Secret Banking Cabal Emerges From AIG Shadows

[Octafish]

This makes my blood boil:

Secret Banking Cabal Emerges From AIG Shadows

Commentary by David Reilly
Bloomberg.com

Jan. 29 (Bloomberg) -- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.

We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system -- apart from the matter of AIG’s bailout -- deserves further congressional scrutiny.

The New York Fed is in the hot seat for its decision in November 2008 to buy out, for about $30 billion, insurance contracts AIG sold on toxic debt securities to banks, including Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, among others. That decision, critics say, amounted to a back-door bailout for the banks, which received 100 cents on the dollar for contracts that would have been worth far less had AIG been allowed to fail.

SNIP...

Later, when it became clear information would be disclosed, New York Fed legal group staffer James Bergin e-mailed colleagues saying: “I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals -- too many counterparties, too many lawyers and advisors, too many people from AIG -- to keep a determined Congress from the information.”

Think of the enormity of that statement. A staffer at a body with little public accountability and that exists to serve bankers is lamenting the inability to keep Congress in the dark.

CONTINUED...

http://www.bloomberg.com/apps/news?pid=20601039&sid=aaIuE.W8RAuU

Gee. Billions for banks owned by foreigners makes me mad.

What makes me really mad is the thought that the people who stole all this loot aren't the ones paying for the bailouts.

In fact, they're getting away with their crime.

[Mari333]

1. knr

[Octafish]

6. Thanks, Mari333! Remember Henry Paulson, Banker to the BFEE?

Want to know where the bailout trillions went? Ask Henry Paulson, banker and accountant to the Bush Family Evil Empire.
The guy cut his teeth in the Nixon White House, working for John Ehrlichman, domestic advisor and Master Plumber.
You may remember Nixon is the president who said, "I am not a crook."



So today, he's the architect of the Wall Street Bailout. Here's what his gig means in dollars and sense of power:

Who is Henry Paulson?

By Tom Eley
23 September 2008
WSWS.org

EXCERPT…

Since taking office, Paulson has overseen the destruction of three of Goldman Sachs’ rivals. In March, Paulson helped arrange the fire sale of Bear Stearns to JPMorgan Chase. Then, a little more than a week ago, he allowed Lehman Brothers to collapse, while simultaneously organizing the absorption of Merrill Lynch by Bank of America. This left only Goldman Sachs and Morgan Stanley as major investment banks, both of which were converted on Sunday into bank holding companies, a move that effectively ended the existence of the investment bank as a distinct economic form.

In the months leading up to his proposed $700 billion bailout of the financial industry, Paulson had already used his office to dole out hundreds of billions of dollars. After his July 2008 proposal for $70 billion to resolve the insolvency of Fannie Mae and Freddie Mac failed, Paulson organized the government takeover of the two mortgage-lending giants for an immediate $200 billion price tag, while making the government potentially liable for hundreds of billions more in bad debt. He then organized a federal purchase of an 80 percent stake in the giant insurer American International Group (AIG) at a cost of $85 billion.

SNIP…

Paulson bears a considerable amount of personal responsibility for the crisis.

Paulson, according to a celebratory 2006 BusinessWeek article entitled “Mr. Risk Goes to Washington,” was “one of the key architects of a more daring Wall Street, where securities firms are taking greater and greater chances in their pursuit of profits.” Under Paulson’s watch, that meant “taking on more debt: $100 billion in long-term debt in 2005, compared with about $20 billion in 1999. It means placing big bets on all sorts of exotic derivatives and other securities.”

According to the International Herald Tribune, Paulson “was one of the first Wall Street leaders to recognize how drastically investment banks could enhance their profitability by betting with their own capital instead of acting as mere intermediaries.” Paulson “stubbornly assert Goldman’s right to invest in, advise on and finance deals, regardless of potential conflicts.”

CONTINUED...

http://www.wsws.org/articles/2008/sep2008/paul-s23.shtml

Wow. That was a warning from before Congress signed off on Bush’s 2008 bailout.

Gee. What a nice friend to have – a miracle worker. Instead of water into wine, though, he turned millionaires into billionaires.

[Mari333]

8. k to the top

[midnight]

2. Looks like they took the American wallet, and are having a good laugh...

[Octafish]

11. A damned good laugh over a wallet by Lloyd Blankfein and Warren Buffett

At our expense, midnight.

Congress Exposes Potential Profiteering in AIG's Deals

Contributed by Anonymous on Thursday, January 28, 2010 5:08:54 PM

EXCERPT...

Goldman CEO Lloyd Blankfein claims he had no idea AIG had trouble producing collateral. I knew AIG was headed for grave trouble more than a year before the September 2008 bailout and raised the issue with both Warren Buffett and JPMorgan Chase CEO Jamie Dimon. Goldman Sachs claims to be superior risk managers, yet asks the public to believe that it was clueless about AIG's distress, even though Goldman itself was a key contributor to it.

Then Treasury Secretary Henry Paulson was CEO of Goldman Sachs at the time it put on these trades with AIG. Lloyd Blankfein was (and remains) CEO of Goldman and was the only Wall Street CEO at one of Paulson's bailout discussions. Stephen Friedman, then Chairman of the NY Fed, also served on Goldman's board.

Details That Could Anger the PublicAn analysis of the previously secret details shows that at the time of the November 2008 buyout, some CDOs had implied prices of around 60 cents on the dollar. Others had implied prices of around 20 cents on the dollar.

Not revealed by the new report is that many of the assets backing some of the CDOs have a high risk of severe or total principal loss (many have actual losses). These CDOs have "cliff risk," as in falling off of one. (There is currently no reliable secondary market, and similar CDOs have traded as low as one penny.) One such CDO is Davis Square IV, a CDO on which French bank Societe Generale bought protection from AIG. The CDO is a poster child for Wall Street's key contribution to a financial crisis that devastated the U.S. economy.

SNIP...

CDO managers may disclose conflicts of interest, but a conflict of interest shouldn't mean that new assets "managed" into your portfolio are highly likely to do you harm. TCW and Goldman Sachs had a relationship that benefited TCW, which earned fees from deals like Davis Square IV. Davis Square IV included several tranches of Goldman's Abacus deals, including $53.5 million from 2006. By September 2008, Goldman's CDO, Abacus 2006-12, was already downgraded from AA2 to Ca, a junk rating--it means you are likely to lose your shirt. Another part of this CDO in Davis Square IV's portfolio was downgraded from A3 to Ca. Three of Goldman's slices of Abacus 2006-15 also made their way into Davis Square IV, and they were also all downgraded to Ca, a junk rating, by September 2008.

CONTINUED...

http://beforeitsnews.com/story/14298/Congress_Exposes_Potential_Profiteering_in_AIGs_Deals.html

It's a shell game that makes learning ancient Arawak seem simple by comparison.

[appal_jack]

3. Moral of the story:

Moral of the story: if you are a regular-shmo of an American, it would behoove you to "stockpile ammo, bottled water and peanut butter."

k&r

-app

[mdmc]

7. 1

[Octafish]

18. You got it.

Paraguay is where Rev Moon and the BFEE are a-headin' to ride out Chimpageddon.

Lots of fresh water there. Soldiers and slaves, too.

[Me.]

4. Not In The Least Surprised

However it us surprising to see Bloomberg use the word canal. IMHO, the cat is finally, however slowly, starting to come out of the bag. Excellent OP.

[Octafish]

30. Thanks, Me.. Hey! Didya hear Warren Buffett pocketed $3 BILLION off his Goldman Sachs investment?

I'd be laughing, too, if only I could afford it.

Warren Buffett's $3 Billion Goldman Anniversary

Published: Wednesday, 23 Sep 2009 | 10:27 AM ET Text Size
By: Alex Crippen
Executive Producer

It's 12 months later and Warren Buffett's Berkshire Hathaway is $3 billion richer.

One year ago today, on September 23, 2008, with the financial world still reeling from the collapse of Lehman Brothers just days before, Buffett stunned Wall Street with a massive vote of confidence for Goldman Sachs.

In a late-day news release, Goldman announced a private deal to sell Berkshire $5 billion of perpetual preferred stock. In effect, Berkshire was giving Goldman a massive loan. And you don't loan that kind of money to a firm you think could follow Lehman down the drain.

SNIP...

The next day, in an interview on CNBC, Buffett said, "The price was right, the terms were right, and the people were right."

SNIP...

Goldman agreed to pay Berkshire a 10 percent annual dividend on the preferred stock. That's $500 million a year, and the payout didn't depend at all on what happened to Goldman's common stock price.

But there was more. In what Buffett later described as a "bonus," Goldman also gave Berkshire the right to buy $5 billion of common stock at $115 a share. Berkshire could exercise that right any time in the next five years.

CONTINUED...

http://www.cnbc.com/id/32982928

GS stock closed about $149 on Friday. What should I care? What would I do with all that money? I'd probably waste it all on Chips Ahoys, 2-percent moloko and trashy novels.

[fascisthunter]

5. it would be justice to drag the fascists out in the street

for a public tar and feathering.

[truedelphi]

12. Wouldn't it though?

Sort of a waste of perfectly good tar, and perfectly good feathers.

[scarletwoman]

24. I'd be happy enough to see them put into stocks (and think of the ironic word play!) & displayed in

a public square where the good citizens can pelt them with rotten vegetables and foreclosure notices.

[Octafish]

31. Great idea. It'd make their names -- like Greenberg and China -- household words, PDQ.

From 2001, before the meltdown, some background on AIG everyone should know:

China's Man in America

by William F. Jasper
October 8, 2001

Financial mogul Maurice Greenberg presides over a vast and expanding insurance empire. Meanwhile, he consorts with and lobbies for the barbaric Communist regime in Beijing.

Maurice R. "Hank" Greenberg leads a charmed and busy life. As chairman and CEO of one of the world’s largest insurance and financial conglomerates, American International Group (AIG), Greenberg sits atop a very profitable and powerful empire. He dines with presidents and potentates and sups with the likes of Federal Reserve Chairman Alan Greenspan, global "wise man" Henry Kissinger, and chairman-of-the-world emeritus David Rockefeller. The New York-based magnate appears equally at home with the commissars of Communism, counting China’s premier, Zhu Rongji, and president, Jiang Zemin, as longtime friends.

Business has been very good for AIG. Greenberg’s "Letter To Shareholders" in AIG’s Annual Report 2000 noted:

AIG started the new Millennium on a positive note. Net income rose 11.5 percent to a record $5.64 billion, while earnings per share totaled $2.41, an increase of 12.1 percent over 1999.... et income gained 14.8 percent to $5.74 billion, or $2.45 per share. In addition, Revenues gained 13.1 percent to $45.97 billion; Assets rose 14.3 percent to $306.58 billion; Shareholders’ equity reached $39.62 billion at year-end, compared to $33.3 billion at year-end 1999; and Return on equity was 15.6 percent.

Behemoths the size of AIG have voracious appetites — and deep pockets. So, over the past few years, Greenberg has led the company on a worldwide acquisition binge. Some of the firms devoured by AIG include the Los Angeles-based financial services company SunAmerica, Inc. ($18 billion), the Hartford-based HSB Group ($1.2 billion), Egypt’s Pharaonic Insurance Company ($18 million), the financial units of Korea’s Hyundai Group ($860 million), the Canada-based Norwich Union Holdings, Ltd ($159 million), and the Chiyoda Mutual Life Insurance Company of Japan ($522 million). Most recently, Greenberg received accolades from Wall Street and the investment community for his August 29, 2001 acquisition of American General Corporation (for $23 billion).

Powerbroker

SNIP...

Greenberg is chairman of The Asia Society, the Starr Foundation, and the Nixon Center, as well as the founding chairman of the U.S.-Philippines Business Committee and past chairman of the U.S.-China Business Council. He is vice-chairman of both the U.S.-ASEAN Council on Business and Technology and the Center for Strategic and International Studies, and has long been a major force in The Business Roundtable and the President’s Advisory Committee for Trade Policy and Negotiations. He is also a member of the Board of Directors of the New York Stock Exchange, a member of the Trilateral Commission, a director of the United Nations Association, and the past chairman, deputy chairman, and director of the Federal Reserve Bank of New York. President Clinton appointed him to the Advisory Committee of the President’s Commission on Critical Infrastructure Protection.

COMMTINUED...

http://www.thefreelibrary.com/China's+Man+in+America.(insurance+executive+Maurice+Greenberg+lobbies...-a079087192

Then again, Corporate McPravda being what it is, they'd probably misidentify everyone wearing feathers and call them all liberals.

[fascisthunter]

39. .

thank you for posting

[David Zephyr]

9. Enthusiastic K&R.

Great read.

[Octafish]

40. Ain't it, though? AIG is legalized bank robbery at the taxpayers' expense.

And those who fleeced us are at the pinnacle of political power -- in the United States and abroad.

A.I.G.’s Unknown Counterparties Take Center Stage

New York Times
March 5, 2009, 11:53 am

Jim Bunning, the Republican senator from Kentucky, has been a reliably feisty presence in the Senate Banking Committee’s many hearings on the financial crisis. An outspoken foe of Washington’s financial rescue plans, he once lashed Timothy F. Geithner, the Treasury secretary, for being “involved in just about every flawed bailout” of the Bush administration.

On Thursday, Mr. Bunning did not disappoint, as he lambasted the vice chairman of the Federal Reserve for saying that the names of American International Group’s trading counterparties should not be revealed.

The Fed vice chairman, Donald Kohn, was one of three panelists called to testify Thursday morning on what went wrong at A.I.G., the insurance giant bailed out last fall out by the United States government.

One of the most contentious issues surrounding the government’s A.I.G. bailout was the role of various international financial institutions — which have not been named — that were on the other side of the credit-default swap agreements that brought A.I.G. to its knees.

In seeking to justify putting tens of billions of dollars of taxpayer money at risk, many have pointed to these swap agreements, saying that they would cause a failure at A.I.G. to infect the global financial system.

As part of its rescue, the government has stepped in with a program to buy securities from A.I.G.’s counterparties at par, or full value, even though many of these securities are surely worth far less.

And just who are these banks being bought out at par?

That’s what a lot of people want to know, but that’s something Mr. Kohn does not think should be revealed.

“Giving the names could undermine the stability of the company and would have serious knock-on effects” in the broader financial system, Mr. Kohn told lawmakers Thursday.

CONTINUED...

http://dealbook.blogs.nytimes.com/2009/03/05/sharp-words-about-aigs-mystery-counterparties/

Cough. China.

[malaise]

10. The scum always rises to the top

Unfuggingbelievable.

[Agony]

13. Thanks for that.

[PA Democrat]

14. Recommended. People need to be prosecuted and jailed.

Who is that in the picture? I'm guessing Blankfein, Head of the Goldman Sachs mob family on the left, but who is that on the right?

[Octafish]

25. 2nd Richest Man in the World, Warren Buffett.

The guy sank $5 billion into Goldman Sachs during the bailout. A year later, it was worth $8 billion.

[PA Democrat]

33. Thanks! I was going to guess Buffet but wasn't sure.

[gulfcoastliberal]

15. K&R - The true constituents of the Obama admin. nt

[flyarm]

16. +1 billion! eom

[flyarm]

17. or 10 billion..or 70 ..or whatever..we are screwed! eom

[hootinholler]

19. "The New York Fed is in the hot seat for its decision in November 2008"

Oh, really?

-Hoot

[Blackhatjack]

20. Those with the power to control money usually end up with ALL THE MONEY...

When organized crime looked at new enterprises like drugs, gambling, prostitution, etc. they never said 'let's go out and become the public owners of these operations so we can receive all the money.'

No, they were clever. Other people are the 'owners' on paper of front enterprises, and those people were responsible for filing all the proper paperwork and keeping an auditable set of books. They always took their cut, but others stood in the position to take legal and criminal responsibility if things went bad.

So is the case with those who corral most of the $$ on Wall Street. They can operate much more profitably from the shadows, wielding powers the public hasn't an idea even exist.

Nothing would threaten the profitability and power of the 'shadow bankers' like having real Congressional Investigations that look into their roles and actions taken.

The first step is to bring them out into the sunlight....

[unkachuck]

21. K&R....n/t

[earthboundmisfit]

22. God damn

Can we call it TREASON yet? :mad:

[Greyhound]

23. K&R. They took all we had and are taking all we can borrow.

Next comes the blow-off.

[MinM]

26. Ellen Brown: Economic 9-11: Did Lehman Brothers Fall or Was It Pushed?

A year after the bankruptcy of Lehman Brothers on September 15, 2008, questions still swirl around its collapse.

Lawrence MacDonald, whose book A Colossal Failure of Common Sense came out in July 2009, maintains that the bank was not in substantially worse shape than other major Wall Street banks. He says Lehman was just "put to sleep. They put the pillow over the face of Lehman Brothers and they put her to sleep." The question is, why?...

If Lehman was indeed sacrificed, who pushed it and to what end? Some critics point to Henry Paulson and his cronies at Goldman Sachs, Lehman's arch rival...
http://www.huffingtonpost.com/ellen-brown/economic-9-11-did-lehman_b_278202.html

:dem: 'n R

[Octafish]

41. Did Lehman threaten to overturn the derivative apple cart?

Great article. Incredible, the connections go across just about every line imaginable.

If so, someone had to go.

Paulson, Geithner and Blankfein configured the bailout to reward cronies.

Still, it's odd to feel bad for the company what hired Jeb Bush.

[Octafish]

42. A disaster: Unwinding Lehman Brothers derivatives deals

D'ah. I forgot the important parts:

A disaster: Unwinding Lehman Brothers derivatives deals

October 10, 2008 — 1:15pm ET | By Jim Kim

Perhaps the government should have saved Lehman Brothers. Business Week reports a stunning fact: Lehman Brothers' bankruptcy "threw into jeopardy derivative deals with a staggering 8,000 different firms that had paid Lehman billions of dollars in collateral." Now the court battles begin. The affected parties can be surprising. The list of affected parties includes big hedge funds like Harbinger Capital Partners and various Goldman Sachs funds. Big banks like Bank of America and small banks like the Federal Home Loan Bank of Atlanta were also affected. The basic issue is collateral. Companies put up collateral, which Lehman apparently used in ways that are still unclear. It seems to have disappeared. What's really scary is that this was standard industry practice.

For more:
- here's the article

Related Articles:
The Death of Lehman Brothers

Read more: http://www.fiercefinance.com/story/disaster-unwinding-lehman-brothers-derivatives-deals/2008-10-10#ixzz0eFekHAH5

Perhaps they co-opted Stalin's precept: "No company. No problem."

[MinM]

43. (Henry) Paulson says he was scared and clueless during Lehman collapse

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x4251806

http://www.nytimes.com/2008/10/19/business/19gold.html?_r=2
:yoiks:

[TheUnspeakable]

27. k&r

[whistler162]

28. And next someone will come to the conclusion that it is

lead by the, well hint hint you know, the Jews, nudge nudge.:puke:

[fooj]

29. KandR!

[sabrina 1]

32. It's unbelievable and yet there is so little outrage ~

I know I'm being simplistic as I don't know much about economics, but what happened to all the money? Where did it go? Doesn't someone have it? It didn't just disappear into thin air. And assuming that is the case, who is going after it to give it back to its rightful owners?

Seems to me they put the Foxes in the WH for only one reason, they know where the bodies are buried and they couldn't let someone else stumble on them and start digging them up. That is the only explanation I can think of to have Bernanke, Geithner, Summers back in charge of the mess they oversaw. And Paulson is still around, I'm sure, even if not officially.

The Bigges Heist in History', someone called it, and the robbers are guarding the spoils and it looks like we just cannot get rid of them.

Bernanke was confirmed again despite all that Congress knows ~ shame on them and on Obama for that appointment.

[Lorien]

34. +1 nt

[SlingBlade]

35. D'OH !

"Change, You Can Believe In "

[invisible]

36. .

[OnyxCollie]

37. K&R. nt

[pjt7]

38. The Fed has to be audited

& then gutted. Think of all the criminal giveaway's they are involved in