Goldman Sachs made billions by pushing AIG to bankruptcy

[Hannah Bell]

An investigative report published Sunday by the New York Times... headlined “Testy Conflict With Goldman Helped Push AIG to Precipice,” documents the role of Goldman Sachs, the biggest and most profitable US investment bank, in pushing the insurance giant American International Group (AIG) to the brink of bankruptcy.

At the height of the financial crisis, in mid-September 2008, the Bush administration stepped in to rescue AIG with $85 billion in taxpayer money. Since then, under Bush and then Obama, government aid to the company has grown to $182.3 billion. The firm is currently 80 percent owned by the US Treasury. AIG has used its government bailout to award its top traders and executives hundreds of millions of dollars in bonuses...

The Times article, by Gretchen Morgenson and Louise Story, is based on a review of internal AIG documents and a recording of a January 29, 2008, conference call between Goldman Sachs executives and AIG. It describes how Goldman, in the two years preceding AIG’s bailout, worked to undermine investor confidence in the insurer, then the biggest seller of credit default swap contracts, and drive down the market value of mortgage-backed securities.

During this period, Goldman was betting on a collapse of the housing bubble, which it had helped inflate by promoting sub-prime mortgages. Even as Goldman’s top traders were structuring credit default contracts with AIG on mortgage-backed securities in a manner that enabled the bank to profit from a decline in the price of these securities, Goldman was making money by purchasing the same type of securities for clients and charging fees for bundling home loans into so-called “collateralized debt obligations” and selling the mortgage-backed CDOs into the market...

The Times article suggests that Goldman was using its close relationship with AIG to manipulate the housing market and encourage a panic selloff of mortgage-backed assets...The implication is that the financial crash was not simply the result of disembodied “market forces.” Highly conscious profit-driven calculations by financial giants such as Goldman played a critical role...

They continue, “Goldman stood to gain from the housing market’s implosion because in late 2006 the firm had begun to make huge trades that would pay off if the mortgage market soured. The further mortgage securities’ prices fell, the greater were Goldman’s profits.”

At the time of the AIG bailout, then-Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and then-President of the Federal Reserve Bank of New York Timothy Geithner secretly funneled a total of $62 billion from the rescue of the insurer to AIG’s major bank counterparties. Goldman was by far the biggest beneficiary...Geithner has been implicated in efforts, recently revealed in emails between the New York Fed and AIG, to conceal the use of taxpayer funds handed to AIG to pay off its bank counterparties at 100 cents on the dollar...

http://www.wsws.org/articles/2010/feb2010/gold-f10.shtml

[amborin]

1. worse, GS was betting the mortgage-backed securities it was selling clients (pens funds) would tank!

[Hannah Bell]

2. the article says this too. it's really astonishing that such wide-reaching criminality is accepted.

it's ruined millions of people in the us & elsewhere, & will ruin millions more.

[leftstreet]

3. And isn't Golden Sacs trying to securitize life insurance policies?

(maybe they already did)

We're all dead peasants

[amborin]

4. i don't know....but....just re-read some thing from january...really criminal:

"Mr. Blankfein, your firm, and others, created and sold bundles of mortgages known as collateralized debt obligations that it simultaneously sold short, or bet against. These C.D.O.’s turned out to be bad investments for the people who bought them, but your short bets paid off for Goldman Sachs.

In the process of selling them to institutional investors, however, your firm lobbied ratings agencies to assign them high ratings as solid bets — even as your firm planned on shorting them.

Could you explain how Goldman bet against these C.D.O.’s while simultaneously trying to persuade ratings agencies and investors that they were good investments? Were they designed from the outset to be shorted by Goldman and possibly select clients....."

GS may have deliberately created these bundles of bad CDOs!

http://dealbook.blogs.nytimes.com/2010/01/12/what-the-financial-crisis-commission-should-ask/?apage=10&scp=7&sq=goldman%20sachs%20securitize%20insurance&st=cse


yes, we are all dead peasants!

[Kalun D]

5. Criminals In DC

""Since then, under Bush and then Obama, government aid to the company has grown to $182.3 billion.""

and the entire amount of red ink in the states having problems is 178 $BILLION. Funny how they get no help but a bunch of rich criminal individuals do.

And the very people that caused all these problems are still here, and they have been put into positions of bank oversite.

AND NONE OF THE RULES THAT ALLOWED THESE CRIMES TO HAPPEN HAVE BEEN CHANGED.

Gietner, Bernanke, THEY ARE REPUBLICANS.

Sort of puts the light of truth to the phony ObamaRahma "We Are Change" TV show (brought to you by... the corporations)

Goldman Sachs donations to Obama campaign $996,000 (2nd largest contributor)

do ya think they're getting what they paid for? HEL* YEAH!!

[Raster]

6. just doing "god's work"!

[Hubert Flottz]

7. When there are big crashes on Wall Street the money don't just

vanish. Somebody gets well off of other's misfortune. Just like in 1929.