 billion.

1. How likely is it that taxpayers could start suffering actual losses from this $3.7 trillion in risk?

2. What are the potential pitfalls that could cause these risks to start causing losses to taxpayers?

3. The last time you
testified before the Committee, I asked you about a Wall Street
investment firm named Blackrock.  I understand your office is auditing
or investigated potential conflicts of interest involving this company
and the Public-Private Investment Program, the $40 billion TARP program
designed to buy toxic assets.  As I understand it, BlackRock has a deal
to work on Maiden Lane for the Federal Reserve Bank of New York as a
toxic asset analyst, while a separate BlackRock company has a deal with
Treasury to participate in the Public-Private Investment Program to buy
toxic assets.  What can you tell this Committee about the results of
your investigation/review to date?

4. Your office has been
investigating excessive executive severance payments to AIG executives
that occurred earlier this year.  I have asked you to conduct this
investigation because the Treasury Special Master for Executive
Compensation has been unwilling to get to the bottom of what happened.
 You also are investigating potential conflicts of interest within the
Special Master’s office.  Could you please update the Committee on your
progress?

Comments

[bugs_]

Chuck, next Senate Majority Leader.

[E pluribus unum]

I find it amazing how these Senators become "men of the people" full out populists for six months leading up the election day while sucking the financial industry's left nut the othe 5 1/2 years of their term. VOTE THEM ALL OUT!

They must laugh at the naive voters in the privacy of their own club

[Rick64]

 Same old game over and over. 

I have a better question. How do we get the politicians to represent the people ?

[Arthor Bearing]

We must view political solutions suspiciously and work to solve our own problems together, without a gov't daddy's guiding hand

[i-dog]

"How do we get the politicians to represent the people ?"

Errrrrmm ... put them all in prison?

America has 8 TIMES the per-capita prison population of the rest of the western world. Since the pollies created this situation for "the people", let them enjoy/represent it themselves.

Then let the private sector get on with voluntarily living and trading and protecting each other without any government interference at all.

[nedwardkelly]

Maybe we need 6 month terms?

[Inspector Asset]

Refresh my memory. Is Black Rock that chop shop owned 51% by GS and 49% by Morgan Stanley?

[RockyRacoon]

How about a follow up article giving us voracious readers the answers to these questions -- or why they were not answered!  This is about the only place we can get this info since other faux-news sources give us piecemeal news or none at all.

[Reese Bobby]

 I believe questions for the record have to be answered but in can take a couple months for them to be included in the official, public record.  The anwers are unlikely to be comprehensive.

For a lifetime political hack Grassley seems above average.  Iowa went 54% Obama in 2008 but with a 91% white population whose key issue was the economy it is probably solid Red again already...

[Lndmvr]

Speaking as an Iowan who really doesn't like the state,  Chuck has got to go when it's his time. Hows the cow fart smellin' goin' Chuck?

[virgilcaine]

Lots of questions, some answers, very few changes. If the ones who make the Laws don't know were in trouble. Rangal sure knows how it all works.

[traderjoe]

More corruption, cronyism, obfuscation, lack of interest by anyone relevant, etc., etc.

Nothing to see, you can move on now. 

[Reese Bobby]

Politics is frustrating if not hopeless as the average voter is too dense to understand what is happening to them.  But I don't think that means you give up on it.  You fight to educate people and vote the bums out...rinse, repeat.

Or join up we these fine people?

http://www.youtube.com/watch?v=8PaoLy7PHwk

[goldfreak]

Does anybody see that ad for Cramer on the left side?

Profit with Cramer?

[dark pools of soros]

click it and Tyler will profit FROM Cramer

[knukles]

"Your office has been investigating excessive executive severance payments to AIG executives that occurred earlier this year.  I have asked you to conduct this investigation because the Treasury Special Master for Executive Compensation has been unwilling to get to the bottom of what happened.  You also are investigating potential conflicts of interest within the Special Master’s office."

Don't it says it all Right There, Ollie?

Like the Special Master's (God that is so twisted sexy!  Please make me squirm Mr. Special Master.  Wonder if it has anything to do with the SEC's Tranny Enforcers?) latest prognostication, that those evil bastards who got too much bonus money from their firms that would have otherwise gone belly without direct government dispensation better never, ever even think about doing that again! 

What?  Do fucking what?  Get bailed out and give the cash to their minions?  Like doing it again is something that comes along every so often around bonus time?  Like this was Not a One Fucking Time Special Unusual Out of the Ordinary Event?  Raid the US Treasury?  In Fact, Raid my Ass!  It was a formal US Government sponsored open door come one, come all, major financial intermediary Campaign Donor Smorgasbord of Taxpayer Money.  Just in time for the Lobbying and Campaign Contribution cycle for FinReg.  Which was just sooooooo coincident with the Goldman Slap on the Wrist, back to Business (Pillage & Loot) as normal, Problems All Solved, No Reason to Give a Shit Defining Event.

Hah!  Fucked again!

[dark pools of soros]

Tyler, let me know when GS sends you free passes to the premier!

http://online.wsj.com/article/SB10001424052748704249004575385471576237734.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

[Hang The Fed]

You know what?  Who gives a shit what the answers to these questions are?  By the time the good stuff hits the street, it's been cut and diluted so many times that there's barely a grain of truth anywhere in it.  Old-men Sacks and the Fed have done things together in seedy motel rooms that make most pornos seem like Sesame Street, but for some reason it's the public at large who always end up being fucked.  The current economic conditions remind me of some sad parody of Poe's "Masque of the Red Death," though I can't figure out whether it'll be Blankfein or Bernanke in the role of Prince Prospero.

[nedwardkelly]

Right. Not only will the answers be diluted and obfuscated, but they wont actually affect any change anyway.

It's like this whole feinberg scam on excessive compensation. How much money was wasted on this clown and his support team/investigation, just so that he could tell us that some execs are overpaid? They're not doing anything about it (other then public shame..lol!!!) so what was the point? It's all bread and circuses. The only thing the government is getting busy at is making it look like they're getting busy 'fixing' things.

So now with elections coming up this clown is getting busy making it look like he's tough on wall street and wants to get to the bottom of things he should have gotten to the bottom of months ago.

[DavidRicardo]

Can you believe anyone ever thought Elizabeth Warren was anything but a corrupt, stupid front?  Evidently in America, you put the idiot of the family in government.  Look at Obama.

[Dburn]

The powers that be , Geithner and friends are 100% against Warren’s appointment as for the Consumer Watchdog Agency she outlined 3 years ago and was finalized in the recently passes legislation, for fear she may unravel the extend and pretend scheme publically. She would have go to the sources to quash the various dodges the banks have put on consumers which inevitably leads straight back to Geithner and Bernanke and the Banks where their loyalties lie.

She is far from stupid. Obviously you haven’t seen the hearings where she was questioning Geithner. It’s almost inevitable that she won’t be appointed as she is seen as an enemy of the vested interests and the new status quo. Typically potential appointees don’t generate high level opposition at this early stage unless they are considered a threat which is why I see comments like “stupid” and “corrupt” are either simply ideological based insults as opposed to ones based on fact, or worse part of the rolling shitball to keep her from getting appointed.

Anyone the banks and their bitches are against being appointed should be of great interest to people here.

[Cursive]

@ Chuck Grassley

These questions are a laugh riot and about 20 months too late, chump.  Do us and Iowa a favor and retire.

[woolybear1]

I saw Grassley last summer say in public that he didn't vote for the bailouts. Yea right Chuck, you voted against it the first time but, for it the second time. Grassley is a liar and a fraud.