AIG's largest trading partner wasn't a nameless European bank. It was Goldman Sachs.
I'd wondered for years how Goldman avoided the kind of huge mortgage-related writedowns that plagued all the other investment banks. And now we know: Goldman hedged its exposure via credit default swaps with AIG. Sources inside Goldman say the company's exposure to AIG exceeded $20 billion, meaning the moment AIG was downgraded, Goldman had to begin marking down the value of its assets. And the moment AIG went bankrupt, Goldman lost $20 billion. Goldman immediately sought out Warren Buffett to raise $5 billion of additional capital, which also helped it raise another $5 billion via a public offering.
The role of Goldman Sachs, and Paulson's ties to the bank, concern me greatly. I would like to see the phone records between those two sooner rather than later. Just curious, yaknow.
BTW, excellent article.
Goldman Takes ‘Private’ Equity To a New Level (2007 article)
Saturday, October 04, 2008 9:02:16 PM · by Lorianne · 6 replies · 227+ views
Wall Street Journal ^ | MAY 24, 2007 | RANDALL SMITH
Firm’s Trading System Lets Unregistered Stock Reach Exclusive Market ___
Goldman Sachs Group Inc. ranks as the most profitable securities firm on Wall Street — reflecting its mastery of trading on the world’s public markets. Now Goldman is turning that franchise on its head, creating its own private system to trade the stocks of companies that don’t want the scrutiny and regulatory burdens of going public.
The new system, GS TRuE — short for Goldman Sachs Tradable Unregistered Equity — was announced two weeks ago and made its debut on Monday with an $880 million sale of a 15% stake...
You're not alone. Something STINKS about what has happened, not that you'd know it from the media & press, which love this deal that bails out the mistakes of their political friends.