Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs
February 24th, 2010In an e-mail message to select clients, Thomas C. Mazarakis, the head of Goldman’s fundamental strategies group, acknowledged that his unit often provided investment ideas that the firm had already traded on. Sometimes Goldman has even taken the opposite approach, betting against particular instruments that the group has recommended.
“We may trade, and may have existing positions, based on trading ideas before we have discussed those trading ideas with you,” he wrote.
Via: Bloomberg:
When a congressional panel convened a hearing on the government rescue of American International Group Inc. in January, the public scolding of Treasury Secretary Timothy F. Geithner got the most attention.
Lawmakers said the former head of the New York Federal Reserve Bank had presided over a backdoor bailout of Wall Street firms and a coverup. Geithner countered that he had acted properly to avert the collapse of the financial system.
A potentially more important development slipped by with less notice, Bloomberg Markets reports in its April issue. Representative Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform, placed into the hearing record a five-page document itemizing the mortgage securities on which banks such as Goldman Sachs Group Inc. and Societe Generale SA had bought $62.1 billion in credit-default swaps from AIG.
These were the deals that pushed the insurer to the brink of insolvency — and were eventually paid in full at taxpayer expense. The New York Fed, which secretly engineered the bailout, prevented the full publication of the document for more than a year, even when AIG wanted it released.
“the $21.2 billion in CDOs minted after 2005, mostly based on prime and commercial mortgages, performed as badly as or worse than the earlier subprime”
some chop shop CDO sausage, old chap? it’s awwwflyy good, whatt.