The Real AIG Scandal
The transfer of $12.9 billion from AIG to Goldman looks fishier and fishier. ___ The AIG scandal is getting ever-more disturbing. Goldman Sachs’ public conference call explaining its trading relationship and exposure with AIG established once again that Goldman knows how to protect itself. According to Goldman, even if AIG had failed, Goldman’s losses would have been minimal.
How did Goldman protect itself? Sensing AIG’s weakening capital position through 2006 and 2007, Goldman demanded more collateral from AIG and covered outstanding risk with instruments from other firms.
But this raises two critical questions. The first is why did $12.9 billion of taxpayer money go from AIG to Goldman? What risk—systemic or otherwise—was being covered? If Goldman wasn’t going to suffer severe losses, why are taxpayers paying them off at 100 cents on the dollar? As I wrote earlier in the week, the real AIG scandal is that the company’s trading partners are getting fully paid rather than taking a haircut.
(Excerpt) Read more at slate.com …
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