Wednesday, March 18, 2009


His Day

I saw this just this morning on the American Papist blog. Even though it's a day late, Happy St. Patrick's Day!

He's not my favorite religious figure -- his holiday owes more to Dionysus than to Jesus -- but I do like the graphic.

St Patrick's Day here was unseasonably warm, not so positive for me but the local weather geeks treated it as good news. I'm not sure why people in a desert climate should be averse to some free water (i.e. rain) once in a while....


Monday, March 16, 2009


What happened to common sense?

I really think I need to go back to school and take some economics classes. Maybe we all do. I'm having trouble understanding why AIG needs to pay "retention bonuses" to people who bankrupted the company. I understand the idea of fulfilling a legal obligation to avoid a more expensive lawsuit, but I would link the payouts to some quasi-voluntary resignations. If a particular teacher scares off all the students, resulting in no tuition payments and bankruptcy for the school, doesn't it make sense to get rid of that teacher?

In a related story,

The mainstream media isn't always wrong. Sometimes those who are up to no good -- whether in the political, the financial, or any other realm -- use the public's distrust of big media to protect themselves. Because media credibility is so badly damaged (and why that is would be a-whole-nother subject) most of the time they get away with it. This case in point is from the Financial Times' "Alphaville" blog:

Point counter point: AIG, Goldman and the NYT

Does anyone care to remember this story on AIG, from the New York Times, back in September? More to the point, does anyone remember the trouble it caused?

It was one of a series of articles that appeared in the mainstream press contemporaneous to AIG’s bailout that dissected just what the insurer had been doing that made it so risky, and so systemically important.

We cite the NYT article in particular though, for this paragraph:

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.

… which caused something of a furore.

Goldman strenuously and very publicly denied the gist of the allegation. So aggressive was their rebuttal, in fact, that the wires even wrote up seperate stories on it. Here’s Reuters:

NEW YORK (Reuters) - Goldman Sachs Group Inc rejected as “seriously misleading” a published report on Sunday that said the Wall Street bank had as much as $20 billion of exposure to the troubled insurance giant American International Group Inc.

Lucas van Praag, a Goldman spokesman, on Sunday said the Times article was wrong to suggest that Goldman had reason to be concerned about AIG’s problems.

“Although we have said many times on the record that our exposure to AIG was, and is, not material, the reporter chose to pursue a story line which suggests, by innuendo, that is not the case,” he said in an e-mailed statement.

“For the avoidance of doubt, our exposure to AIG is offset by collateral and hedges and is not material to Goldman Sachs in any way,” he continued. “The conclusions about our interests that readers of the New York Times article are invited to reach are seriously misleading.”

Now, of course, we have AIG’s counterparty list. And guess who tops it?

Goldman Sachs.

Goldman is the proud recipient of $12.9bn in payments from AIG and AIGFP. (Specifically, $2.5bn from CDS collateral postings, $5.6bn from Maiden Lane III payments for CDS positions, and $4.8bn in payments related to securities lending. The Maiden Lane III portfolio was, of course, created in December specifically help reduce the burden of CDS collateral postings facing AIGFP proper - it bought the underlying CDO tranches from the CDS counterparties)

For the record then, it certainly was not the NYT that was “seriously misleading”.

We wonder whether things might yet get uncomfortable for Goldman. After all, they’re in rather an awkward position: on the one hand, according to their above PR line, they didn’t need AIG’s money at all (it was, to paraphrase, immaterial whether AIG went under or not). And yet, on the other hand Goldman is - gosh - the largest recipient, via AIG, of taxpayers’ money.

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