"Goldman Sachs Group [GSG] played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled [AIG]. [GSG] was one of 16 banks paid off when the US government last year spent billions closing out soured trades that AIG made with the financial firms. ... [GSG] originated or bought protection from AIG on about $33 billion of the $80 billion of US mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Societe Generale and Merrill Lynch, the banks with the biggest exposure to AIG after [GSG], according an analysis of ratings-firm reports and an internal AIG document that details several financial firms' roles in the transactions. ... The trades yielded [GSG] less than $40 million in profits, which were mostly booked from 2004 to 2006, according to a person familar with the matter. But they piled risks onto AIG's books, which later came to haunt the insurer and [GSG]. The trades also gave [GSG] a unique window into AIG's exposure to losses on securities linked to mortgages. ... A [GSG] spokesman says that until AIG was rescued by the government, the insurer 'was viewed as one of the most sophisticated financial counterparties in the world. It wasn't until the government intervened in September 2008 that the full extent of AIG's problems became apparent. ... More clarity has emerged recently over the roles that firms such as [GSG] played as complex deals carried out by banks are now being untangled in legal and regulatory inquiries. Last month a government audit of part of the AIG bailout described [GSG's] middleman role. ... The trades seemed prudent at the time given AIG's strong credit rating and the fact that AIG agreed to make payments to [GSG]. known as collateral, if the value of the CDOs declined", Serena NG and Carrick Mollenkamp at the WSJ, 12 December 2009, link: http://online.wsj.com/article/SB10001424052748704201404574590453176996032.html.
Where was PWC which "audited" AIG and GSG during the relevant time? Why hasn't the PCAOB yanked PWC's practice rights? There's more to come out.
Where was PWC which "audited" AIG and GSG during the relevant time? Why hasn't the PCAOB yanked PWC's practice rights? There's more to come out.
1 comment:
I can only imagine the "AIG Information Monitoring Office" at Goldman Sachs, the Federal Reserve, US Treasury, the SEC, PWC, the other investment banks involved...
With all the people involved and hundred's of billions of taxpayer dollars will we see the phone logs and emails of the principal parties? Will President Obama create an executive order that seals these things for 20+ years?
What would we see if we knew more about the conversations between Lloyd Blankfein and Hank Paulson? Would we learn on what basis "systemic risk" was determined? And why this required the payment of 100 cents on the dollar to Goldman, SC, DB, Calyon etc? Will the legal advice relied upon by Tim Geithner and Ben Bernanke to hand billions of dollars to Wall Street banks be revealed?
Or is continued "trust" in the system assumed? Every mega earnings report from a Wall Street bank as this country stagnates and slows erodes the "trust"...
Finance is a confidence game... good luck with that...
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