Skip to comments.Behind Insurerís Crisis, Blind Eye to a Web of Risk [major conflict of interest/rip off]
Posted on 09/29/2008 12:41:22 AM PDT by Freedom_Is_Not_Free
Two weeks ago, the nations most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.
As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of Americas oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the worlds largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.
The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulsons former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals woes, was A.I.G.s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldmans side, several of these people said.
Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.
Their message was simple: Lehman was expendable. But if A.I.G. unspooled, so could some of the mightiest enterprises in the world.
A Goldman spokesman said in an interview that the firm was never imperiled by A.I.G.s troubles and that Mr. Blankfein participated in the Fed discussions to safeguard the entire financial system, not his firms own interests.
Yet an exploration of A.I.G.s demise and its relationships with firms like Goldman offers important insights into the mystifying, virally connected and astonishingly fragile financial world that began to implode in recent weeks.
(Excerpt) Read more at nytimes.com ...
Yeah I’m especially comforted by how the CEO of Goldman Sachs had taken part of the decision making process in that whole deal with Paulson...
Have the shills whom are advocating for bailout woken up yet?
Gretchen Morgenson is a star reporter. I noticed from the accompanying video that she is also very attractive.
Gretchen has been on top of the banking funniness for a long time, and has even receieved death threats for her reporting. She has been spot on, and is indeed very nice looking!
Pretty good article. Yeah, no problem with Goldman’s exposure to AIG-insured assets, hey, just their main trading partner, no problem here, let’s just ask Henry Paulson why he bailed out AIG in such a hurry. Sure. Just a quirky coincidence, I’m sure. Maybe George Noory has the answers or could invite on a guest to blather about it. Ya think?
Nothing to see here, just mosey along.
At this point Coast to Coast seems more credible than the Congress or White House.
>> Yeah Im especially comforted by how the CEO of Goldman Sachs had taken part of the decision making process in that whole deal with Paulson...
This is an insider sweetheart deal from start to finish.
Corruption, conflict of interest, self-dealing bump!
Paulson needs to step down! If he doesn’t tender his resignation PDQ, the president should fire him. (I know, that’s not going to happen.)
I think Paulson needs to resign.
I have a simple question to anyone here that understands this business- what happened to PMI (Private Mortgage Insurance)? This insurance was (is?) required by all home buyers of conventional mortgages, and it’s purpose is to indemnify LENDERS against defaults, as I understand it. Where are they? What have all these homeowners been paying for? Why isn’t this mess insured?
i am not taking any specific spin on this story, but one who thinks goldman is not the most connected firm on the street with Treasury is blind.
This has to be shouted out from the rooftops:
Paulson left GS. His successor, Blankfein, was in the room when it was decided that OUR money would be used to bail out AIG. AIG was on the hook to GS to the tune of $20 billion. Fast forward to LEH, Paulson lets it go bankrupt, “drawing a line in the sand.” Then when GS comes hat in hand last week, all of a sudden there is this overiding, pressing, world-ending crisis, armageddon, god save us all need for a bailout. Paulson is so conflicted it is beyond disgusting. He needs to go. And if Bush is listening to this guy, he deserves all of the opprobrium heaped upon him.
“Back in New York, the situation at Morgan Stanley and Goldman Sachs was worsening rapidly. In the middle of the trading day, at about 2 p.m., Morgan Stanley CEO John Mack dispatched an email to employees: “What’s happening out here? It’s very clear to me — we’re in the midst of a market controlled by fear and rumors.” By the end of Wednesday, employees at Morgan Stanley and Goldman were shell-shocked. Morgan Stanley’s shares had fallen 24% to $21.75 while Goldman, the largest investment bank by market value, fell 14% to $114.50.
By Thursday, Messrs. Paulson and Bernanke decided that the fallout presented too great a threat to the financial system and the economy. In the biggest government intervention in financial markets since the 1930s, they extended federal insurance to some $3.4 trillion in money-market funds and proposed a $700 billion plan to take bad assets off the balance sheets of banks.
Three days later, Goldman Sachs and Morgan Stanley applied to the Fed to become commercial banks — a historic move that ended the tradition of lightly regulated Wall Street securities firms that take big risks in the pursuit of equally big returns.”
I don’t think PMI is required for a conventional mortgage if the downpayment is 20% or more.
When will people realize that the shell of this story is the same for:
etc., etc., etc.
Many more to come as the tangled web unweaves.
You just mentioned the crux of the problem- none of these "affirmative action" mortgages required ANY down payment, or regular income, or citizenship in this country, or anything resembling a responsible buyer. However, you're missing the point that I'm trying to make- WITHOUT 20% down, PMI is (was) required.... why isn't this PMI insurance now liable for all this worthless paper? That was what it was insuring, if I understand it correctly.