The fall of 2008 was a hectic time, when in the aftermath of the Lehman failure, the entire financial system was on the verge of collapse and only the biggest Fed/taxpayer-backed bailout in history avoided an all out depression. Today, as a result of the latest, 12th Podesta leak, we find that then president-elect Barack Obama was also being intimately briefed with unfolding events.
In a previously never before seen confidential memo, sent on November 9, 2008 from current Fed governor Dan Tarullo addressed to Barack Obama, Tarullo send John Podesta an email in which Tarullo, who at the time was not employed by the Fed and was Professor of Law at Georgetown University Law Center, reveals what Hank Paulson and Ben Bernanke in which Tarullo was told on a “confidential basis that, before the markets open tomorrow morning, they will be announcing a significant restructuring of the AIG bailout package. They are taking this step in order to avoid what they asserted would be a systemic crisis.” Continue reading »
From the article:
Just three questions here about Sarah Dahlgren’s “resignation”:
1. Why is she resigning now: is there a crackdown on just how corrupt the Goldman Sachs branch office at Liberty 33 truly is? Acutally, just kidding. Ignore this for obvious reasons.
2. What will her salary at Goldman Sachs be once she joins the 200 West firm?
3. Which Goldman partner will replace her?
– NY Fed Head Of Banking Supervision, And Person Who Handed Over Billions In AIG Profits To Goldman, Resigns (ZeroHedge, April 30, 2015):
The name Sarah Dalgren is well-known to long-term Zero Hedge readers: back in January 2010 we revealed that, just before the Great US banking system backdoor bailout by way of getting a par return on AIG CDS, back in August 2008 Goldman was willing to tear up AIG Derivative Contracts, and had in fact offered to take a haircut. It was the Fed who turned Goldman’s offer down! And the person who made the decision would become the Fed’s head of Special Investments [AIG] Management Group: Sarah Dahlgren.
We said that Dahlgren “not only did not save US taxpayers’ money, but in fact ended up costing money, when they funded the marginal difference between par (the make whole price given to all AIG counterparties after AIG was told to back off in its negotiations) and whatever discount would have been applicable to the contract tear down that had been proposed by Goldman a mere month earlier. This, more so than anything presented up to now, is the true scandal behind the New York Fed’s involvement.” Continue reading »
Added: Apr 21, 2013
9/11 Conspiracy Solved: Watch this documentary and look for the evidence and then make up your own mind whether or not 9/11 was an inside job.
Special thanks to Michael C. Ruppert, Mark H. Gaffney, and Kevin Ryan for their amazing research, as they tried to solve the crimes of 9/11. This video is a compilation of evidence they have uncovered.
Tags: 9/11, AIG, Banking, Bush administration, CFR, CIA, Council on Foreign Relations, Dick Cheney, Documentary, Economy, False flag, FBI, George Bush, Global News, Government, Inside job, Pentagon, Politics, Terrorism, Terrorists, U.S., WTC
YouTube Added: 21.03.2013
Tags: AIG, Bank of England, Banking, Bonds, Collapse, Cyprus, Debt, Derivatives, Derivatives market, ECB, Economy, EU, Europe, Fed, Federal Reserve, Global News, Government, Hillary Clinton, JPMorgan, Lehman Brothers, Max Keiser, MF Global, Obama administration, Politics, Quantitative Easing, Reggie Middleton, Society, U.S.
– Kyle Bass Warns “The ‘AIG’ Of The World Is Back” (ZeroHedge, March 12, 2013):
Kyle Bass, addressing Chicago Booth’s Initiative on Global Markets last week, clarified his thesis on Japan in great detail, but it was the Q&A that has roused great concern. “The AIG of the world is back – I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp – $5bn at a time… and it is happening in size.” As he explains, the regulatory capital hit for the bank is zero (hence as great a return on capital as one can imagine) and “if the bell tolls at the end of the year, the 27-year-old kid gets a bonus… and if he blows the bank to smithereens, ugh, he got a paycheck all year.” Critically, the bank that he bought the ‘cheap options’ from recently called to ask if he would close the position – “that happened to me before,” he warns, “in 2007 right before mortgages cracked.” His single best investment idea for the next ten years is, “Sell JPY, Buy Gold, and go to sleep,” as he warns of the current situation in markets, “we are right back there! The brevity of financial memory is about two years.”
Click the image below for the full presentation (unembeddable):
The main thrust of the discussion is Bass’ thesis on Japan’s pending collapse – which we wrote in detail on here, here, and here – and while the details of this thesis should prepare most for the worst, it is the Q&A that provides some very clear insights into just what is going on in the world.
Starting at around 50:00…
Bass On Immigration Reform in Japan – hailed as a solution to the demographic problem – Bass says “Ain’t gonna happen. They need wage inflation and this will not encourage that. It’s an untenable situation.” Summing up his whole view on Japan – “I just don’t think it can be fixed.”
Question: When you look today in the capital markets at the tactical asymmetry that exists among the various financial instruments to take advantage of cheap optionality – what is that instrument?
I’ll give you guys a bit of an idea… we don’t talk about exactly what
we do – we tell you how much we love coke but we’re not gonna give you
The AIG of the world is back – I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp – $5bn at a time.
You know why? Because it’s outside of a 95% VaR, its less than one-year to maturity, so guess what the regulatory capital hit is for the bank… I’ll give you a clue – it rhymes with HERO…
– Secrets and Lies of the Bailout (Rolling Stone, Jan 4, 2013):
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed. To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?
It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.
Tags: AIG, Bailout, Bank of America, Banking, Barack Obama, Ben Bernanke, Bush administration, Citigroup, Economy, FDIC, Fed, Federal Reserve, Financial Crisis, General Motors, George Bush, Global News, GM, Goldman Sachs, Government, Great Depression, Henry Paulson, Jamie Dimon, Larry Summers, Lehman Brothers, Merrill Lynch, Neil Barofsky, Nomi Prins, Obama administration, Politics, Ponzi schemes, Sheila Bair, Society, TARP, Taxpayers, Timothy Geithner, U.S., Wachovia, Wall Street, Wells Fargo
– Facing backlash, AIG won’t join suit against U.S. (USA Today/AP, Jan 9, 2013):
NEW YORK — Facing a certain backlash from Washington and beyond, American International Group won’t be joining a shareholder lawsuit against the U.S. government.
AIG was legally obligated to consider joining the lawsuit being brought against the government by former AIG Chief Executive Maurice Greenberg, who claims that the terms of the $182 billion bailout weren’t fair to AIG shareholders.
The prospect of AIG joining the lawsuit had already triggered outrage. A congressman from Vermont issued a statement telling AIG: “Don’t even think about it.”
– AIG Considers Suing US Over US Bailout Of AIG (ZeroHedge, Jan 8, 2013):
Sometimes you just have to laugh – or you will cry. In what could well have been Tuesday Humor if it wasn’t so real, the AIG board (fulfilling its shareholder fiduciary duty) is considering joining Hank Greenberg’s suit against the government over the cruel-and-unusual bailout that saved the company. The $25bn lawsuit, as NY Times reports, based not on the basis that help was needed but that the onerous nature “taking what became a 92% stake in the company with high interest rates and funneling billions to the insurer’s Wall Street clients” deprived shareholders of tens of billions of dollars and violated the Fifth Amendment (prohibiting the taking of private property for “public use, without just compensation”). The ‘audacious display of ingratitude’ comes weeks after the firm has repaid the $182 billion bailout funneled to it and its clients by an overly generous Treasury. The firm has asked for 16 million pages of government documentation, this “slap in the face of the government” portends a question of whether the government will sue The Fed for enabling the recovery that strengthened Greenberg’s case that the bailout was so harsh. Happy retirement Tim Geithner.
– Lawmakers outraged after AIG announces potential suit against US over bailout (FOX News, Jan 9, 2013):
As American International Group Inc. weighs whether to join a lawsuit against the government that spent $182 billion to save it from collapse, U.S. lawmakers have a message for the insurance behemoth: “Don’t even think about it.”
In a letter to AIG Chairman Robert Miller, U.S. Reps. Peter Welch, D-Vt., and Michael Capuano, D-Mass., characterized the insurer as the “poster child” for Wall Street greed, fiscal mismanagement and executive bonuses.
“Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah,” the letter read. “Taxpayers are still furious that they rescued a company whose own conduct brought it down. Don’t rub salt in the wounds with yet another reckless decision that is on par with the reckless decision that led to the bailout in the first place.”
– Marc Faber: “Paul Krugman Should Go And Live In North Korea” (ZeroHedge, Dec 13, 2012):
If there is one thing better than Marc Faber providing a free, must-watch (and listen) 50 minute lecture on virtually everything that has transpired in the end days of modern capitalism, starting with who caused it, adjustable rate mortgages, leverage, why did the Fed let Lehman fail, why was AIG bailed out, quantitative easing, Operation Twist, where the interest on the debt is going, which bubbles he is most concerned about, a discussion of gold and silver, and culminating with his views on a world reserve currency, is him saying the following: “The views of the Keynesians like Mr. Krugman is that the fiscal deficits are far too small. One of the problems of the crisis is that it was caused by government intervention with fiscal and monetary measures. Now they tells us we didn’t intervene enough. If they really believe that they should go and live in North Korea where you have a communist system. There the government intervenes into every aspect of the economy. And look at the economic performance of North Korea.” Priceless.
50 minutes of Faberian bliss:
Tags: AIG, Alan Greenspan, Ben Bernanke, Bonds, Bubble, Collapse, Debt, Dollar, Economy, Fannie Mae, Fed, Federal Reserve, Freddie Mac, Global News, Government, Lehman Brothers, LTCM, Marc Faber, Mortgage crisis, Mortgages, Operation Twist, Paul Krugman, Politics, Quantitative Easing, Stock Market, U.S.
– A.I.G. Is Now Worried About Bad P.R. — for Policyholders (New York Times, Oct. 11, 2011):
Insurance providers are constantly coming up with new products to sell to policyholders. But the American International Group has hit upon one of the more unusual new services we’ve heard of in some time: reputation insurance.
Chartis, A.I.G.’s property and casualty insurance arm, said Tuesday that it would begin selling something called ReputationGuard. Created by Chartis’s executive liability team, it would give policyholders access to “a select panel” of experts at the public relations firms Burson-Marsteller and Porter Novelli to protect against negative publicity.
Recommended ‘extensive roundup’ here:
Finally, after trillions in fraudulent activity, trillions in bailouts, trillions in printed money, billions in political bribing and billions in bonuses, the criminal cartel members on Wall Street are beginning to get what they deserve. As the Eurozone is coming apart at the seams and as the US economy grinds to a halt, the financial elite are starting to turn on each other. The lawsuits are piling up fast. Here’s an extensive roundup:
Don’t blame American appetites, rising oil prices, or genetically modified crops for rising food prices. Wall Street’s at fault for the spiraling cost of food.
It took the brilliant minds of Goldman Sachs to realize the simple truth that nothing is more valuable than our daily bread. And where there’s value, there’s money to be made. In 1991, Goldman bankers, led by their prescient president Gary Cohn, came up with a new kind of investment product, a derivative that tracked 24 raw materials, from precious metals and energy to coffee, cocoa, cattle, corn, hogs, soy, and wheat. They weighted the investment value of each element, blended and commingled the parts into sums, then reduced what had been a complicated collection of real things into a mathematical formula that could be expressed as a single manifestation, to be known henceforth as the Goldman Sachs Commodity Index (GSCI).
Tags: Agriculture, AIG, Banking, Barclays, Bear Stearns, Commodities, Derivatives, Derivatives market, Deutsche Bank, Economy, Financial Crisis, Food, Global News, Goldman Sachs, Inflation, JP Morgan Chase, Lehman Brothers, PIMCO, Wall Street
“When a country embarks on (record) deficit financing (Obamanomics) and inflationism (Quantitative easing) you wipe out the middle class and wealth is transferred from the middle class and the poor to the rich.”
– Ron Paul
The other 93% will be destroyed in the coming greatest financial collapse. (1% will get richer.)
This is the Greatest Depression.
Wall Street at least temporarily relieved of the burden of having to buy Treasuries & Agency bonds, is looking at the jump in oil prices as nothing more than an irritant to their plans for a higher market. Bill Dudley of the NY Fed, a most powerful member, continues to make a vigorous defense of Federal Reserve policies. He, and a few other Fed participants, and Chairman Bernanke believe liquidity is the key for solving problems. That is not only in the realm of debt purchases, but in the relief it brings to Wall Street and banking. It relieves them of the responsibility of having to make those purchases to assist the Fed. Those funds can then be directed toward other investments, such as la liquidity-driven stock market rally. The correlation between the movements in the Fed balance sheet and market can be traced to 85% of market movement for the past 2-1/2 years. An interesting result of Fed manipulative policy is low level of short interest during this period. Most of the professional market players knew the market was headed higher, because they knew such overwhelming liquidity injections would have to take it higher.
They also knew that the Fed had to keep the wealth affect going, because the market was the only generator of wealth left, as the bond market bubble would be broken eventually. The Fed has engineered a market recovery and Wall Street knew what they were up too. QE1 saved the financial community and QE2 saved the government debt structure at least temporarily. The wealth effect has been saved temporarily as well. The public has been left with a pile of crumbs as they struggle for survival. Unemployment has improved ever so slightly and now we have a new problem to increase the suffering and that is much higher oil prices.
Tags: AIG, Banking, Barack Obama, Ben Bernanke, Debt, Depression, Dollar, Economy, Fed, Federal Reserve, Government, Great Depression, Inflation, Obama administration, Politics, Society, U.S., Wall Street
On Friday, free and efficient market champion Ted Kaufman, previously known for his stern crusade to rid the world of the HFT scourge, and all other market irregularities which unfortunately will stay with us until the next major market crash (and until the disbanding of the SEC following the terminal realization of its corrupt and utter worthlessness), held a hearing on the impact of the TARP on financial stability, no longer in his former position as a senator, but as Chairman of the Congressional TARP oversight panel. Witness included Simon Johnson, Joseph Stiglitz, Allan Meltzer, William Nelson (Deputy Director of Monetary Affairs, Federal Reserve), Damon Silvers (AFL-CIO Associate General Counsel), and others.
In typical Kaufman fashion, this no-nonsense hearing was one of the most informative and expository of all Wall Street evils to ever take place on the Hill. Which of course is why it received almost no coverage in the media. Below we present a full transcript of the entire hearing, together with select highlights.
The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a MUST READ for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished.
Key highlights from the transcript:
Tags: AIG, Bank of America, Bank of England, Barack Obama, Bush administration, Citigroup, Congress, Debt, FDIC, Fed, Federal Reserve, Freddie Mac, George Bush, Global News, Goldman Sachs, Government, Obama administration, Politics, Quantitative Easing, Real Estate, Recession, Society, TARP, Taxpayers, Ted Kaufman, U.S., Unemployment, Warren Buffett, Wells Fargo
Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University.
This essay is about three recent books that explain how we lost our economy, the Constitution and our civil liberties, and how peace lost out to war.
Matt Taibbi is the best–certainly the most entertaining–financial/political reporter in the country. There is no better book than Griftopia (2010) to which to turn to understand how stupidity, greed, and criminality, spread evenly among policymakers and Wall Street, created the financial crisis that has left Americans overburdened with both private and public debt. Taibbi walks the reader through the fraudulent financial instruments that littered the American, British, and European financial communities with toxic waste. He has figured it all out, and what in other hands might be an arcane account for MBAs is in Taibbi’s hands a highly readable and entertaining story.
For the first 65 pages Taibbi entertains the reader with the inability of the public and politicians to focus on any reality. The financial story begins on page 65 with Fed chairman Alan Greenspan undermining the Glass-Steagall Act leading to its repeal by three political stooges, Gramm-Leach-Bliley. This set the stage for the banksters to leverage debt upon debt until the house of cards collapsed. When Brooksley Born, head of the Commodity Futures Trading Commission, attempted to do her regulatory job and regulate derivatives, the Federal Reserve, Treasury, and Securities and Exchange Commission got her bounced out of office. To make certain that no other regulator could protect the financial system and its participants from what was coming, Congress deregulated the derivatives markets by passing the Commodity Futures Modernization Act.
Tags: AIG, Bailout, Banking, Barack Obama, Bonds, Bush administration, CIA, Civil liberties, Civil rights, Constitution, Dick Cheney, Dollar, Economy, Fed, Federal Reserve, Financial Crisis, George Bush, Global News, Goldman Sachs, Government, Griftopia, John F. Kennedy, Matt Taibbi, Mortgage crisis, Mortgages, Obama administration, Politics, U.S.
There was a time when everyone thought CDOs are perfectly safe. That ended up being a tad incorrect. It resulted in AIG blowing up, recording hundreds of billions in losses and almost taking the rest of the financial world with it, leading ultimately to the first iteration of quantitative easing. A few years thereafter, several blogs and fringe elements suggested that munis are the next major cataclysm and will likely require Fed bail outs (some time before Meredith Whitney came on the public scene with her apocalyptic call). It would be only fitting that the same AIG that blew up the world the first time around, end up being the same company that does so in 2011, and with an instrument that just like back then only an occasional voice warned is a weapon of mass destruction: municipal bonds. AIG dropped over 6% today following some very unpleasasnt disclosures about its muni outlook, and corporate liquidity implications arising therefrom: “American International Group Inc., the bailed-out insurer, said it faces increased risk of losses on its $46.6 billion municipal bond portfolio and that defaults could pressure the company’s liquidity.” So how long before we discover that Goldman has been lifting every AIG CDS for the past quarter? And how much longer after that until someone leaks a document that the company’s muni strategy was orchestrated by one Joe Cassano?
From the Risk Factors section in the company’s just issued 10-K:
Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them
Over drinks at a bar on a dreary, snowy night in Washington this past month, a former Senate investigator laughed as he polished off his beer.
“Everything’s fucked up, and nobody goes to jail,” he said. “That’s your whole story right there. Hell, you don’t even have to write the rest of it. Just write that.”
I put down my notebook. “Just that?”
“That’s right,” he said, signaling to the waitress for the check. “Everything’s fucked up, and nobody goes to jail. You can end the piece right there.”
Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world’s wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.
This article appears in the March 3, 2011 issue of Rolling Stone. The issue is available now on newsstands and will appear in the online archive February 18.
The rest of them, all of them, got off. Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What’s more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even “one dollar” just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick “The Gorilla” Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars.
Instead, federal regulators and prosecutors have let the banks and finance companies that tried to burn the world economy to the ground get off with carefully orchestrated settlements — whitewash jobs that involve the firms paying pathetically small fines without even being required to admit wrongdoing. To add insult to injury, the people who actually committed the crimes almost never pay the fines themselves; banks caught defrauding their shareholders often use shareholder money to foot the tab of justice. “If the allegations in these settlements are true,” says Jed Rakoff, a federal judge in the Southern District of New York, “it’s management buying its way off cheap, from the pockets of their victims.”
To understand the significance of this, one has to think carefully about the efficacy of fines as a punishment for a defendant pool that includes the richest people on earth — people who simply get their companies to pay their fines for them. Conversely, one has to consider the powerful deterrent to further wrongdoing that the state is missing by not introducing this particular class of people to the experience of incarceration. “You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street,” says a former congressional aide. “That’s all it would take. Just once.”
But that hasn’t happened. Because the entire system set up to monitor and regulate Wall Street is fucked up.
Just ask the people who tried to do the right thing.
Tags: AIG, Bank of America, Banking, Economy, FDIC, Global News, Goldman Sachs, Government, JPMorgan, Justice Department, Lehman Brothers, Morgan Stanley, NYSE, Obama administration, Politics, SEC, Stock Market, U.S., Wall Street
Make no mistake, the financial crisis has only just begun.
This is The Greatest Depression.
Paulson on Paulson
A friend sent me a collage of quotes from former Treasury Secretary Henry Paulson’s memoir of the financial crisis, On the Brink. The quotes are particularly relevant in view of the Financial Crisis Inquiry Commission’s newly issued report which concludes that the 2008 financial crisis was badly mishandled by the government.
The collage paints a stunning picture of a confused and panicked government without a coherent strategy for getting in front of and containing the crisis. Judge for yourself:
“I misread the cause, and the scale, of the coming disaster. Notably absent from my presentation was any mention of problems in housing or mortgages.” (p. 47)
“All of this led me in late April 2007 to say . . . that subprime mortgage problems were ‘largely contained.’ I repeated that line of thinking publicly for another couple of months. . . . We were just plain wrong.” (p. 66)
“Lehman’s UK bankruptcy administrator, PricewaterhouseCoopers, had frozen [Lehman’s] assets in the UK . . . a completely unexpected . . . jolt.” (p. 230)
“General Electric . . . was having problems selling commercial paper. This stunned me.” (p. 172)
“I’d never expected to hear those troubles spreading like this to the corporate world. . . .” (p. 227)
“In a celebratory mood, [Rep.] Pelosi, [Sen.] Reid, [Sen.] Dodd, [Rep.] Frank, [Sen.] Schumer, and I walked together to Statuary Hall to announce the [TARP] deal. . . . Perhaps I should have foreseen the problems ahead . . . .” (p. 314)
“I expected [TARP] to be politically unpopular, but the intensity of the backlash astonished me.” (p. 370)
“I began to seriously doubt that our asset-buying program [TARP] could work. This pained me, as I had sincerely promoted the [toxic asset] purchases to Congress and the public. . . .” (p. 385)
Added: 28. January 2011
Tags: AIG, Bailout, Bank of America, Banking, Barack Obama, Barclays, Ben Bernanke, Bush administration, Citigroup, Economy, Fed, Federal Reserve, Foreclosures, George Bush, Global News, Goldman Sachs, Inflation, JPMorgan, Lehman Brothers, Merrill Lynch, Mortgage crisis, Mortgages, Obama administration, Politics, Society, Timothy Geithner, U.S., Wall Street
More info on the criminal Goldman Sachs banksters at the end of the following article.
That is what Goldman Sachs CEO Blankfein calls ‘doing God’s work‘.
Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The fact that a significant slice of the proceeds secured by Goldman through the AIG bailout landed in its own account–as opposed to those of its clients or business partners– has not been previously disclosed. These details about the workings of the controversial AIG bailout, which eventually swelled to $182 billion, are among the more eye-catching revelations in the report to be released Thursday by the bipartisan Financial Crisis Inquiry Commission.
The details underscore the degree to which Goldman–the most profitable securities firm in Wall Street history–benefited directly from the massive emergency bailout of the nation’s financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.
“If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders,” said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. “The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public.”
Complete administrations should have been fired a long time ago:
Even firing complete administrations would not solve the problem, because they are all only puppets of the elitists that OWN governments (all big parties), the Federal Reserve, other central banks, the big corporations and the mass media worldwide.
Added: 25. October 2010
The fraudulent CEOs looted with impunity, were left in power, and were granted their fondest wish when Congress, at the behest of the Chamber of Commerce, Chairman Bernanke, and the bankers’ trade associations, successfully extorted the professional Financial Accounting Standards Board (FASB) to turn the accounting rules into a farce.
The FASB’s new rules allowed the banks (and the Fed, which has taken over a trillion dollars in toxic mortgages as wholly inadequate collateral) to refuse to recognize hundreds of billions of dollars of losses. This accounting scam produces enormous fictional “income” and “capital” at the banks.
The fictional income produces real bonuses to the CEOs that make them even wealthier. The fictional bank capital allows the regulators to evade their statutory duties under the Prompt Corrective Action (PCA) law to close the insolvent and failing banks.
Tags: AIG, Bank of America, Banking, Barack Obama, Ben Bernanke, Congress, Derivatives, Derivatives market, Economy, Fed, Federal Reserve, Foreclosures, Global News, Mortgage crisis, Mortgages, Obama administration, Politics, Timothy Geithner, U.S., William Black
Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.
Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.
Asked the significance of the list, Grassley said, “I hope it’s as simple as taxpayers deserve to know what happened to their money.”
He added, “We thought originally we were bailing out AIG. Then later on … we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world.”
The logo of American International Group Inc. (AIG) on the outside of their corporate headquarters in New York (Reuters)
NEW YORK (Reuters) – The U.S. Justice Department has dropped a probe of American International Group Inc executives involving the credit default swaps that sent the insurer to the brink of bankruptcy and forced a huge taxpayer bailout, lawyers for the executives said on Saturday.
The investigation had centered on AIG Financial Products, which nearly brought down the giant insurer after writing tens of billions of dollars on insurance-like contracts on complex securities backed by mortgages that turned out to be toxic.
The U.S. government stepped in with a $182 billion bailout to avert a bankruptcy filing by AIG.
The criminal probe had focused on whether Joseph Cassano, who ran the financial products unit, and Andrew Forster, his deputy, knowingly misled investors about the company’s accounting losses on its credit default swaps portfolio.
“Although a 2-year, intense investigation is tough for anyone, the results are wholly appropriate in light of our client’s factual innocence,” F. Joseph Warin and Jim Walden, Cassano’s lawyers, said in a statement.
Forster’s lawyers also confirmed the probe had been dropped. Continue reading »
Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP), testifies at a House Oversight and Government Reform Committee hearing on preventing home foreclosures in Washington, D.C. (Bloomberg)
– Barofsky Says Criminal Charges Possible in Alleged AIG Coverup (Boomberg):
Janet Tavakoli, founder of Chicago-based Tavakoli Structured Finance Inc., says Barofsky hasn’t been aggressive enough. She says SIGTARP should be running criminal probes of the bankers who underwrote and managed the collateralized debt obligations that were at the center of the financial meltdown.
CDOs are bundles of mortgage-backed bonds and other debt sold to investors.
Tavakoli says the CDO managers sometimes replaced relatively high-quality securities with new ones that were more likely to default.
“It is securities fraud if you take securities and package them and knowingly pass them off with phony labels,” she says.
Barofsky says investigations related to the underwriting and sale of CDOs are ongoing.
Barofsky says the question of whether the New York Fed engaged in a coverup will result in some sort of action.
“We’re either going to have criminal or civil charges against individuals or we’re going to have a report,” Barofsky says. “This is too important for us not to share our findings.”
He won’t say whether the investigation is targeting Geithner personally.
WHOA: TARP Watchdog Says Criminal Charges May Be On the Table For New York Fed Over AIG Coverup
Neil Barofsky, The Special Inspector General for TARP oversight, better known as SIGTARP, says criminal or civil charges are still on the table in the AIG coverup, according to a long profile at Bloomberg.
In the eye-opening piece, Barofsky talks about how he got a crappy basement office in the Treasury building and likens its foul smell to relations between the Treasury department and himself.
Since Barofsky’s job is to watchover TARP funds and how they’re used. it should come as no surprise that when $700 billion is on the line, funds are bound to be misappropriated.
So what’s the essence of Barofsky’s beef? A few things:
- “Barofsky’s most recent broadside came on April 20, when a SIGTARP report labeled a housing-loan modification program funded with $50 billion of TARP money as ineffectual.”
- He has also criticized Tim Geithner in reports for his handling of the AIG bailout back when he was Chair of the NY Fed.
- Mortgage deals involving CDOs similar to the ABACUS deal.
- How both Obama and Bush handled the financial crisis.
Date: 26th Apr 10
Tags: AIG, Bailout, Banking, Barack Obama, Ben Bernanke, cds, Congress, Derivatives, Derivatives market, Fed, Federal Reserve, Financial Crisis, Fraud, Goldman Sachs, Government, Henry Paulson, Law, Obama administration, Peter Schiff, Politics, SEC, U.S., Wall Street
President Obama is sponsoring a bill by the Senate Banking Committee Chairman Chris Dodd(D-CT) that would reward the Financial Firm Goldman Sachs with up to Billions of Dollars. The bill implements a $50 billion resolution fund to the firms creditors through fees that would come from banks and other businesses, which the bill calls a “nonbank financial company.” Critics are calling it a “backdoor bailouts” to Goldman Sachs who was already payed $12.9 billion in tax dollars through the bailout of AIG.
Supporters are denying the bill is a bailout because its demands the removal of some management positions but Financial Crisis Inquiry Commission member Peter Wallison said “that act – paying off the creditors when the government takes over a failing firm – is a bailout. It doesn’t matter that the management lose their jobs, or that the shareholders get nothing. When the creditors are aware that they will get a better deal with the failure of a large company than they will get with a small one that goes the ordinary route to bankruptcy, that is a bailout.” Continue reading »
Last week had the opportunity to visit Kynikos Associates in Manhattan and speak with its President, famed short-seller James S. Chanos.
The billionaire hedge funder is the stuff of legend. He made a killing shorting companies like Tyco, Worldcom, and of course, Enron. Chanos spoke with us at length on everything from how he discovered Enron’s problems to the issues at hand with Greece to the ongoing problems in China.
We’ll be running several posts on our Q&A sessions with Chanos throughout the week.
Today we talk about Dubai, Greece, and the role of derivatives in these markets.
Business Insider: Let’s talk about Dubai and Greece. Dubai – was it just a case of a nation that saw too much growth and excessive debt?
Jim Chanos: No, no. Dubai was a property bubble. Plain and simple. Go to Dubai and see what happened. It was…what I call it the “Ediffice complex” – it’s just, we can grow by putting up lots and lots of buildings and trying to attract people to come here, stay here, and put up offices here and sooner or later, you put up too many. And whether it’s the Palm Island project or the indoor ski resort or, you know, take your pick because everyone has lots of Dubai stories. At first it seemed plausible and economic and by the end of the boom, they were putting on drawing boards all kinds of crazy projects. So it didn’t take a rocket scientist to see the excesses. They were pretty visible to the naked eye.
Greece is a different issue. We’re not involved. We don’t trade sovereign debt, we don’t trade CDSes. You know I feel bad for my mother country in that they’re going through a lot of austerity now and I actually think that the Prime Minister and his team are doing the right thing. I met with them recently, actually, in Washington [DC] and they gave a pretty rational response to a problem that they, quite frankly, inherited.
You know they came in and discovered the hole in the budget deficit and discovered a lot of the off balance sheet stuff that was not of their doing. And he’s taking the politically unpopular step of extending the retirement age and cutting government wages not knowing if it’s going to be enough and so far the market is pretty skeptical, but I think the Greek government is being more courageous than some of the other western-European governments who aren’t addressing these issues and are going to be facing these same problems like Greece down the road. So Greece is a prelude to the problems that a lot of other countries will face that have made promises to their people without the ability to pay for them.
Timmy-Gate Takes a Turn For The Worse: Did Geithner Help Lehman Hide Accounting Tricks?
By L. Randall Wray
L. Randall Wray, Ph.D. is Professor of Economics at the University of Missouri-Kansas City, Research Director with the Center for Full Employment and Price Stability and Senior Research Scholar at The Levy Economics Institute. His research expertise is in: financial instability, macroeconomics, and full employment policy.
Just when you thought that nothing could stink more than Timothy Geithner’s handling of the AIG bailout, a new report details how Geithner’s New York Fed allowed Lehman Brothers to use an accounting gimmick to hide debt. The report, which runs to 2200 pages, was released by Anton Valukas, the court-appointed examiner. It actually makes the AIG bailout look tame by comparison. It is now crystal clear why Geithner’s Treasury as well as Bernanke’s Fed refuse to allow any light to shine on the massive cover-up underway.
Recall that the New York Fed arranged for AIG to pay one hundred cents on the dollar on bad debts to its counterparties-benefiting Goldman Sachs and a handful of other favored Wall Street firms. (see here) The purported reason is that Geithner so feared any negative repercussions resulting from debt write-downs that he wanted Uncle Sam to make sure that Wall Street banks could not lose on bad bets. Now we find that Geithner’s NYFed supported Lehman’s efforts to conceal the extent of its problems. (see here) Not only did the NYFed fail to blow the whistle on flagrant accounting tricks, it also helped to hide Lehman’s illiquid assets on the Fed’s balance sheet to make its position look better. Note that the NY Fed had increased its supervision to the point that it was going over Lehman’s books daily; further, it continued to take trash off the books of Lehman right up to the bitter end, helping to perpetuate the fraud that was designed to maintain the pretense that Lehman was not massively insolvent. (see here)
Geithner told Congress that he has never been a regulator. (see here) That is a quite honest assessment of his job performance, although it is completely inaccurate as a description of his duties as President of the NYFed. Apparently, Geithner has never met an accounting gimmick that he does not like, if it appears to improve the reported finances of a Wall Street firm. We will leave to the side his own checkered past as a taxpayer, although one might question the wisdom of appointing someone who is apparently insufficiently skilled to file accurate tax returns to a position as our nation’s chief tax collector. What is far more troubling is that he now heads the Treasury – which means that he is not only responsible for managing two regulatory units (the FDIC and OCC), but also that he has got hold of the government’s purse strings. How many more billions or trillions will he commit to a futile effort to help Wall Street avoid its losses? Continue reading »
“We’re of the opinion that a quick implementation of actions in the area of CDS has to happen,” Merkel said. Citing “ongoing speculation against euro-region countries,” she called for the “fastest possible” implementation of new rules. Europe must “do everything to avoid unhealthy speculation,” said Juncker, who heads the euro-area finance ministers group.
Where ‘ya been Angie?
Oh, and you too Papandreou:
“Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system,” Papandreou said yesterday in a speech in Washington.
And, of course, Sarkozy.
Note that I’ve been calling for these things to be either exchange-traded with central counterparty “blinding” (on purpose) as is the case with the regulated option and futures markets or be torn up since The Ticker began publication.
Why? Because it is my position and remains so that unless you have this sort of market these contracts are all a scam.
They are a scam because: Continue reading »
Added: 3. März 2010
Tags: AIG, Bailout, Banking, Bill Clinton, Bubble, CO2, Commodities, Derivatives, Derivatives market, Economy, Financial Crisis, Global News, Goldman Sachs, Government, Henry Paulson, Internet, Larry Summers, Mortgage crisis, Mortgages, Oil, Oil Prices, Politics, Robert Rubin, Timothy Geithner, U.S., Wall Street
Congress should act immediately to abolish credit default swaps on the United States, because these derivatives will foment distortions in global currencies and gold. Failure to act now will only mean the U.S. will be forced to act after these “financial weapons of mass destruction” levy heavy casualties. These obligations now settle in euros, but the end game is to settle them in gold. This is so ripe for speculative manipulation that you might as well cover the U.S. map with a bull’s-eye.
Credit default swaps are not insurance. If you buy fire insurance on your home, you must own the house. If you buy credit protection on the United States, however, you do not need to own U.S. Treasury bonds. If your protection gains value after you buy it — not because the U.S. defaults, but because of market mood changes — you can resell that protection and make a profit.
Lower credit risk means a lower price for protection. Zero implies zero risk. The higher the basis points, the higher the implied risk. When U.S. credit default swaps were first introduced, the price of protection was around two basis points. According to Bloomberg, the price for five-year protection was around 38 basis points (per annum) on Friday. But the price in the over-the-counter market — where this stuff actually trades — was almost double or around 75 basis points.
Since most traders in U.S. credit default swaps don’t think the U.S. will default any time soon, why are they trading U.S. credit default swaps? They are speculating on price movements the way a day trader buys and sells stocks to speculate on stock price movements.
Volume in U.S. credit default swaps is relatively small, but it can explode rapidly, just as volume expanded rapidly for credit default swaps on mortgage debt in 2006 and 2007.
Speculators Want U.S. CDS Payoffs in Gold
Remember AIG? When prices moved against AIG on its credit default swap contracts, AIG owed cash (collateral) to its trading partners. AIG paid billions of dollars and owed billions more when U.S. taxpayers bailed it out in September 2008.
U.S. credit default swaps currently trade in euros. After all, if the U.S. defaults, who will want payment in devalued U.S. dollars? The euro recently weakened relative to the dollar, and market participants are calling for contracts that require payment in gold. If they get their way, speculators on the winning side of a price move will demand collateral paid in gold. Continue reading »
The building that will house the new headquarters of Goldman Sachs Group Inc. beginning in March, stands at 200 West Street in New York, U.S., on Jan. 20, 2010. Photographer: JB Reed/Bloomberg
Feb. 23 (Bloomberg) — When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.
Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.
A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.
These were the deals that pushed the insurer to the brink of insolvency — and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.
That lack of disclosure shows how the government has obstructed a proper accounting of what went wrong in the financial crisis, author and former investment banker William Cohan says. “This secrecy is one more example of how the whole bailout has been done in such a slithering manner,” says Cohan, who wrote “House of Cards” (Doubleday, 2009), about the unraveling of Bear Stearns Cos. “There’s been no accountability.”
Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy – they’re re-creating the conditions for another crash
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses – meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a “bailout tax” on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. “In a year that proved to have no shortage of story lines,” he said, “I believe very strongly that performance is the ultimate narrative.”
Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn’t alone. The nation’s six largest banks – all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry – set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. “What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?” asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America’s populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what’s the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there’s still a widespread misunderstanding of how exactly Wall Street “earns” its money, with emphasis on the quotation marks around “earns.” The question everyone should be asking, as one bailout recipient after another posts massive profits – Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation – is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its “performance” was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients. Continue reading »
Tags: AIG, Alan Greenspan, Bailout, Bank of America, Banking, Bankruptcy, Ben Bernanke, Bonds, Brad Sherman, Bubble, Citigroup, Debt, Economy, FDIC, Fed, Federal Reserve, Goldman Sachs, Government, JPMorgan, Matt Taibbi, Morgan Stanley, Mortgage crisis, Mortgages, Politics, Ponzi schemes, Robert Rubin, Societe Generale, Taxpayers, Timothy Geithner, Treasury, Wall Street
Compared to Wall Street the US government and the Fed nuked the economy, the dollar and any bright future that the people in the US might have had. The people will experience the fallout very soon.
The ‘Greatest Depression’.
Cynthia McKinney is spot-on :
(This guest post comes from Tavakoli Structured Finance)
If a high-on-crack driver crashed his speeding rental car into your house and killed your spouse, you would be outraged if law enforcers took bribes and gave the driver a pass on a blood test. If the judge then merely fined the killer and ordered you to pay it, you would appeal, wondering what happened to justice. If the government then handed the crack-driver keys to a bigger rental car and presented you with the rental bill, you would certainly protest.
How is it, then, that you have remained largely silent in the face of the same sort of behavior by Wall Street and Washington? Bonus-seeking bankers careened off the right path and ran Ponzi schemes that nearly ruined our economy. Bureaucrats and elected officials bailed them out without demanding consequences. Bankers are revving their engines again.
Bankers Get Bonuses, the USA Gets the Great Recession
Taxpayers are asked to believe that over-borrowing by U.S. consumers created a global financial crisis. This myth aids and abets Wall Street. The economy was nearly destroyed because banks borrowed massively, and they borrowed many multiples more than they could afford. Wall Street pumped the Fed’s cheap money through financial meth labs, and deceptive financial vehicles ran over securities laws at top speed.
More than 20% of mortgage loans–including originally sound loans–are underwater, meaning the borrower owes more than the home is worth. Official unemployment numbers hover at around 10%. If you include underemployment, it is around 18%. In depressed areas where the nation’s poorest–chiefly minorities–have been hurt the most, unemployment has soared past 30%. For this destitute group, unemployment combined with underemployment exceeds 50%.
As U.S. soldiers fought wars in Iraq and Afghanistan, Wall Street flattened Main Street. Our foreign wars drag on, while the U.S. battles a crippling recession at home.
Global Ponzi Scheme
Fraud by borrowers, fraud on borrowers, and speculation by people who thought home prices would rise forever have all tarnished mortgage lending. Yet this pales compared to the epidemic of predatory lending.
Predatory snipers committed financial murder as deliberately as British soldiers sold smallpox contaminated blankets to Native Americans. Honest homeowners were systematically targeted and actively misled into bad mortgage products. Loans were presented as gifts, but these Trojan horse loans hid destructive risk. “Disclosures” were acts of malice.
When Wall Street packaged these loans and sold deceptive “investments,” documents did not specifically disclose that credit ratings were misleading. If you know or should know a car’s gas tank will blow up, you cannot use a misleading third-party consumer report as an excuse. Yet bonus-seeking bankers used this sort of excuse to get through a few more highly-paid bonus cycles, before it all fell apart. Only the elite crowd of insiders prospered.*
This was the most massive Ponzi scheme in the history of the global capital markets. U.S. taxpayers became unwilling unsophisticated investors when we bailed out the financial system. We must hold Wall Street accountable for its fraud. Continue reading »
David Fiderer’s below piece, originally published on the Huffington Post, continues probing the topic of Goldman and AIG. For all intents and purposes the debate has been pretty much exhausted and if there was a functioning legal system, Goldman would have been forced long ago to pay back the cash it received from ML-3 (which in itself should have been long unwound now that plans to liquidate AIG have been scrapped) and to have the original arrangement reestablished (including the profitless unwind of AIG CDS the firm made improper billions on, by trading on non-public, pre-March 2009, information), and now that AIG is solvent courtesy of the government, so too its counterparties can continue experiencing some, albeit marginal, risk, instead of enjoying the possession of cold hard cash. Oh, and Tim Geithner would be facing civil and criminal charges.
Yet as we look forward, we ask, who now determines the variation margin on Greek CDS (and Portugal, and Dubai, and Spain, and, pretty soon, Japan and the US), the associated recovery rate, and how much collateral should be posted by sellers of Greek protection? If Greek banks, as the rumors goes, indeed sold Greek protection, and, as the rumor also goes, Goldman was the bulk buyer, either in prop or flow capacity, it is precisely Goldman, just like in the AIG case, that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance. Let’s say Goldman thinks Greece’s debt recovery is 75 cents and the CDS should be trading at 700 bps, instead of the “prevailing” consensus of a 90 recovery and 450 spread, then it will very likely get its way when demanding extra capital to cover potential shortfalls, since Goldman itself has been instrumental in covering up Greece’s catastrophic financial state and continues to be a critical factor in any future refinancing efforts on behalf of Greece. Obviously this incremental margin, which only Goldman will ever see, even if the CDS was purchased on a flow basis, will never be downstreamed on behalf of its clients, and instead will be used to [buy futures|buy steepeners|prepay 2011 bonuses|buy more treasuries for the BONY $60 billion Treasury rainy day fund].
In essence, through its conflict of interest, its unshakable negotiating position, and its facility to determine collateral requirements and variation margin, Goldman can expand its previous position of strength from dictating merely AIG and Federal Reserve decision making, to one which determines sovereign policy! This is unmitigated lunacy and a recipe for financial collapse at the global level.
This is yet another AIG in the making, with Goldman this time likely threatening to accelerate the collapse not merely of the US financial system, but of the global one, in order to attain virtually infinite negotiating leverage. Of course, the world will not allow a Greece-initiated domino, allowing Goldman to call everyone’s bluff once again. Continue reading »
Tags: AIG, Derivatives, Derivatives market, Dollar, Dubai, Economy, Fed, Federal Reserve, Gold, Goldman Sachs, Greece, Henry Paulson, Merrill Lynch, Politics, Portugal, Societe Generale, Spain, Taxpayers, Treasury
Jan. 29 (Bloomberg) — The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny.
The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.
That move came a few weeks after the Federal Reserve and Treasury Department propped up AIG in the wake of Lehman Brothers Holdings Inc.’s own mid-September bankruptcy filing.
Saving the System Continue reading »
Added: 28th Jan 10
Timothy Geithner does not want Americans to know who really controls and is behind the Federal Reserve.
The elite created the Fed. The same elite also controls the US government.
‘The Federal Reserve is above the law’. (Google that!)
“Mr. Geithner has been wrong about everything for the last 15 years.”
Added: 27. Januar 2010
“Mr. Geithner has been wrong about everything for the last 15 years.”