Guest Post: Dirty Little Secrets About Goldman's Collateral Calls on AIG

Tyler Durden's picture

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hedgeless_horseman's picture

More of, "God's work." 

More of the same old, "virtuous cycle."

"Everybody should be, frankly, happy."

Critics say that had AIG gone bust, the entire financial system could have collapsed, taking Goldman with it. What’s more, at the height of the crisis, the Federal Reserve broke with an 80-year-old tradition and let Goldman turn itself from a pure investment bank into a bank holding company. This meant it could borrow funds at the same cheap rate as commercial banks for as long as it wanted. Blankfein says Goldman changed status not for the money, but because it had become clear, following the collapse of Bear Stearns and Lehman, that the market had lost faith in the ability of the US Securities and Exchange Commission to regulate investment banks. Being regulated by the central bank, the Federal Reserve, would help to restore confidence in the financial system as a whole.

csmith's picture

Or, the Giant Squid needed access to $ trillions in cash in order to remain in business...I choose option two.

Seasmoke's picture

yes Goldman are geniuses and they should have been smart enough to figure out how to collect on their bets with a bankrupt AIG without any help from the taxpayers (especially at $1 for $1)

dick cheneys ghost's picture

the stench is getting worse. but thats a good thing.

Ned Zeppelin's picture

Yep.  This is who we bailed out.  Nice work, Mr. Paulson (Henry, Hank, Hammer or simply the much more accurate "Douchebag," if you prefer.)

Buckaroo Banzai's picture

More evidence that Goldman is once again the smartest douchebag in the room.

ReallySparky's picture

Tyler is on FIRE today, love it when you throw all these bombs and the banksters!

Yen Cross's picture

 Thank God I read from Right! to-left,?

Yen Cross's picture

 Love Ya ! Come on HcCtcS.S.RE. Health care,Corporate tax Cuts, Social Security, Rham E-Mule

whatz that smell's picture

fluffer is a fluffer does.

stop it! all smoke and mirrors! there is nothing going on here but paper being shuffled from one corrupt paper-shuffler to the next. somebody gonna be left holding the bag of shit... and if it's AIG or GS or JPM who gives a flying fornicator?

what keeps the ponzi going is the american taxpayer because all bags-o-crap end up there, on his her bill. until you kill the blood suking parasite....

praise be the bernank! may he ease a thousand years!

Bob's picture

That was a beautiful piece of work.  Nice that somebody is boring down into the mechanical details of the case.  Very nice.

buzzsaw99's picture

Criminal activities are no longer criminal, depending on who you are and which tbtf corporation you are CEO of. The squid holding company in particular has been an officially sanctioned pirate for decades.

blindman's picture

@ .."  and yes, the people at AIG were clueless,.."

the term "control fraud" comes to mind and the idea that

another "affiliated" outlaw, i mean outfit, could get a big

piece of that action knowing a thing or two about the

trajectory of control fraud would not be a big stretch.

the inside dynamics of too big and too treasonous to

comprehend or to prosecute, hence the idea or phrase

crime of the century.?  some day the control fraud story of

aig will be told.  now i should read the rest of this post.... 


sgt_doom's picture

Exactly right, Oh Valley of the Blind Leader.

Hank Greenberg, then CEO of prez of the board of A.I.G., back in the 90s, told GAO auditors he perfectly understood and comprehended those securitized credit derivatives (CDOs, CDSes, etc.), but in testimony before congress claimed that he, like so many others, was clueless when it came to those "exotic financial instruments."

Also, with Martin Feldstein, legendary econ prof at Harvard on AIG's Financial Products group BofD, along with Richard Holbrooke, "great man of diplomacy" and financial genius*** on AIG's BofD, how could they not be completely guilty???

***(Ya know, these politicians like Holbrooke, a poster child of the bunch, couldn't get hired by the NY Times after that "financial genius" graduated with a BA in journalism, and couldn't qualify for State's Foreign Service, but fortunately was a friend of Dean Rusk's family --- who used his connections to get "financial genius" Holbrooke a job with the State Dept.'s Foreign Service.  Just like all those other pols, who flunked Algebra, yet somehow garner millions in between their elections when they reside in the "private sector"  ---- please note obvious pattern.)

Rainman's picture

Put simply, it's always about the cash flow. Sooner or later the same con will be dressed up in a different outfit and introduced again.

lieto's picture

Why isn't this on the front page of the NYT?

The truth hurts real bad.


TD should give the State of the Union address.


JEHR's picture

All this makes sense to me.  Maybe David should send his analysis to the FCIC or SEC.  I would so love to see GS on the hotseat then in jail.

topcallingtroll's picture

Hmmm.......hey guys whats paris hilton been up too?

jm's picture

This is a good post, and the detail is awesome.  I do wonder about something.

So there was never a moment, when any of these deals could ever be bought or purchased, free and clear, on the open market.

So West Coast I was level three, valuation based on internal marks of either Goldman and AIG.  

Do you have any idea why AIG didn't mark on the basis of their internal model tight to Goldman's? 

Why did they solicit quotes on a product with slippery underlying?

This staggers the mind.  It's like some one at AIG making the company suck GS' balls.


Convolved Man's picture

Mr. Fiderer presented a good analysis of Goldman's role in AIG's downfall in an article published February 8, 2010:

when everyone seemed to be sure the SEC had a slam dunk case against Goldman's shorting of the ABACUS deal.  This was before the theatrical grilling of "Fabulous Fab" and Lloyd over "The Big Short" by the US senate's permanent subcommittee on investigations April 27, 2010.

Can't believe Goldman is still held in high regard by anyone not affiliated with criminal syndicates (which includes the Fed).

working class dog's picture

Please god let the good State of Washington follow the lead of the North Dakota Bank,and open a public bank, and than write the following  letter to Bernanke and the NY banks.

Dear con artists,

 Your services are no longer required as the primary dealer of debt to this state.

 Please go to hell, as we don't need your monopoly. If Goldman wants our business we will take bids from them and any other financial service company to manage some of our assets for a set fee and no bonuses.

Dear JP Morgan, Merrill, Goldman, and the rest of the shysters we intend to treat you like any other service industry in the US. That is when I need a plumber I surf the web for the best price. So we will put out to bid a going price for a transaction, take it or leave it, and by the way we are thru getting ripped off by you scum. If our own public bank or Investment trust screws up, and rips off the pensioners that will be our sin and not yours Aholes.

love State of Washington Investment Trust

Mark McGoldrick's picture

Great research and article.  

This is the stuff that adds value to ZH.