Subprime Lending Crises including Barack Obama's Involvement in the 90's (Part 3 - AIG, Goldman-Sachs)

Now fast forward to 2007-08-09, when (1) Goldman Sachs bets its portfolio of Liar Loans against the short-traders then-coordinating the Obama campaign from within the Bush Treasury Dept, (2) sabotages the McCain campaign from within the Bush Treasury Dept, (3) hoodwinks George Bush into signing the TARP, (4) receives tens of billions of dollars stolen from the American taxpayer, (5) that they launder through AIG, (6) emerges from the collapse of the markets as the dominant force in NYSE program trading, and, (7) transforms $tens of billions of dollars [stolen from the American taxpayer] into record bonus payouts in the middle of the worst economic crisis since the Great Depression.

GOLDMAN BIG DEFENDS $12.9B PAID BY AIG By KAJA WHITEHOUSE, NY POST, March 21, 2009

Despite catching flack for having accepted $12.9 billion in taxpayer funds as payment for bets it made with beleaguered insurance giant American International Group, officials at Goldman Sachs were unapologetic, saying the payday was strictly business and aboveboard.

"We don't think we did anything wrong," Goldman's Chief Financial Officer David Viniar said in a conference call with reporters. "We had commercial terms. It is our responsibility to our shareholders to make sure that we are protecting ourselves. That's why we enter into these contracts."

Goldman set up the call to "clarify certain misperceptions in the press" around the bank's vulnerability to an AIG collapse. The Wall Street bank was largely successful in soothing those concerns, as Viniar explained how, despite a $20 billion derivative exposure to AIG as early as September, Goldman had set things up so that it could walk away largely unscathed had AIG gone bust.

Since July 2007, Goldman Sachs has spent around $100 million hedging against the risk of default in its AIG derivatives, said Goldman spokesman Lucas van Praag. But in soothing concerns over its exposure to AIG, Goldman officials opened another can of worms namely, why the firm was made whole on its bets, given AIG's troubled financial health and given that Goldman was so well-protected against default.

AIG has come under fire amid revelations that $90 billion of the government funds it received were funneled to its trading counterparties, whose contracts were largely bought out at face value. Goldman was the largest single beneficiary of the funds.

"I think the question is why did the Treasury not demand that Goldman Sachs and AIG negotiate down the collateral agreements on CDS?" said James Kaufman, a former Wall Street banker with Lazard Freres, referring to derivatives known as credit-default swaps. "If we had taken a discount, then we would have taken a loss to Goldman Sachs, and, frankly, as I'm sure you know, we also have taxpayer money at Goldman Sachs," Viniar said. Goldman got $10 billion as part of the Troubled Asset Relief Program.

Viniar also downplayed the notion that Goldman Sachs CEO Lloyd Blankfein had the ear of then-Treasury Secretary Hank Paulson, who was Blankfein's predecessor at Goldman.

Even before AIG became a government-owned enterprise, Goldman had already persuaded the company to pay it $7.5 billion in cash collateral as a result of the waning value of the assets tied to its derivative contracts.

After AIG was bailed out, Goldman received another $2.5 billion in cash collateral, plus $5.6 billion in payments made to unwind its contracts with AIG. Goldman said its remaining derivative exposure to AIG sits at around $7 billion, to which it's received $4.4 billion in collateral.

SOURCE: http://www.nypost.com/seven/03212009/business/goldman_big_defends_12_9b_paid_by_aig_160547.htm