The Banking and Strategy Initiative

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How AIG got out of paying for its default swaps?

When push came to shove, AIG sat down at the bargaining table instead of paying the sum defaulted..and that’s the usual way of  doing it, but to hear it from the AIG side, Goldman Sachs and Paulson were going to get the joyride…

Billions of dollars were at stake when 21 executives of Goldman Sachs and theAmerican International Group convened a conference call on Jan. 28, 2008, to try to resolve a rancorous dispute that had been escalating for months.

Now read the following even more carefully, AIG is being asked to pay and it is noting overpayment concerns. Probably the guys don’t come from financial trading at all, but just legal beavers from the Insurance Claims desk, that is why G is originating and AIG is buying. Having bought, time to pay, dears..we are not the churlish Typhoon struck sailors..

A.I.G. had long insured complex mortgage securities owned by Goldman and other firms against possible defaults. With the housing crisis deepening, A.I.G., once the world’s biggest insurer, had already paid Goldman $2 billion to cover losses the bank said it might suffer.

A.I.G. executives wanted some of its money back, insisting that Goldman — like a homeowner overestimating the damages in a storm to get a bigger insurance payment — had inflated the potential losses. Goldman countered that it was owed even more, while also resisting consulting with third parties to help estimate a value for the securities.

Apparently this analysis is based on the hearing documents. Talk of missing documents can’t tell their tales, but  remember a single missing document would make a merry melee of the tale and the ‘tail’ in publishing too :lol

After more than an hour of debate, the two sides on the call signed off with nothing settled, according to internal A.I.G. documents and an audio recording reviewed by The New York Times. I don’t mind AIG getting their say but a CDS written on sub prime by them had come a begging , isn’t that expected? Didn’t you get the rates every week from the Mort OTC? Is Greenberg getting ready for a legal strangle for Blankfein’s good boys?

But, no we have otherwise seen this paper and with it producing writers on the Facebook movie and their known Political stance, this could well be a joyrde for the readership, Sanity returns though and they outline hard facts..

Behind-the-scenes disputes over huge sums are common in banking, but the standoff between A.I.G. and Goldman would become one of the most momentous in Wall Street history. Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

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