Wikinvest Wire

A setback for Government Sachs

Saturday, December 12, 2009

Just days after their top management "took one for the team" by accepting stock they can't sell for five years in place of billions of dollars in cash out of a bonus pool pegged at somewhere around $20 billion, the Wall Street Journal reports that the role of Goldman Sachs in the AIG recklessness/meltdown/bailout was much larger than originally believed.

Goldman Fueled AIG Gambles
Wall Street Titan's Role Shown in Journal Analysis; Firm Says Problems Hidden

Goldman Sachs Group Inc. played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American Insurance Group Inc.

Goldman was one of 16 banks paid off when the U.S. government last year spent billions closing out soured trades that AIG made with the financial firms.

A Wall Street Journal analysis of AIG's trades, which were on pools of mortgage debt, shows that Goldman was a key player in many of them, even the ones involving other banks.

Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms' roles in the transactions.
Asked to comment, a Goldman spokesman said that, right up until the time that the U.S. government took them over, AIG was "viewed as one of the most sophisticated financial counterparties in the world. It wasn't until the government intervened in September 2008 that the full extent of AIG's problems became apparent."

Translation: We were unaware of potential problems just like everyone else (snicker, snicker).

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