Federal Reserve moral hazard smoking gun

(While I prefer to post about cleantech at night, about something optimistic and positive rather than just more on the slime oozing out of Wall Street. However this story looks to be huge. Mark my words, the AIG scandals will metastasize into a cancer that will make Enron look small.)

In August 2008 Goldman was willing to tear up AIG derivative contracts, offered to take haircut

Yet the NY Fed forced AIG to stand-down, made them pay back at 100% (which gave the investment banks billions) and has tried desperately to cover up what happened ever since. WSJ broke the story.

Zero Hedge

The implications of this discovery are huge as they essentially destroy all the arguments presented by the FRBNY about an inability to extract concession out of Goldman (which being the largest AIG CDO counterparty, was the critical negotiating factor). It also casts doubt on the veracity of any arguments presented in Congress by Goldman representatives discussing the potential to take a haircut on their AIG exposure. What this means in plain English is that, in the month before the Fed entered the scene, GOLDMAN SACHS ITSELF OFFERED TO TEAR DOWN THE CDS ON AIG’S CDO PORTFOLIO (we don’t use caps lock lightly).

This is basically a smoking gun on the moral hazard issue perpetrated by the FRBNY when it got involved, and indicates that through their involvement, Tim Geithner, Sarah Dahlgren or whoever, not only did not save US taxpayers’ money, but in fact ended up costing money, when they funded the marginal difference between par (the make whole price given to all AIG counterparties after AIG was told to back off in its negotiations) and whatever discount would have been applicable to the contract tear down that had been proposed by Goldman a mere month earlier. This, more so than anything presented up to now, is the true scandal behind the New York Fed’s involvement.

If this November Blackrock report indeed exists, and if Goldman did in fact offer to tear down contracts, this is an act of near criminal implications and heads at the FRBNY must roll immediately.

TARP IG opens two new investigations of AIG.

“If anyone at the Fed thought that this investigation will stop after Wednesday’s hearing – they are completely mistaken,” [Rep. Darrell] Issa said in an emailed statement. “There has been a widespread effort by officials at the NY Fed to thwart transparency and we will continue to pursue this investigation for as long as it takes to get the truth.”

NY Fed emails about AIG coverup

SEC mulled national security status for AIG details. Yes, they wanted to invoke national security to cover their trails. What are they hiding?

Corporatists, greedheads, and the coming populist revolt

The AIG saga is now unfolding in ways that “professionals” would not even dream of and is snaring past and present Treasury Secretaries who rushed to bail out the failed insurer’s counterparties at 100 cents on the dollar, to the tune of $62 billion.

I must admit I made a big mistake three years ago: I thought no American government would ever dare to use such an enormous amount of public money to cover the private losses of the nation’s wealthiest institutions. And I am once again amazed at these same institutions’ hubris of paying record-breaking bonuses for 2009 results. If this isn’t the stuff that makes for public uproar and revolution, I don’t know what is…

Rep. Towns subpoenas NY Fed for AIG counterparty documents

Chairman Edolphus “Ed” Towns (D-NY) today released the following statement ahead of issuing a subpoena to the Federal Reserve Bank of New York (FRBNY) for documents related to AIG counterparty payments (counterparties).

“To help the Committee’s investigation of payments made by AIG to its counterparties, I am issuing a subpoena today to the Federal Reserve Bank of New York. This subpoena will provide the Committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout.”

Emphasis added.

Thank you, Rep. Towns. This is a major step forward.

The vampire squid makes another enemy

Goldman Sachs out for a stroll


Let me get this straight. Is [Ex-CEO of AIG Hank] Greenberg saying the machinations of Goldman Sachs were responsible for the disastrous failure of AIG amid the recent financial crisis? “Well, it certainly wouldn’t be difficult to come to that conclusion.”

The response from the White House on all of this has either been stonewalling or crickets. Why it’s almost like they see their primary role as being the protector of Goldman Sachs, irregardless of political cost or anyone else.

Time to indict Geithner for securities fraud

The web of known parties guilty of fraud, coercion, or securities manipulation keeps getting bigger

I am 100% in favor of allowing Geithner to defend himself … In a court of law, for securities fraud.

And as I have stated before Paulson, Bernanke, and Bank of America ex-CEO Lewis as well.

So says Mish, and I agree completely. Do we still have rule of law or will the plunder of the country by greedheads be allowed to continue? What happened with AIG is, in every sense of the word, criminal. It now appears AIG, more than anyone else, is Ground Zero for the corruption, cover-ups, evasions, and financial ripoffs.

Geithner’s dubious AIG cover-up

This was looting and a cover-up plain and simple.

A quick review: Damaging e-mails have revealed that Treasury Secretary Timothy Geithner urged AIG to withhold crucial information about the deterioration of its financial condition in the lead up to its demise. This will put further political pressure on Geithner, who has already been exposed for his dubious role in the Lehman Brothers bankruptcy.

(Start rant)
Golly, would it be too much to ask for the hard left in the US and UK to get its head of its ass and organize on this? Rather than having pissing contests about whether Iran is a ‘mature democracy’ or if the protesters are boojie (and thus presumably deserve to be tortured and raped.) The breadth and depth of such self-marginalizing idiocy is astonishing. Hello, that crisis of capitalism you’ve waited decades for is finally here. So of course the only thing to do is ignore it and go off on bizarre tangents instead. Are they just summer soldiers? Dunno. But by their own hand they are now mostly useless and irrelevant.
(End rant)