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Non-Tech : Derivatives: Darth Vader's Revenge
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To: Worswick who wrote (1312)3/28/2009 12:40:45 PM
From: carranza21 Recommendation  Read Replies (1) of 2794
 
Goldman Sachs Chief Financial Officer David Viniar said March 20 that because the New York-based bank had collateral on swaps and hedges against AIG, the company wasn’t willing to accept anything less than full payment from the i nsurer.

Says it all.

If the transaction had been at arm's length, some sort of negotiation would have taken place under which the AIG money is targeted at certain CDS and the payee is forced to accept less otherwise AIG is forced into Ch. 11 where the haircut gets imposed by a Bankruptcy judge.

The AIG $165 billion bailout was not at arm's length, however. Thus, 100 cents on the dollar got unnecessarily paid with our tax money. Goldman and others were simply not in a very good negotiating position but it made no difference.
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