Goldman Sachs executives are all over the place, trying to explain away their various crimes in the AIG collapse. These letters to the editor are very amusing and quite clever. But not so clever as to fool us! Also, General Growth is now shrinking like the Wicked Witch of the West in the Wizard of Oz. It is now dead. Bankrupt. Thanks to too much funny money borrowing via the carry trade business. And what has restarted? The carry trade, of course.
Our Mission at AIG: Repairs, and Repayment
By Edward M. Liddy
Chairman and CEO, American International Group
The government rescue of American International Group (AIG) and other financial firms has produced a palpable wave of anger on the part of Americans and a rising public demand for accountability from corporate and government leaders. The anger is understandable, and I share it. HAHAHA….’I share your pain!!!’—I have been fortunate in more than three decades in business to see firsthand the wealth creation that well-managed American companies bring to their employees and their communities. I have seen the good side of capitalism. As he gets to see the good side of capitalism while the rest of us get to pay off trillions in debts he and his gang created. But over the past six months, since agreeing to take the reins of AIG and reviewing how it was run in prior years, I have also seen instances of the bad side of capitalism.
He presumes that Goldman Sachs is good. This is because, it is profitable. Up until Goldman Sachs and others like it, destroyed the world’s financial systems. He still thinks his organization, WHICH HE DOESN’T NAME IN THIS LETTER, is good, not utterly evil. This is another indication that these crooks do not recognize, they committed crimes. They think, destroying the entire planet’s fiances is accidental…not due to actions taken by the biggest players in this game. Mistakes were made at AIG, and on a scale that few could have imagined possible. The most egregious of those began in 1987, when the company strayed from its core insurance competencies to launch a credit-default-swaps portfolio, which eventually became subject to massive collateral calls that created a liquidity crisis for AIG.
I am doing a video tonight with my new camera and new studio set-up. I am going to use props to explain how the Derivatives Beast was created and how it grew and why it was created. AIG is a TOOL of Goldman Sachs. Pretending that it was sort of floating out there in La-la-land while GS had nothing to do with anything, is Liddy’s cynical attempt at isolating AIG to take all the heat for the creation and growth of the Derivatives Beast. This was very much a joint effort.
Its missteps have exacted a high price, not only for the company and its employees but for the American taxpayer, the federal government’s finances and the global economy. These missteps brought AIG to the brink of collapse and to the government for help.
When the bail out of AIG was first proposed, the ‘pain’ suffered by AIG big shots was for them to go on expensive business trips to top-end rich resorts, give themselves immense bonuses and to party like there was no tomorrow. This is why a befuddled public suddenly morphed into outrage and fury. True, the stock options for these guys fell.
But they ceased using that alone as their reward for screwing around with finances and killing everything in their path! No, they wanted bonuses above and beyond stock options. The need to leech out all profits from the system before it got to the shareholders on the outside, was the motivation here. Now that the stocks of all these organized pirates have lost around 60-98% of their value, this leaves virtually nothing for the people who were the actual source of the real capital in the system.
Now, the capital comes from Goldman Sachs, JP Morgan and AIG raiding the US Treasury and having our government basically buy up all the bad deals and insuring the same people who destroyed the entire insurance business.
Letter: Goldman Protected Its Clients From AIG’s Weakness
The Wall Street Journal – 14 Apr 2009 – By Lucas van Praag (Copyright (c) 2009, Dow Jones & Company, Inc.)
Why is a letter to the editor copyrighted? And I got this from the Goldman Sachs site, not the WSJ. Prof. Amar Bhidé does his readers a disservice when he asserts that Goldman Sachs miscalculated the creditworthiness of AIG and was “made whole” by a government bailout of the company (“You Can’t Rush a Recovery,” op-ed, April 9).
Yup. Goldman Sachs didn’t miscalculate anything. They knew damn well that the CDS system was a wretched lie. But used AIG and this system because it allowed them to merrily do business with no perceived risk. These are the facts: Goldman Sachs is in the business of acting as an intermediary for numerous clients and often assumes risk on their behalf. HAHAHA— Our normal protocols require that we protect our shareholders from loss associated with our incurring these positions through rigorous risk management. This includes buying credit insurance which, in the matter at hand, we did from AIG,—AND THIS IS THE CORE OF THE PROBLEM! They shifted risk to another party who had NO CAPITAL to cover these risks! Nothing at all! —- then one of the world’s largest insurance companies. The terms of this insurance included a requirement that AIG give us enough cash collateral to protect us against possible future loss.
While the Derivatives Beast grew to amazing size, before the total collapse of all financial markets, I was horrified. This is not a surprise to me, that AIG didn’t have enough cash on hand to deal with bad losses. NONE OF THE MAJOR INTERNATIONAL BANKS HAD THIS!!! They were all grossly over-extended with ratios of less than 1% supporting immense deals which were then traded back and forth until the overall value of all this was stratospheric, well over $600 trillion! We have consistently said that we had no direct economic exposure to AIG. We marked to market the risk we had insured with AIG, and AIG was contractually required to give us collateral to cover any diminution in value. Because there were periods when AIG didn’t provide enough collateral, we hedged ourselves against the then seemingly unlikely event that AIG might default. —This is an admission that GS knew that AIG’s insurance against losses was fake. The cost of this hedging was over $100 million.—Note that he doesn’t mention what this ‘hedging’ was! I am very curious. I bet, GS did the same things AIG did. We know that GS ran off to Uncle Sam and all us tax payers for help because their hedges turned into money pits.— If AIG had failed, we would have had both the collateral and the proceeds from the credit default swaps and therefore would not have incurred any economic loss.
HAHAHA. Right! So why did they, right on the heels of AIG going down, rush to DC and have Paulson, who is a GS gnome, rush into Congress demanding a fast $700 billion in tax dollars plus a demand to expand this amount to infinity to ‘save America’? In order to collect under a credit default swap, there has to be an event of default. No event of default means no payout. By supporting AIG, the government prevented the company from defaulting. Some have questioned whether, if AIG had defaulted, we would have received the money owed to us under the credit default swap arrangements. Because these swaps were written by large financial institutions which mark to market their obligations to each other and net their positions at the close of business every day, we exchanged collateral with the CDS providers on a daily basis. This protected us from the risk of any knock-on defaults.
HAHAHA, again! This guy is a comedian, all right! Note how, as he explains things away, this makes less and less sense? Of course, if the government becomes AIG and takes on all the credit defaults covered by AIG, then, there is no bankruptcy! HAHAHA. Instead, we get all the horrible mess and are risking NATIONAL bankruptcy in order to keep markets rolling!
This is TERRIBLE. Also, Goldman Sachs has to mention the web of derivative gamesters who wove a nifty spiderweb of counter party defaults and hedges that are all tied together. And the AIG crash tore through this flimsy but extremely expensive web. Finally, others have asked why Goldman Sachs didn’t take a “haircut,” in other words, less money than we were owed. We had taken great care and incurred considerable expense to protect our shareholders. HAHAHA….lobbying Congress and buying the services of politicians is very expensive, indeed! Why would it have been appropriate for them to have suffered a loss when they didn’t need to?
Since Goldman Sachs runs our government, why should they take losses? They shoveled all the losses onto others. Thank you! Far from miscalculating the creditworthiness of AIG, we acted in a way which most people would think of as a good example of responsible risk management.
So much for this letter filled with excuses. The rage of the super-rich financiers who destroyed everything in their path is amusing and horrible. They have learned nothing. They will give up no power. Instead, they are fighting hard for more power. They want to bail us all out by bailing themselves out and tossing us into a sea of red ink which they will then disown or worse, will force us all to pay as they move all their wealth offshore and hit us with the bills that will inevitably come due.
Revenue in the investment-banking unit was a record $8.3 billion, including $4.9 billion from fixed-income trading alone. The business generated $3 billion in the same period a year earlier. Investment-banking profit was $1.61 billion, compared with a loss of $87 million in the first quarter of 2008.
Revenue was offset by $711 million in writedowns on leveraged loans and $214 million on mortgage-related securities.
Retail banking posted a profit of $474 million, compared with a loss of $311 million in last year’s first quarter. JPMorgan set aside $3.88 billion to cover bad loans in the quarter and said “delinquency rates continued to increase.”
Thanks to ZIRP, they can ink deals again. They can get carry trade money and move it from borrowing from major central banks to buying up the bonds of struggling smaller economies that have to offer high interest rates for their finances…then, these guys turn around and use this to buy up corporations and businesses and dump tons of debt on them. Just like before the crash!
Unlike the Great Depression, the present clowns running things don’t have to reform anything in order to restart the destruction! Back in the Great Depression, the smartest thing the US did was, put up tariffs and barriers to trade! Here, we have none and so all our trade rivals which is EVERY NATION ON EARTH, are now hoping to resume destroying our national industrial base. JP Morgan and Goldman Sachs get rich off of this destruction.
Dimon, calling money received through the Troubled Asset Relief Program “a scarlet letter,” said the New York-based bank is awaiting guidance from the U.S. Treasury Department. “We could pay it back tomorrow,” he said.
Now that the carry trade is back, they can all repay Uncle Sam with carry trade dollars which are NOT profits at all but DEBTS. These same guys claimed that the crisis was due to not enough liquidity, not due to too much debt! So now, they get to get back into an old groove which is to create more and more debt and dump it on more and more physical things like houses, businesses, factories, mines, forests, water systems, roads, etc.
The mall owner will continue operating its more than 200 properties, including South Street Seaport in Manhattan and Boston’s Faneuil Hall, after it sought Chapter 11 protection in U.S. Bankruptcy Court in New York. The company listed $29.5 billion in total assets and debts of about $27.3 billion.
“While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11,” Chief Executive Officer Adam Metz said in a statement today.
The filing lists Eurohypo AG, a unit of Commerzbank AG, as General Growth’s largest unsecured creditor with claims totaling $2.59 billion under two loans. Noteholders are owed about $4 billion in total. Much of the company’s debt can be traced to its $11.3 billion purchase of commercial-property developer Rouse Co. in 2004.
Friedman of the NYT, Mr. Free Trade Flat Earth, is one unhappy puppy. His multi-multimillionaire wife is now destitute. This bankruptcy will hammer the various entities who lent to General Growth. General Growth grew thanks to the flood of carry trade money. Carry trade money exists because of the floating fiat currency system.
Note that this mountain of debt is owed to an European bank out of Germany:
The German government offered 1.39 euros per share on Thursday for stricken lender Hypo Real Estate (HRXG.DE), a move which sets the stage for the first nationalisation of a German bank in the postwar era.
General Growth grew thanks to Hypo of Germany handing off $4 billion in loans that were capitalized with DERIVATIVES HELD BY OTHERS, namely, AIG, Goldman Sachs, JP Morgan, etc. If the fools running GG were smarter, they wouldn’t have gone very deep in debt to grow. They would have capitalized themselves, first. But no, everyone thought they could make money grow while sucking up all the capital for themselves which is why their pay and bonuses grew monstrously over the last 20 years. And grew last year! Despite the crashing markets.
Regulators seized Fannie and Freddie in September amid a rise in mortgage delinquencies that led to a combined net loss of $108.8 billion last year at the companies, the largest sources of financing for new U.S. home loans. The Treasury Department has injected $59.8 billion in emergency funds into the companies, including $46 billion issued two weeks ago.
Executives at Washington-based Fannie have discussed internally the possibility of taking over McLean, Virginia-based Freddie’s operations, according to people familiar with the matter. A formal approach isn’t imminent, said the people, who asked not to be named because the discussions are private.
The Treasury has agreed to give the two government- sponsored enterprises, or GSEs, as much as $400 billion through Dec. 31. That agreement probably will need to be extended by Congress before year-end, said Karen Shaw Petrou, a managing partner of Federal Financial Analytics Inc., a Washington-based research firm.
As these two entities overextended themselves, they tried to fix this by growing even bigger. There is no way in hell, the US government should have used them to suck down the vast majority of all the loans made by the bankers! There has to be limits. The push to make housing ‘affordable’ via interest rate cuts did exactly one thing: caused prices to shoot to the moon!
This sort of social experiment has to be terminated. I was a landlady for years and years. It is HARD WORK. And you have to put in LOTS OF CAPITAL. I know landlords who use their properties to get loans so they can live high off the hog. They usually end up bankrupt. Smart landlords have zero debt on a property so they can collect money straight off. I did this. It makes perfect sense. It is an investment!
The markets were utterly warped by low interest rates. And they are all very anxious to warp it again, so we can bid up prices to where they were during the bubble. This rescue operation will cause tremendous harm, it simply moves the day of reckoning into the future where it will be even bigger than today.
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