Friday, Feb 26, 2010
De-mystifying God's work
Bloomberg: Secret AIG document shows that G Sachs minted most toxic CDOs
A document has come to light showing a list of the mortgage CDOs on which GS and others were paid $62bn on their CDS insurance with AIG. Turns out (1) banks mostly owned, or had ties with, mortgage lenders/originators of the bad loans (2) the CDOs created on these mortgages fell sharply in value almost immediately and (3) the banks buying the CDSs from AIG were the ones underwriting the CDSs. The authorities also told AIG to pay GS et al in full when the former tried to negotiate to pay out at a discount. Then AIG was bailed out. The authorities kept the aforementioned list of CDOs secret (to protect GS or the financial system?). One thing's sure - the banks made money at the front end from buyers of the CDOs and then made more at the back end when the CDOs imploded.
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. icarus said...
Compare this with an except from an article in the current 'Economist' about Goldman Sachs:
"Despite the firm's swashbuckling reputation its senior people have a conservative streak, which explains its decision to pull back from mortgages in 2006, though even its risk managers failed to spot the danger of being so heavily involved with AIG."
2. icarus said...
Point (1) of intro should have said "banks mostly involved with these CDOs and CDSs also owned, or had ties with, lenders/originators of the bad loans.
It all boils down to dealing themselves aces.
3. mark wadsworth said...
I'm prepared to give the UK government and banks the benefit of the doubt and assume they were just incompetent, greedy, Home-Owner-ist, whatever, but what goes on in the USA is out and out criminal activity. This sort of thing will drive Karl Denninger apoplectic.
4. icarus said...
Also - point (3) the banks buying CDSs from AIG were the ones underwriting the CDOs (not CDSs) that were insured by the CDSs. So the intro should have read:
A document has come to light showing a list of the mortgage CDOs on which GS and others were paid $62bn on their CDS insurance (taken out on these CDOs) with AIG. Turns out (1) banks most involved with these CDOs and CDSs owned, or had ties with, the mortgage lenders/originators of the bad loans bundled in these CDOs (2) these CDOs fell sharply in value almost immediately and (3) the banks buying the CDS insurance from AIG were the ones underwriting the CDOs. The authorities also told AIG to pay GS et al in full when the former tried to negotiate to pay out at a discount. Then AIG was bailed out. The authorities kept the aforementioned list of CDOs secret (to protect GS or the financial system?). One thing's sure - the banks made money at the front end from buyers of the CDOs and then made more at the back end from CDS payouts when the CDOs imploded.
5. freemanphil said...
Isn't it great to see real journalism again? The leaking of secret documents!! Finally, journalists are relying on more than just press releases.
6. icarus said...
FMP - The Economist version @1 supports what you said the other day about Americans' having a better handle than UK hacks on what's taking place.