SEC charges GS with fraud

Quote from MarketMasher:

I've heard that from a few people - but where I get confused is with the term "systemic risk" in relation to that. Systemic risk means the big financial companies are interconnected, so one goes belly-up, the counterparties they owe are screwed.
So even if GS didn't need a direct infusion of $, if their counterparties all went belly-up, wouldn't they be hosed?

Bailing out the companies who then pass through the money to GS (like AIG) seems like an indirect bailout, but a bailout nonetheless. It still required gov't intervention.

So unless GS would have been fine if no one got bailed-out, then I'm not sure how they weren't bailed-out along with everybody else, "systemically".
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The losses would have been written-down. While you may look at the AIG bailout as indirect support for a company like GS, the fact remains that the banks got direct money which not all of them needed.

AIG is a unique case becuase they insured derivatives. The fact that the feds could affect a systemic bailout by just helping AIG speaks volumes.
 
Quote from Kassz007:

It was a joke. Lighten up a touch.
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Sorry, you can imagine that I am not able to tell since these things don't always come across in text.
 
GS was payed $1.00 on every dollar (par) it was owed by AIG, a company that was clearly in a dire situation and could have easily not payed that money if it were allowed to implode:

"..The New York Fed urged AIG to limit disclosure of its deal to buy out derivative trading partners at 100 cents on the dollar..."

http://online.wsj.com/article/SB10001424052748704130904574644623457242200.html


In fact, it was not AIG that payed it. It was tax payers, through the grace of Hank Paulson and Tim Geithner that bailed AIG out and indirectly GS. If it were really AIG that was doing the paying, it would have been more like .50 on the dollar, if that.

Why tax payers aren't going after at least .50 of this money is beyond me.
 
http://www.nytimes.com/2010/04/19/business/19goldman.html

But in 2006, some inside Goldman began to worry about the fragile state of housing. Daniel L. Sparks, the Texan who ran the mortgage unit, sided with those who believed the market was safe. Two of his traders, Joshua S. Birnbaum and Michael J. Swenson, had placed a big bet that mortgage bonds would rise in value.

But this camp clashed with Goldman sales staff who were working with hedge funds that wanted to bet against subprime mortgages. Mr. Birnbaum told the team to stop promoting bets against some mortgage investments since such trades were hurting the market and Goldman’s own position, according to two former Goldman employees.
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Goldman turned over all these negative positions to Mr. Swenson and Mr. Birnbaum, the traders who had previously been positive on the market. Along with Mr. Sparks, they have been credited for managing the short position that yielded a $4 billion profit for Goldman in 2007. Mr. Sparks retired in 2008. Mr. Birnbaum also left in 2008, to start his own hedge fund.

But former Goldman employees said those traders benefited from the short positions that were given to them. And their trading was tightly overseen by senior executives.
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At one point in the summer of 2007, for instance, Mr. Birnbaum made a case to Mr. Cohn that some mortgage assets were cheap and that Goldman should let him add $10 billion in positive bets. Mr. Cohn said no.
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I wonder how Mr. Birnbaum's hedge fund is doing with such a bright mind managing it.
 
Quote from nitro:

GS was payed $1.00 on every dollar (par) it was owed by AIG, a company that was clearly in a dire situation and could have easily not payed that money if it were allowed to implode:

"..The New York Fed urged AIG to limit disclosure of its deal to buy out derivative trading partners at 100 cents on the dollar..."

http://online.wsj.com/article/SB10001424052748704130904574644623457242200.html


In fact, it was not AIG that payed it. It was tax payers, through the grace of Hank Paulson and Tim Geithner that bailed AIG out and indirectly GS. If it were really AIG that was doing the paying, it would have been more like .50 on the dollar, if that.

Why tax payers aren't going after at least .50 of this money is beyond me.
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If GS got par for debts due to them from AIG, how did the other AIG counterparties fair? Was GS the only firm to get par?
 
"The worship of Mammon" - Evelyn De Morgan.

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