Goldman Sachs Blankfein Says He Wasn’t Asked to Take AIG Discount on Swaps

January 13, 2010 by · Leave a Comment
Filed under: Legal News 

What a bombshell!  Now we know the fix was in, Treasury did not even bother to offer a discount to AIG’s counter-parties.  So it was a de facto bailout of Goldman Sachs among other firms and foreign banks visa-vi the U.S. taxpayer.   What is even better about this bailout is that is didn’t fall under TARP restrictions, didn’t need to be paid back and Goldman will be paying huge bonuses this year with the taxpayers money.

Also, unlike the commercial banks, I doubt we would of went over the edge if they failed.  Yes, investment banks are important and they make markets but we would of been able to survive without bailing them out.  That’s capitalism, winner succeed and losers fail.  I think Mr.  Geithner will have some explaining to do if not having to resign over the fallout.

Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein testified that he was never asked by U.S. regulators to accept a discount on investment contracts his firm had with American International Group Inc.

AIG, as part of a bailout orchestrated by the Federal Reserve Bank of New York, paid 100 cents on the dollar on credit-default swaps purchased by bank counterparties including New York-based Goldman Sachs. The New York Fed said it had to make the payments after banks refused to accept so-called haircuts, according to a November audit from Neil Barofsky, the special inspector of the U.S. Troubled Asset Relief Program.

“I never got a request myself about taking less, it never came up in any conversation I can recall,” Blankfein said while testifying at a hearing of the Financial Crisis Inquiry Commission in Washington today. He said that while an employee said he had received a question on the topic, it “never came up to me.”

Lawmakers have called the AIG rescue, which has swelled to $182.3 billion, a “backdoor bailout” of the Wall Street firms that were fully reimbursed for securities trading at less than face value. The New York Fed made “limited efforts” over two days in November 2008 to negotiate discounts on $62.1 billion in swaps from AIG clients including Goldman Sachs and Societe Generale SA, Barofsky has said.

Blankfein testified that the Goldman Sachs employee said he “couldn’t answer that question himself at his level” regarding a discount and that was the end of the inquiry. Blankfein was responding to a question from commission member Heather Murren, a retired managing director at Merrill Lynch & Co.

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