How do you like the convenient appearance of Bin Laden whenever someone in power in the U.S. government is in BIG trouble and needs to avert the public's gaze for a little while? This year he's a "liberal" who is eco-friendly and hates banksters. The wiseacres who spend so much time devising these opportunistic videos want us to think that if we pursue the banksters or any type of true "green" policies that we are sympathetic to terrorists. They've certainly got a good sense of humor (and very little regard for ours). Seems to me that they assume the mob from the French Revolution is brewing and this time it's not from the lowest classes. The AIG-Goldman SEXual hijinks continue with news that, yes, everyone on the inside knew exactly what they were orchestrating (and hiding for years before) for our continued enjoyment. Too bad they are so easily exposed and so difficultly banished from the scene of the loving MSM coverage of their venality. Click PDF here to learn everything (including how the taxpayer bailed out the European investors as well). Even more explication here.* (Emphasis marks added - Ed.)
* Schedule A to the Amended Shortfall Agreement, once redacted to the nines, now unveiled, means we don’t have to wait until 2018 to get an inside peak into just which CDO deals, and banks, the US government helped via its bail-out of mega-insurerer AIG. As guest-blogger Tom Adams over at Naked Capitalism points out, one of the most interesting things here is the relationship between notional value and collateral posted. Since AIG was providing insurance on these deals, it had to post additional collateral as the notional value of the deals declined.
A key question at the heart of the controversial bailout of AIG is just how much money the government lost. The Federal Reserve and Treasury Department have worked to keep that number secret and to conceal who was on the winning end.
An unredacted document obtained by the Huffington Post lists the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time - a de facto $8 billion subsidy, courtesy of taxpayers.
The list was produced as part of a congressional investigation led by the House Oversight and Government Reform Committee into the federal bailout of AIG.
The Federal Reserve Bank of New York, then led by now-Treasury Secretary Tim Geithner, purchased a slew of souring assets from the world's biggest banks for 100 cents on the dollar in November and December 2008. A scathing report by a government watchdog held Geithner responsible for the overpayments.
The New York Fed initially pressured AIG to keep the list hidden from investors, regulators and the public. When it was eventually filed with the Securities and Exchange Commission, the SEC allowed the Fed and AIG to keep the details secret. A heavily-redacted version was made public last March.
The document is part of 250,000 pages of internal documents on the AIG deliberations subpoenaed by the oversight committee. It lists the toxic mortgage bonds that banks insured through AIG.
Those insurance contracts, called credit default swaps, are what the New York Fed ultimately took off AIG's books, paying the banks 100 cents on the dollar for toxic mortgage bonds - home mortgages that were bundled together and securitized. The banks could never have gotten anywhere near such a generous deal on the open market, so the move served essentially as a direct subsidy to those banks from taxpayers.
Up until now, taxpayers had no way to know exactly what they owned. They knew they owned a certain amount of assets, but none of the details: which bundles of mortgages it purchased from AIG; how the banks were valuing those mortgages; how much collateral they had demanded from AIG on those securities; or which bank bundled those mortgages into securities.
Rep. Darrell Issa of California, the top ranking Republican on the oversight committee, told HuffPost that he was not persuaded by government and Fed arguments that the transactions should be kept secret.
"Just because the government happens to own the bonds, which means - by the way, they don't have to be sold at all until they are worth what we want them to be worth - that somehow they have to be kept a secret," Issa said during a break in the today's AIG oversight hearing, where Treasury Secretary Tim Geithner testified about his role in the bailout as then-head of the New York Fed.
The troubled insurer tried to publicly disclose these details in December 2008 before being thwarted by the Geithner-led New York Fed. A month later Geithner left to head the Treasury Department.
Issa said that the public had a right to see the document. "I mean, think about it: What the government owns it can keep as long as it wants. It would be like saying you can't appraise federal land. Why? It is one of those things that's outrageous. We know we paid a hundred percent for them. We know who got the money. This document shows who ultimately were the beneficiaries. And we believe since that they've asked to have it locked up until 2018 - and nobody today defended that - that it's time to release that," Issa said.
A government audit this month found that as of Sept. 30, 2009, the Treasury Department was expecting a $30 billion loss on its TARP-related AIG investment. The value of the securities could ultimately rise, though.
"The way the AIG bailout was engineered was to specifically benefit Goldman Sachs and its trading partners," said Janet Tavakoli, a Chicago-based derivatives expert and founder of Tavakoli Structured Finance. "Goldman's past and present officers used crony capitalism to put their own interests ahead of the public."
The nation's fifth-largest bank by assets ultimately got $14 billion through what members of Congress are calling a "backdoor bailout" of the world's biggest banks.
"The suppression of the details of the [credit default swap] trades protected Goldman Sachs and its trading partners," said Tavakoli, who's examined Goldman's credit default swap arrangements with AIG. "The $182 billion bailout overall kept AIG alive, and its trading partners, including Goldman Sachs, benefited from the funds made available to the securities lending transactions and other subsequent trading transactions."
At the time the document was prepared, Goldman's $14 billion in souring derivatives had a market value of just $6 billion. Goldman had more than $8 billion in collateral from AIG to protect it from losses, meaning it was still about $6 billion short.
But more than $2 billion of those collateral payments came from AIG after it was bailed out on Sept. 16 of that year, according to a Nov. 2008 presentation prepared for the New York Fed that was released this week. So that $2 billion was made possible partly due to taxpayer assistance.
Combined with the $6 billion deficit it faced in the face value of those securities, Goldman Sachs ultimately received about $8 billion from taxpayers via AIG. Goldman posted a $1.3 billion profit for 2008.
Despite the Fed's protestations that full disclosure would harm AIG - and thus the taxpayer - the financial blog Naked Capitalism has largely pieced together many of the key details using public sources - and traders who were interested in buying the bonds from the government would easily have access to the rest.
. . . a Schedule A Shortfall Agreement, can be viewed here.
AIG and the Fed, not above water, but drowning? – FT Alphaville The uncomfortable position of UBS – FT Alphaville
For a fair number of deals, the posted collateral is very close to the notional amount of the bonds. In layperson-speak, that means some deals were basically dead already – and they were distributed across vintages and collateral type (excluding the commercial real estate CDOs, which are a small portion of the total). This implies that the other deals were going to catch up at some point. Put another way – if a 2005 high grade deal from one issuer had 80% collateral posting (meaning the counterparty and AIG agreed it was worth only 20% of its original value), odds are high that the other 2005 high grade deals and the 2006 high grade deals are going to get there soon enough (there was enough similarity in structures and underlying assets that the dispersion among eventual outcomes, in most cases, would not be that great).
The fact that some transactions were acknowledged both by AIG and the dealers to be zeros as of the bailout is yet another reason to doubt that these deals would have future upside. That is contrary to both the Fed’s logic in buying the CDOs (see our related post) and its current claim that the deals have traded up despite a massive decay in credit quality.
And what about that missing $6 Billion in Abacus trades? Is this the secret link to the Carlyle Group or some other larger and more mysterious entity behind all of the cronies?One commenter at Naked Capitalism has a very cogent explication.
The story Geithner and Bernanke (and Hank Paulson) tell is that they did everything, however personally repugnant it was to them as dedicated stewards of public funds, to keep the entire financial system from collapsing. And they are sticking to this story no matter what. People who study the details know they did so many things that had nothing to do with saving the world, both during the early days when they were shoveling money out the door into their friends’ limos and later when they started hiding their tracks and working to preserve Wall Street’s ability to pull off new scams in the future, that the only real question is whether they are crooks or cronies. Nevertheless, most Americans, including people I know and like, believe the end-of-the-world comic book version, in which life as we know it was preserved by three superhero geniuses–a nerdy professor from Princeton who understood financial collapses better than anyone else on the planet and two financial wizards with nerves of steel who were on loan from Wall Street. People hear versions of this story every day, from people they trust, from Time Magazine and the New York Times, from Paul Krugman and Brad DeLong and Mark Thoma, from Barack Obama and Larry King and, probably, from Oprah. More than sixty U.S. Senators are about to endorse this version of reality. What can you do?Sounds like something to consider carefully to me. And then there's the latest data that shows that "somebody's lying: Subpoenaed Documents Show Goldman Sachs Offered to 'Tear Up' AIG Derivatives Contracts at 'Right Price' Before NY Fed Took Over Negotiations And the final insult to us all. Yes, we are "too angry" and thus all the bankster actions are forgiveable (whereas ours aren't).
Joe Bageant outs the teabaggers (and the corruption funding them) once and for all.
One of the things that has been driving me crazy about MSM coverage of the latest public demands for tougher reforms of Wall Street is that they typically engage in subtle or not-so-subtle demonization of the critics. It is a blatant effort to put the shoe on the wrong foot. No, it isn’t that the financiers managed to drive their own firms over the cliff and take the global economy with it, yet come out even more profitable than before by skillfully looting the public purse. Heavens no, can’t look at the facts at hand. No, the fact that a normally complacent public has woken up to the fact that its was had is turned on its head. How often have you read that the reason for renewed reforms headfakes is that the public is “angry”? Obviously, by implication, anyone who is emotional must not have sound judgment. so the anger by implication is not warranted or at best overdone.
The more sophisticated version of this meme is to brand calls for reform as populist, again implying that it is great unwashed (and thus of course uninformed) masses that want reform, that if they really understood how things worked, they’d be delighted with this Best of All Possible Worlds that we inhabit.Matt Taibbi continues his salvos against recent David Brooks New York Times op-ed columns (hat tip Marshall Auerback), and does his usual brutally effective job of shredding this sort of argument.
I don't get it about the Tea Party movement. After eight years of of a super right wing administration destroying jobs and what social safety net there was ... "the people" have suddenly decided: "Now that I'm unemployed, I think I'll form a grassroots movement to destroy my health care too. It seems that no one in the mainstream media finds it a bit suspicious that this so-called grassroots popular movement sounds an awful lot like the neocons we just dumped. Hell, in my home town the Tea Bagger leadership pretty much comes from the ranks of the movers and shakers in the local Republican Party. This is a populist movement?Definitely - from this crowd.Suzan ___________________
Maybe it's just my cynicism, but the Tea Party movement smells to high hell of the far right think tanks.Of course if you get upwind, up there in the official state entertainment agencies, mainstream media, you can't smell it, and wonder of wonders, it is declared to be another example of the American people exercising democracy!
What's your take?
(Joe replied)You're right about the nature of the Tea Baggers.
However, there are three things that really stand out to me about the Tea Baggers in a broader context.The first is the general political incoherence of their lines of attack and in what they claim to be for and what they claim to be against. The most retrograde or ignorant of McCarthyites in the 50's or New Right activists of the 70s and 80's would not have attacked their very mainstream adversaries for being both Communists and Nazis at the same time. Second is the responses the Tea Baggers have solicited from progressives in general and the very large well funded Obama political organization. The Obama machine has no interest in fending them off since they have been excellent foil in keeping progressives in line and have pushed the health care debate in the direction of the deals they have already cut with the health care industry (pro-corporate and to the right), and away from more progressive vision of health care reform. And the progressives are fucking worthless - they don't hate, they don't fight and then they wonder why no one is afraid of them. Lastly and most importantly, I think the Tea Baggers are really our canary in the mine that we are entering our late empire period. Crisis and decline in such situations does not lead to discrediting the failed ideologies that caused the given crisis, but rather the belief that we are failing because we were not faithful enough to those ideals. (Think of the crisis in Islamic world and the rise of fundamentalism.) When it comes to history, shit just flows down hill. John Brown