Hmmmm..... now this is interesting.... offered without comment... (ed)
TSF Opinion Commentary November 10, 2009 (last of a series)
Goldman wasnt the only contributor to the systemic risk that nearly toppled the global financial markets, but it was the key contributor to the systemic risk posed by AIGs near bankruptcy. When it came to the credit derivatives American International Group, Inc. (AIG) was required to mark-to-market, Goldman was the 800-pound gorilla. Calls for billions of dollars in collateral pushed AIG to the edge of disaster. The entire financial system was imperiled, and Goldman Sachs would have been exposed to billions in devastating losses.
A Goldman spokesman told me its involvement in AIGs trades was only as an intermediary, but that isnt even close to the full story. Goldman underwrote some of the CDOs comprising the underlying risk of the protection Goldman bought from AIG. Goldman also underwrote many of the (tranches of) CDOs owned by some of AIGs other trading counterparties.
Even if all of Goldmans CDOs had been pristine, it poisoned its own well by elsewhere issuing deals like GSAMP Trust 2006-S3 thatalong with dodgy deals issued by other financial institutionseroded market trust in this entire asset class and drove down prices.
By September 2008, Goldman had approximately $20 billion in transactions with AIG. Goldman was AIGs largest counterparty, and its trades made up one-third of AIG's approximately $62.1 billion in transactions requiring market prices. Societe Generale (SocGen) was AIGs next largest counterparty with $18.7 billion. SocGen, Calyon, Bank of Montreal, and Wachovia bought several (tranches) of Goldmans CDOs and hedged them with AIG.
END OF EXCERPT (click above for pdf of entire commentary)
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