Skip to comments.Goldman Sachs/ AIG Scandal
Posted on 02/10/2010 3:57:57 AM PST by mgist
While many accounts have been written about the extremely 'shady' dealings which Goldman Sachs has/had with AIG which led directly to AIG's $180 billion bail-out unless I've missed it, one of the key issues has been soft-pedaled and another has been ignored altogether.
These two topics which I intend to discuss are
a) that Goldman Sachs used AIG as its financial 'toilet'; and
b) that Goldman Sachs had begun openly and deliberately misrepresenting assets/investments to investors starting in 2006 or 2007 at a time when all the other banker-oligarchs were continuing to assert their mark to model valuations both publicly and privately.
I'm basing my analysis on two, other accounts of the Goldman/AIG relationship: one by New York Times' columnist by Gretchen Morgenson, and one a more recent piece by an attorney and former monoline executive.
The first issue has been alluded to by others, but never in blunt terms. Essentially, as the bankster-created U.S. housing-bubble progressed, Goldman Sachs discovered that AIG was so eager and aggressive to cash in on what it perceived to be a bankster gold-mine that it would write-up insurance on anything irrespective of whether its own personnel had any genuine understanding of what they were writing up.
Thus, Goldman Sachs began to take the worst of its financial-feces to AIG, in order to get AIG to write-up credit default swaps on the assets in question. For those still not familiar with some of the bankster jargon, a credit-default swap is a form of insurance used specifically to insure against the risk of default on debt instruments.
As a brief aside, it has been suggested by myself and others that much of the CDS industry was simply a sham: writing up phony insurance for these assets which was never intended to be relied upon. These phony insurance contracts would then allow the banksters to pretend they had reduced their risk - which would, in turn allow them to leverage their mountains of paper to even more obscene levels. That issue is not relevant to the Goldman/AIG relationship, since it is clear that at least one of the parties (Goldman Sachs) took these CDS contracts very seriously.
Indeed, as Goldman found the greedy-but-gullible bankers at AIG would insure anything they brought to them, some time in 2006 or 2007 their intent on entering into these agreements changed. Originally, like the other banksters, they entered into these CDS contracts purely for risk management.
However, as Goldman Sachs began to aggressively short the various assets of the U.S. housing bubble, instead of having AIG write-up CDS contracts as protection, Goldman had its housing shorts duping AIG to enter into these CDS contracts for the specific purpose of making huge, windfall profits when those CDS contracts blew up.
Goldman Sachs Will Be Sitting Pretty With Emanuel in the Obama White House
By: Timothy P. Carney, Examiner Columnist, Nov 21, 2008
Goldman Sachs always has clout in Washington, as evidenced by the firms alumni serving as Treasury secretaries under both Presidents Bush and Clinton. Today, in these tumultuous times of bailouts and meltdowns when the investment banking leviathan needs Washington more than ever before, Goldman can leverage its most valuable asset yetincoming White House chief of staff Rahm Emanuel. Goldman Sachs is the giant of Wall Street, and more than any other investment bank, Goldman is surviving the current financial storm.
Traditionally a Democratic booster, and one of Barack Obamas top sources of funds in this past election, Goldman has always had some particularly strong allies within government. Emanuel is one such ally. An interesting early chapter in the Goldman-Emanuel relationship took place in the setting of Bill Clintons campaign for the White House in 1992. Clinton hired Emanuel as his chief fundraiser.
At the same time, however, Emanuel was on the payroll of Goldman Sachs, receiving $3,000 per month from the firm to introduce us to people, in the words of one Goldman partner at the time. This is certainly a noteworthy relationship, but its one that has almost entirely escaped scrutiny. (snip)
In his four terms in Congress, Emanuel has raised $74,750 from Goldman, making the firm his number four source of funds. Goldman has helped Emanuel. How has Emanuel helped Goldman? The most obvious answer, as mentioned in this column two weeks ago, is in Emanuels lead role in shepherding the $700 billion bailoutfirst proposed by former a Goldman CEO, Bush Treasury Secretary Henry Paulsonthrough the skeptical House.
Of course, back in the Clinton days, Goldman benefited from NAFTA and the bailout of the Mexican currency, with Emanuel pushing NAFTA through Congress, and Rubin hammering out the peso bailout. Did Goldman improperly funnel money to the Clinton campaign by subsidizing Emanuels salary in 1992? Did Goldmans help to Clinton spur the Democratic president to push NAFTA and the Mexican bailout?
The answers to these questions are opaque, and with Emanuel burrowed deep within the Obama White House, the continued relationship between Goldman Sachs and Obamas right hand man wont be easy to follow.
Watch which regulations of Wall Street Obama fights for. Watch where the bailout money goes. And dont be surprised Goldman soon sitting pretty once again.
THINGS WE DO NOT KNOW ABOUT RAHM Did Wall Street Rahm reveal all of his ties to financial institutions involved in Obama's trillion dollar federal bailout of financials.......like Goldman Sachs, for instance?
Keep it in the news till everyone knows the details!