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What bullshit. 1. Goldman blew up AIG by making AIG post collateral based on market prices (for bond insurance AIG had written). Because this is only fair. 2.

What bullshit. 1. Goldman blew up AIG by making AIG post collateral based on market prices (for bond insurance AIG had written). Because this is only fair. 2. Goldman got the feds to pay off the insurance at 100% value, not market value. Without an insurable event happening, and without executing the insurance by delivering the bonds. 3. Goldman used the pay off to buy the bonds. At unspecified prices, presumably market prices if we read between the lines. 4. "Qualified investors" knew what they were getting into massive risks buying certain instruments. They were well informed and knew how to investigate and rate risk properly. But when Goldman bought bond insurance from AIG, they were shocked, shocked to find AIG could not pay.

AmericanOP 17y ago
2. If I recall, GS expected and was prepared to take the hit right before bailout bonanza.
- afterburner 17y ago
  I'll bet they knew they'd be among the first to benefit from bailouts if there were any at all though, given the Treasury Secretary Henry Paulson was an ex-CEO of GS.
Estragon 17y ago
You can't blame them for bullshitting. They've been dodging responsibility for this kind of thing for at least the better part of a century, and it seems to work for them. http://books.google.com/books?id=YoXZWqBIIE8C&pg=PA64 http://books.google.com/books?id=YoXZWqBIIE8C&pg=PA64
- idm 17y ago
  It's still okay to blame them for bullshitting. I assume your point is that they've never experienced negative outcomes for their previous bullshitting, so there's no reason for them to do anything different, and I'd have to agree...
yummyfajitas 17y ago
1. Two multinational corporations staffed by highly sophisticated investors came up with a contract. One corporation then enforced the terms of the contract. How evil. 4. The "qualified investors" knew that the contract might obligate them to pay out large sums of money. If you bet money on a horse race, you better plan for losing. On the other hand, Goldman (and everyone else) did not expect gigantic AAA counterparties to go bankrupt. If you bet money on a horse race, you might not plan for winning but then having the track going bankrupt.
- jbooth 17y ago
  I'm sure that Goldman was capable of whipping out a pocket calculator, figuring out how much money was going to pay out and figuring out that that's more than the GDP of some european countries. "Nobody could have predicted" is the worst kind of excuse. Also, when entities go bankrupt, usually all of their debtors get a % of the money they're owed, because if they could get paid everything, then there wouldn't be a bankruptcy. The feds should have told Goldman and everyone else "Here you go, 50 cents on the dollar, take it or leave it". They would have taken it and everything would have been fine.
  - vlod 17y ago
    No everything would NOT have been fine. There was a real fear in the market. By 100% backing any bank that failed, the FEDs allowed the flow of money to continue through the economy and it said a very clear message that everyones money is safe. Imagine if everyone thought their money was not safe in their bank accounts. That everyone started taking out all their money. The system would have collapsed.
    - Daniel_Newby 17y ago
      "No everything would NOT have been fine. There was a real fear in the market." For good reason: many large financial institutions were based on fraud. People were worried that there was nothing backing up their deposits because there really was nothing backing up their deposits. "By 100% backing any bank that failed, the FEDs allowed the flow of money to continue through the economy ..." No, to prevent a panic you back up depositors. "Worried that your checking account might evaporate, that you might not be able to make payroll because they stole your money? Don't worry, our printing press has you covered. And the crooks? They be goin' to jail." The inflationary costs would have been eye popping, but they would be over rapidly, and a foundation of trust would have been laid for future growth. Instead they bailed out the con artists with taxpayer money. This will either have to be covered by punitive taxes for decades (destroying business recovery through low profits), or by massive inflation at some unknown time in the near future (choking off business recovery through fear). Meanwhile the institutionalization of fraud creates direct fear that prevents reasonable speculation.
steveplace 17y ago
AIG FP made AIG blow up. GS maybe threw some firecrackers in.

AmericanOP 17y ago

2. If I recall, GS expected and was prepared to take the hit right before bailout bonanza.

afterburner 17y ago
I'll bet they knew they'd be among the first to benefit from bailouts if there were any at all though, given the Treasury Secretary Henry Paulson was an ex-CEO of GS.

Estragon 17y ago

You can't blame them for bullshitting. They've been dodging responsibility for this kind of thing for at least the better part of a century, and it seems to work for them. http://books.google.com/books?id=YoXZWqBIIE8C&pg=PA64 http://books.google.com/books?id=YoXZWqBIIE8C&pg=PA64

idm 17y ago
It's still okay to blame them for bullshitting. I assume your point is that they've never experienced negative outcomes for their previous bullshitting, so there's no reason for them to do anything different, and I'd have to agree...

yummyfajitas 17y ago

1. Two multinational corporations staffed by highly sophisticated investors came up with a contract. One corporation then enforced the terms of the contract. How evil. 4. The "qualified investors" knew that the contract might obligate them to pay out large sums of money. If you bet money on a horse race, you better plan for losing. On the other hand, Goldman (and everyone else) did not expect gigantic AAA counterparties to go bankrupt. If you bet money on a horse race, you might not plan for winning but then having the track going bankrupt.

jbooth 17y ago
I'm sure that Goldman was capable of whipping out a pocket calculator, figuring out how much money was going to pay out and figuring out that that's more than the GDP of some european countries. "Nobody could have predicted" is the worst kind of excuse. Also, when entities go bankrupt, usually all of their debtors get a % of the money they're owed, because if they could get paid everything, then there wouldn't be a bankruptcy. The feds should have told Goldman and everyone else "Here you go, 50 cents on the dollar, take it or leave it". They would have taken it and everything would have been fine.
- vlod 17y ago
  No everything would NOT have been fine. There was a real fear in the market. By 100% backing any bank that failed, the FEDs allowed the flow of money to continue through the economy and it said a very clear message that everyones money is safe. Imagine if everyone thought their money was not safe in their bank accounts. That everyone started taking out all their money. The system would have collapsed.
  - Daniel_Newby 17y ago
    "No everything would NOT have been fine. There was a real fear in the market." For good reason: many large financial institutions were based on fraud. People were worried that there was nothing backing up their deposits because there really was nothing backing up their deposits. "By 100% backing any bank that failed, the FEDs allowed the flow of money to continue through the economy ..." No, to prevent a panic you back up depositors. "Worried that your checking account might evaporate, that you might not be able to make payroll because they stole your money? Don't worry, our printing press has you covered. And the crooks? They be goin' to jail." The inflationary costs would have been eye popping, but they would be over rapidly, and a foundation of trust would have been laid for future growth. Instead they bailed out the con artists with taxpayer money. This will either have to be covered by punitive taxes for decades (destroying business recovery through low profits), or by massive inflation at some unknown time in the near future (choking off business recovery through fear). Meanwhile the institutionalization of fraud creates direct fear that prevents reasonable speculation.

steveplace 17y ago

AIG FP made AIG blow up. GS maybe threw some firecrackers in.