Shocking – Goldman Sachs Documents List Financial Institutions with Whom Goldman Had Hedged The Risk of its Exposure to an AIG Default

“It’s as if the New York Fed used A.I.G. as a front man to bail out big banks all over the world,” Mr. Grassley said in a statement. “It took nearly two years for the public to learn these details, and they only were revealed because Congress wouldn’t take no for an answer. Taxpayers deserve to know what happened with their money.”

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From

Question for the Record

Hearing before the Senate Finance Committee July 21 2010

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Grassley Submits Questions for Committee Record About Taxpayer Dollars for AIG, Goldman Sachs Counterparties

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Questions for Elizabeth Warren, Congressional Oversight Panel

Several times in your Panel’s June report on the AIG bailout, you indicated that Goldman Sachs failed to provide information requested by the Panel.  In particular, you indicated that Goldman did not provide information sufficient to identify entities you called the “indirect beneficiaries” of the AIG bailout — financial institutions with whom Goldman had hedged the risk of its exposure to an AIG default.  You said, “And we want to know the identity of those parties partly just to know where American taxpayer dollars went, but partly to assess Goldman’s claim … that they had nothing at stake one way or the other in the AIG bailout.”

Following my suggestion to the Chairman that the Committee issue as subpoena if necessary, after the hearing, Goldman Sachs provided the Committee with the following two spreadsheets and a briefing,   (see Attachments 1 and 2 below).  My understanding is that Attachment 1 lists companies that wrote credit default swap protection on AIG for Goldman, meaning that in the event of an AIG default in September 2008, these entities would have been responsible for paying Goldman the amount in the “Net” column.  Thus, these entities avoided losses in the amounts listed on Attachment 1 as a direct result of the taxpayers’ bailout of AIG in September 2008.

1. The fifth largest amount listed is about $175 million that Lehman Brothers would have owed Goldman Sachs on CDS protection.  However, given Lehman’s financial position at the time (September 15, 2008), isn’t it true that the real value of this hedge to Goldman would have been much less than $175 million?  Wouldn’t it have only been worth the approximate value of any collateral that Lehman had already posted to Goldman up to that date?

2. Similarly, is it possible that financial health of the other institutions on the list may have prevented them from being able to pay Goldman in the event of an AIG default? Does this undermine Goldman’s claim that it was “fully collateralized and hedged” with regard to the risk of an AIG default, and thus demonstrate that Goldman did, in fact, receive a direct benefit from the government’s assistance to AIG?

3. Will the Panel be seeking additional details about these transactions in order evaluate Goldman’s claim to have been indifferent to whether AIG went bankrupt?  If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.

As I understand Attachment 2, it lists a series of entities that directly benefited from government assistance through the Federal Reserve’s Maiden Lane III facility, in that they received cash provided to AIG, which it owed to Goldman and which, in turn, Goldman owed them. The majority of these beneficiaries appear to be foreign entities.

4. Can you please explain how ensuring that these institutions were paid in full, rather than required to suffer the consequences of the risks that they took, benefited the U.S. taxpayer?

5. Will the Panel be seeking additional details about these transactions?  If so, please describe the scope of your additional requests and inform the Committee if you do not receive complete cooperation.

The New York Times Reports…

An A.I.G. Failure Would Have Cost Goldman Sachs, Documents Show

A Congressional document released late Friday lists those institutions and shows that Goldman was exposed to losses in an A.I.G. default because some of the investment bank’s trading partners, such as Citibank and Lehman Brothers, were financially unstable and might have been unable to make good on large claims from Goldman.

The document details every institution that had sold credit insurance on A.I.G. to Goldman as of Sept. 15, 2008, the day before the New York Fed arranged the insurer’s rescue with an $85 billion backstop. The document, supplied by Goldman Sachs, was released by Charles E. Grassley of Iowa, the ranking Republican on the Senate Finance Committee.

The report then goes on to say…

According to the document, Goldman held a total of $1.7 billion in insurance on A.I.G. from almost 90 institutions. Its exposure to A.I.G. at that time was $2.6 billion.

Goldman bought most of the insurance from large foreign and domestic banks, including Credit Suisse ($310 million), Morgan Stanley ($243 million) and JPMorgan Chase ($216 million). Goldman also bought $223 million in insurance on A.I.G. from a variety of funds overseen by Pimco, the money management firm.

“It’s as if the New York Fed used A.I.G. as a front man to bail out big banks all over the world,” Mr. Grassley said in a statement. “It took nearly two years for the public to learn these details, and they only were revealed because Congress wouldn’t take no for an answer. Taxpayers deserve to know what happened with their money.”

Ouch, that’s gotta sting…

Read the full press release from the Senate Finance Committee here…

And check out the New York Times article here…

And be sure to check out the Goldman documents below…

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4closureFraud.org

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Goldman Sachs Attachment 1
Companies that Wrote Credit Default Swap Protection on AIG for Goldman

Goldman Sachs Attachment 2
Series of Entities that Directly Benefited from Government Assistance Through the Federal Reserve’s Maiden Lane III Facility

Comments
One Response to “Shocking – Goldman Sachs Documents List Financial Institutions with Whom Goldman Had Hedged The Risk of its Exposure to an AIG Default”
  1. l vent says:

    WOW!!! This should be the top story on all the mainstream news. They used the American people to bail out the very foreign multinational banks around the globe who robbed us in their VAST, foreign multinational PONZI SCHEME HEIST. I dont know why the people are not marching on Washington by the tens of millions. It is coming for sure. The robbed the world blind and they still are with the Federal Reserve, WALL STREET and the FRAUDCLOSURES. None of these DEMORATS AND REPUBLICONS ARE GOING TO GET ELECTED BY THE PEOPLE, HOPEFULLY EVER AGAIN. THEY ARE ALL SO CORRUPT IT IS BEYOND MOST HUMAN COMPREHENSION THE EVILNESS OF THIS ENTIRE ONGOING PONZI SCAM. DEATH TO THE FOREIGN MULTINATIONAL TYRANNY!!! GOD BLESS AMERICA!!!!!

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