Investigation Coming For AIG and Goldman? It Should

Now this is something you aren't gonna hear like this from any other place that I can see. Its a little long but I tried to write it as if I am having a conversation with you.

Back in the day, I used to buy AAA bonds at say a spread of say 50 and then simultaneously "sell" that risk via a type of insurance product called a credit default swap, for 10 and pocket a nice 40. When you multiply that by billions and billions that can turn out to be a nice number in the old profit statement. The only risk you really run is if the guy you sold that risk to ain't around when you go to collect on your insurance. Got it?

Well this went on not just for me but other places including a fine firm named Goldman Sachs. What was kind of cool in my mind was I found out that the Goldman entity doing the exact trade I was doing was their "proprietary trading desk" which in layman's terms means the partner's money. You can imagine the smile when I knew these "titans" of Wall Street thought so much of this trade that the partners, who liked their money, felt these were big money makers.

As I said, the only problem with these trades was if your counterparty on the hedge was still around to pay you off if something went haywire. Well who were these counterparties? Um AMBAC, MBIA mostly and then after awhile.........AIG! You know who Goldman did a lot of these trades (we called them negative basis trades) with? Ding Ding. AIG. You know who the CEO was when a lot of this was going down? Treasury Secretary Hank Paulson.  You know who was waiting in the wings as the head of trading? Current Goldman CEO Lloyd Blankfein.

Well when AIG was gonna go bust before the Fed surprisingly bailed them out, they were on the hook for a lot of money on these VERY trades to a bunch of guys. You know who numbers 1 and 2 were? Goldman Sachs for $20billion and Merrill Lynch for $8billion. Merrill of course being headed by FORMER big Goldman executive John Thain.

Now before your blood starts really boiling, lets be clear about why politics needs to be thrown out of these discussions. Paulson is obviously in the Bush Administration. Lloyd Blankfein current head of Goldman? HUGE Democrat. Like I bet he has Obama's cell phone number. I am not kidding.

So this guy Ed Liddy is on the Goldman board and gets appointed by the FED to run AIG after they get a $75bn+ loan from you and I the taxpayer. Smell anything yet. As we've said before Ed's first act? To drawn down $37bn of that dough to pay off its "collateral calls". $20bn goes to Goldman. $8bn goes to Merrill. As Eric has noted before the old "chums" Paulson and Blankfein met on September 15 by themselves. You think it was to play bridge? I call bullspit. I cleaned that up.

Well you know what I've done? Alerted one of the biggest bulldogs in the media who is ALL over this. As you can see, its NOT a political thing. Now I'm sure if we went to Goldman and said, "look assclowns, Paulson took $75bn of our *%&%(*(^(^&*(#%^^@ money as taxpayers and gave it to AIG so his "blind trust" could get its money back and you Blankfein and your merry men and women in the partners fund could get paid back from these busted down negative basis trades you messed up on," they would say there's nothing further from the truth. But that's ok you may be telling the truth. Thats why we'll be going to AIG now since that is part of the bailout deal with them right? We get to know where our money is going as taxpayers. I'm sure they'll be happy to tell us right?

Sorry if we find out bad news folks and if it is the case, boy is it REALLY gonna be hard to pass this $700bn bailout. Cause then it really does look like its going to bailout fat cats. Hey Warren Buffett you must've pissed yourself yesterday when this thing didn't go through. Oh and maybe Lloyd Blankfein did too if he figured, "hey if this $700bn bailout goes through who the hell is gonna care about some measly $75bn number to AIG." Well its too late for that homeys. I'll be damned if you 2 self-proclaimed Democrats who "always" want to help the little people (Blankfein, Buffett,) and Paulson who did a nice turnabout on helping AIG when he heard his own dough might be in trouble, get away with this without the highest authorities hearing about it.

Now if a bolt of lightning should come down and strike me as I walk to my favorite watering hole tonight, my family will not forgive. Neither will the media guy who might put this story on his show tonight. Cheers. 

Comments

Oh My God.

So the bailout IS for the fat cats at the investment banks.

This is horrible!

I hope you keep on these people.

[richie]

Mike,
In normal times we could never get to the bottom of this since Goldman would tell us all to pound salt and its none of our business as "non-shareholders". But in light of this "bailout" of AIG, I think we're "shareholders" in AIG now and have a right to know as taxpayers. I'm not standing here making accusations but I can tell you 1) they did TONS of these trades and 2) the reason they didnt give a hoot when MBIA and AMBAC were having trouble is they resold off that risk to some "dopey" European bank! I kid you not. So I thought Goldman was cooked 6-9 months ago and then I fished around and voila, there it was, they had found some other sucker. Well I'm just hopin they dont feel like they found another sucker here and it is us. However, if they can come clean, I will shine Lloyd Blankfein's shoes for a year. Come on Lloyd whaddya say? Now I'm going out. Let's see if that bolt of lightning hits me. After all, I do have my insurance policy with AIG.

[mike]

richie:

heavy-duty questions you raise here. You think there's is something awry in fantasyland w/ these jokers?

[richie]

Chris M,
Very good question. I believe Paulson did have to sell his stock and then it was transferred to a "blind trust" but pally this thing I'm talkin about aint no stock. This is probably a good old fashioned hedge fund structured within Goldman that was owed money by AIG. I GUARANTEE he didnt have to sell that. Thats why as our fine public servant he can maybe spill the beans on what he and his old buddy Blankfein were talking about....ALONE.....on September 15. Look if $700bn is $2500 for each person in this land, $75bn is about $275 no? I want my $275 back for me, my family, my friends, etc. if I dont get some answers. Good ones. Pronto. And so does the sledgehammer who has a pretty popular show on TV and on radio. Like Vince Lombardi in those old NFL film clips, "what da hell is goin on around heahhhhhhh?!?!"

[richie]

RPB,
You are probably right (as usual). It will lead to more congressional quivering. But if the $700bn goes like this $37bn is alleged to have gone this aint gonna help anyone other then these assclowns at the top. Trust me I'm the biggest free market guy around but this crap is NOT free markets. This is a fleecing.
You can probably guess who is looking at it in the media and he is PISSED. I just told him to have his research people check and see if I've made any incorrect statements. Um, as Michael Corleone said in the first Godfather......"thats a true story Kay."

[Chris M.]

Great post, Richie.

Quick question, did Paulson have to sell his GS stock when he was appointed Treasury Secretary or was it simply moved to a blind trust? If the latter, I am stunned there aren't more people questioning his motives and actions.

[RPB]

Superb reporting. This is going to blow up and be great for you guys.

But this will also add to the populist quiver and result in more congressional squabling. Hopefully it pushes congress a more taxpayer favorable resolution.

How long can we wait?

[frank]

just found this blog - awesome!!

[richie]

Antilemming, I'm not sure about GS risk management but you are damn tootin' you are on AIG's. We will not let this die. Thanks for the kind words.

[AntiLemming]

If I am a US taxpayer, does that mean I am a member of the GS risk management committee?

Excellent post!