Posted on 11/10/2009 8:02:57 AM PST by FromLori
Goldman wasn’t the only contributor to the systemic risk that nearly toppled the global financial markets, but it was the key contributor to the systemic risk posed by AIG’s near bankruptcy. When it came to the credit derivatives, American International Group, Inc. (AIG) was required to mark-to-market, Goldman was the 800-pound gorilla. Calls for billions of dollars in collateral pushed AIG to the edge of disaster. The entire financial system was imperiled, and Goldman Sachs would have been exposed to billions in devastating losses.
A Goldman spokesman told me its involvement in AIG’s trades was only as an “intermediary,” but that isn’t even close to the full story. Goldman underwrote some of the CDOs comprising the underlying risk of the protection Goldman bought from AIG. Goldman also underwrote many of the (tranches of) CDOs owned by some of AIG’s other trading counterparties.
Even if all of Goldman’s CDOs had been pristine, it poisoned its own well by elsewhere issuing deals like GSAMP Trust 2006-S3 that—along with dodgy deals issued by other financial institutions—eroded market trust in this entire asset class and drove down prices.
By September 2008, Goldman had approximately $20 billion in transactions with AIG. Goldman was AIG’s largest counterparty, and its trades made up one-third of AIG's approximately $62.1 billion in transactions requiring market prices. Societe Generale (SocGen) was AIG’s next largest counterparty with $18.7 billion. SocGen, Calyon, Bank of Montreal, and Wachovia bought several (tranches) of Goldman’s CDOs and hedged them with AIG.
Read the Full Report Here.
Goldman Sachs is a criminal enterprise.
Don’t say that freepers Jason and Top Quack will be all over you and start stalking you like they do me lol
That remains to be seen.
Can you name one act of criminality listed in that article? I doubt it. Neither you nor Lori -- a socialist plant on this forum --- appear to understand a word of what it says.
Lori has made a particularly stupid mistake in this case: she undertood "800-pound gorilla" to be used in a negative light. It has no such connotation. The article simply says that GS was a huge trading partner partner of AIG --- just like Societe General and few others. That's all.
Everyone has always known that; in this sense the article is uninformative. The author's contribution is to list some specifics, which are not widely known.
People like you and Lori routinely defame others --- thousands of honest hard-working people --- without a moment hesitation. In doing so, you show complete disregard for Ten Commandments. You should stop thinking of yourself as a conservative.
However, lets not forget:
Without Obama’s ACORN, the fear of “red lining” lawsuits, the push by the government to issue bad loans, through CRI provisions, (The “sticks”)
And without the “carrot” of Fannie and Freddie promising to purchase these loans, from lenders -—
AIG and Goldman would not have had these risky loans to deal with, in the first place!
Instead of complaining about what was done to diversify and hedge against this massive risk, which the government forced into the financial system -— our time would be better served trying to stop the problem at its source.
This bird would never have hatched, if not for the egg laid by our government.
In this case she really made a mistake: even the author says nothing negative about the facts presented.
These libs do not seem to realize that Goldman AND AIG execs gave HEAVY financial support to Obama and the Democrat Party!
If Goldman and AIG are so “evil” -— why does Obama milk them for more campaign cash than any other politician?
Yes because we all know we should be expected to pay 100% on the dollar for Government Sachs Top Quack was wondering where my stalker was mentioned you in another post. You might like having to pay the bills for gold sachs but I do not a real capitalist would take their own licks and not socialize the losses.
I will cling to that thought as I write out my check to uncle sam knowing the banks did not have to offer that kind of risky financing to begin with then they would not have been able to force them to give it to unqualified people and knowing how heavily they donated to obama and that the banks who profited handsomely at our expense are funding acorn yes indeed .
From what I have read, and I am not a financial wizard nor avid pursuer of this, it seems that many of the derivatives and transactions termed “shenanigans” were actually intelligent and prudent attempts to counter their exposure to the potential mortgage crisis engineered and pushed by the Democrats and ACORN.
After the gun was primed and loaded the trigger was the september 16, 2008 withdrawal of billions of dollars from money market accounts at a rapid rate in the wee morning hours. Was that a effort to cover (colaterolize) some of these problems? If not, who and why the withdrawals?
These were not really withdrawals as those we commonly make from a bank account. They are more like margin calls.
Recall how the margin account works. You have a stock worth today $1000, which you use as collateral to borrow another $1000 and purchase more stock. Now you are sitting on $2000 worth of stock. The law requires that you maintain 50% margin: what is truly yours (before borrowing)) should be no less than %50. That is why you could not borrow more than $1000.
You hoped that the stock would rise but it drops next day to $1800 from $2000. Since $1000 was a loan, your equity is now only $1800-1000 = $800. It is less than 50% of 1800, which is $900. As a consequence, you receive a margin call from a broker, mandating that you bring additional $900-800 = $100 in cash. If you cannot do that, they have the right to sell your stock whether you want it or not.
The accounting rule that makes this evaluation mandatory every day is call "mark-to-market" --- value the stock at the day's closing market prices (rather than at the cost at which you purchased, as in the case of office supplies, for instance). This silly rule was put in effect only a few years ago.
This rule brought down Lehman. It received one "margin call" after another and was compelled to liquidate (like selling stock in the previous example.
It was thus margin calls rather than withdrawals that precipitated its fall. Once Lehman was allowed to fall --- in sharp departure to decades-old policy of bailouts -- confusion transpired, and credit markets froze.
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