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To: Madharry who wrote (190875)	3/16/2009 6:41:26 AM
From: stockman_scott	Respond to of 306849

The Goldman infallibility myth bbc.co.uk By Robert Peston 16 Mar 09, 09:35 AM AIG - the monstrously reckless US insurance and financial group - last night published a list of the "counterparties" that benefited from the $85bn emergency loan it received in September from the US central bank, the Federal Reserve. This disclosure of which banks were on the other end of its complicated financial deals came after weeks of pressure from Congress. And it's a remarkable event: such information is typically cloaked in secrecy. What it shows is why the US authorities felt they had to rescue AIG, while almost simultaneously (and some would say mistakenly) allowing Lehman to collapse. If AIG had collapsed into bankruptcy, the losses for some of the world's biggest and most important banks would have been life-threatening for them and arguably lethal for the financial system as a whole. Now, the name that leaps out for me as a leading beneficiary of the AIG bailout is Goldman Sachs. Between 16 September and 31 December last year, Goldman received $2.6bn in collateral from AIG Financial Products - which in turn had been provided by the Federal Reserve - on credit default swaps (these are a kind of insurance against borrowers defaulting on loans, which are frequently used as a way of speculating on the health of businesses or other creditors). There were subsequent payments to Goldman of $5.6bn, to purchase from it the securities underlying certain credit default swap contracts. And there was a transfer to Goldman of $4.8bn to fulfil commitments under securities lending agreements. So the gross sum received by Goldman from the US Federal Reserve, via AIG, was $13bn. What that shows is Goldman would have been in the deepest, darkest doo-doo, if AIG hadn't been put on life support. Which - some would say - rather explodes Goldman's fearsome reputation for controlling risk better than its rivals. Goldman allowed itself to become deeply dependent on the health and fortunes of a business, AIG, which we now see to have been an unstable house of cards of a scale that boggles all comprehension As it turned out, AIG was far too big to be allowed to fail by the US authorities. But few would argue that was a sound reason for Goldman - or anyone else - doing business with AIG. If Goldman's senior executives don't wake up every morning and whisper "there but the grace of...", well they wouldn't be quite human if they didn't. That said, there are other fascinating conclusions to be drawn from the list of banks which received succour from the Fed, as intermediated by battered AIG. The first is that the disclosures are something of a counterweight to the notion that French and German banks were more prudent than their US or UK rivals. For example, the gross sum that Societe Generale of France received from the Fed via AIG was $11.9bn; and there was a gross transfer of Fed money to Deutsche Bank of $11.8bn. It's also striking that in respect of this particularly debacle, neither Royal Bank of Scotland or HBOS - the UK's more accident-prone banks - were particularly exposed. Of the British banks, Barclays benefited most from the lifeline given to AIG, receiving some $8.5bn (gross) of the unprecedented support given by the US central bank. Anyway, the big point is that the losses and disruption for Goldman, Soc Gen, Deutsche and Barclays would have been hideous if AIG had imploded. And if you were an investor in them, or a creditor to them, you'd be grateful for their luck - that they hitched their fortunes to a business, AIG, that was so enormous and complex that the US government had no other option but to put it on life support. But if Goldman, Soc Gen, Deutsche and Barclays were to claim that they managed themselves more prudently than competitors, you might raise a querying eyebrow.

To: Madharry who wrote (190875)	3/16/2009 10:29:19 AM
From: John Chen	Respond to of 306849

"wall street millionaires" or billionaires, if we can find the money.

To: Madharry who wrote (190875)	3/16/2009 11:58:19 AM
From: mcg404	Read Replies (1) \| Respond to of 306849

The sanctity of AIG's contracts Larry Summers, Sunday, on AIG’s payment of executive bonuses: We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system. Associated Press, February 18, 2009: The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today. The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive. Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far. Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face. salon.com

To: Madharry who wrote (190875)	3/16/2009 2:17:31 PM
From: geode00	Read Replies (2) \| Respond to of 306849

The WS story is that the big failure came when Lehman was 'allowed' (allowed?) to fail. They blithely ignore the fact that the big failure came when they decided to gamble with OPMs betting that the US government would never, ever, ever let a big financial institution fail. The next argument will be that another banking bailout is required so that the previous bailouts aren't 'wasted'....at least that's what I'm predicting. Pandit received $10m as a signing bonus...was he on the short list elsewhere to be CEO? Was Pandit going to not be CEO if he received, say, no signing bonus? Does Pandit have $10m of economic rent? The appetite for corruption is bottomless....we should stop feeding it.