The Truth of AIG bailout

Discussion in 'Odds & Ends' started by leeroy85, Dec 15, 2009.

  1. leeroy85

    leeroy85 Rookie

    Joined:
    Mar 22, 2009
    Messages:
    107
    Surprised that news does not cover this issue. Bailout of AIG is very suspect. AIG is a giant insurance company that wrote insurance contracts to cover the risky investments of investment companies like Goldman Sachs.
    Hank Paulson,Treas Sec, was former CEO of Goldman. Hank let Lehman Brothers fail, but immediately urged President to save AIG. Think like 80 billion to AIG. The 80 Billion to AIG was used to pay out companies like Goldman on their bad investments. Really, 80 billion went to Goldman and other investment companies. Doesn't this seem like a terrible conflict of interest?
     
    #1
  2. chess9

    chess9 Hall of Fame

    Joined:
    Dec 11, 2005
    Messages:
    4,274
    Location:
    1.d4
    Yes, this has been all over the news, but you have to read the economic news to find it. Eliot Spitzer did a column on this exact incident and I posted it here, as I recall.

    When we bailed out AIG we were really bailing out its counterparties, and principally Goldman Sachs. But, you see, we didn't bail out Lehman because they hadn't donated enough money to both parties like Goldman Sachs, and Goldman has about 20 major players on both the Obama and Republican teams. When my people can talk to your people, we save both peoples. ;)

    But, don't let this make you cynical about government. There's too much really bad SH** out there to be cynical about. ;)

    -Robert
     
    #2
  3. Power Player

    Power Player G.O.A.T.

    Joined:
    Sep 2, 2008
    Messages:
    19,762
    Location:
    On my iPhone
    The insurance bailouts went to companies that the government believed could recover. 80% or more of an Insurance companies profits are investments. The decision was made to bailout AIG, and because of this, their investments in Goldmans were able to be paid out.
     
    #3
  4. chess9

    chess9 Hall of Fame

    Joined:
    Dec 11, 2005
    Messages:
    4,274
    Location:
    1.d4
    AIG paid GS 100%. No negotiations over the the counterparties' interests were done. Our cost to bail out AIG could have been a lot less, but Treasury was too busy protecting GS's ass.

    Here's a related article: http://www.nytimes.com/2009/12/20/opinion/20partnoy.html?_r=2&hp

    No one at Treasury or the FED wants the whole tawdry story told because it will be obvious that political influence played the major role in who got bailed out.
    NOT who was viable. GS would have been in a world of hurt if we didn't bail out AIG, btw. They might have collapsed as well.

    -Robert
     
    Last edited: Dec 20, 2009
    #4
  5. r2473

    r2473 Legend

    Joined:
    Aug 14, 2006
    Messages:
    6,964
    I thought "Frontline" did a nice little piece on this.

    Letting Lehman fail was a major mistake and nearly led to a financial meltdown. Bernake wanted to teach the banks a lesson. The government was not going to bail them out for their risky behavior. But, as they were so inter winded, letting one fail would start a domino effect that could not be halted.

    If AIG had failed, the meltdown would have become a reality.

    You can speculate that there was personal motivation for letting Lehman fail and Goldman survive (instead of the story told above). The truth of that will be very hard to determine. If they could do it over again, I doubt they would have let Lehman fail. It was nearly catastrophic.
     
    Last edited: Dec 20, 2009
    #5
  6. chess9

    chess9 Hall of Fame

    Joined:
    Dec 11, 2005
    Messages:
    4,274
    Location:
    1.d4
    Yes, but those weren't the only options. AIG/Treasury should have negotiated with the counterparties and lessened the cost to taxpayers. That wasn't done soley because of the political clout of one of the players-Goldman Sachs.

    I agree that AIG was probably too big to fail. Sad to say....And with no regulatory reform in place, they could fail by this time next year after they are cut loose.

    -Robert
     
    #6
  7. r2473

    r2473 Legend

    Joined:
    Aug 14, 2006
    Messages:
    6,964
    I'm not sure if this is true or not, but it is certainly not hard to believe.

    Goldman's top brass over the years have moved into very influential positions. The "Goldman Sachs Machine" is formidable and far reaching.
     
    #7
  8. leeroy85

    leeroy85 Rookie

    Joined:
    Mar 22, 2009
    Messages:
    107
    This posted from recent Fortune article:

    "A week after Fed Vice Chairman Donald Kohn was lambasted by senators for the failure to disclose the recipients, AIG published the list, which was topped by France's Societe Generale and Goldman Sachs (GS, Fortune 500).

    "The whole line that there would be a panic if they disclosed the counterparties, that was total BS," Cohan said. "It was just a backdoor bailout of the banks on the other side of those trades." "

    Paulson, former CEO of Goldman Sachs, stole money from the US treasury.
    Why isn't he being prosecuted? Unbelievable.
     
    #8

Share This Page