DON'T SWIM WITH SHARK

When you swim with shark it is better to eat it before it eats you.

Chinese Proverb

BANZAI7 NEWS--Here is the link to an excellent article by Gretchen Morgenson of the New York Times, recounting the fencing match between Goldman Sachs and AIG beginning in the Summer of 2007 and ending with the now infamous back door bailout of Goldman in September 2008. Here is a handy time line provided in the article.

Read the article then ask yourself the following questions, for starters:

- At a December 5, 2007 quarterly presentation, Joseph Cassano, the head of AIGFP declared: "It is very difficult to see how there can be any losses in these portfolios." AIG CEO Martin Sullivan said in a related release: "AIGFP reported an operating loss in the quarter due principally to the unrealized market valuation loss related to its super senior credit default swap portfolio. Although GAAP requires that AIG recognize changes in valuation for these derivatives, AIG continues to believe that it is highly unlikely that AIGFP will be required to make any payments with respect to these derivatives.."

How could these statements be made as the company was already being strong armed into making good on $Billions of collateral calls by Goldman?

-Goldman apparently encouraged other counter parties to demand additional collateral, thus putting additional liquidity pressure on AIG. If this is the case (and it probably is, why hasn't AIG commenced a legal action against Goldman?

-On Aug. 18, 2008, Goldman’s equity research department published an in-depth report on A.I.G. The analysts advised the firm’s clients to avoid the stock because of a “downward spiral which is likely to ensue as more actual cash losses emanate” from the insurer’s financial products unit.

Bearing in mind that a rating downgrade was deemed a "credit event" requiring more collateral under the AIG credit default swaps, is this a conflict of interest? If not, does it smell good?

-AIG was historically a valued investment banking client of Goldman. We now see how Goldman lead the subprime gang bang of its valued client. Goldman claims that AIG was a "sophisticated investor"able to fend for itself. Is this the kind of positive economic benefit we should expect from a leading 2big2fail financial institution? Is this an example of the "enhanced liquidity benefits" provided by means of proprietary trading and hedging by investment banks? Is something wrong here?

-Would you want Goldman to be your trusted investment adviser knowing what you now know? How can a principal trader of this magnitude be considered a trusted adviser by anyone?

-When will Mario Cuomo figure out that this nefarious backroom heist is a bigger kahuna than Ken Lewis?  Poor old Ken,  Mr Outside.

-This is clearly a textbook case of a giant systemic predator "being all that it can be" under our existing regulatory circus framework. Why is it so difficult for Obama's crack team of Wall Street lackeys to connect the dots?

-What would happen if Sarah Palin ever figured out that a credit default swap is not a sex game?

"Yes, as through this world I've wandered / I've seen lots of funny men / Some will rob you with a six-gun / And some with a fountain pen."
Pretty Boy Floyd

"It is better to swim alone than with sharks."

Banzai7 Proverb