Here is an interesting piece from Huffington Post of meeting lead by Hank Paulson during the financial crisis.
Huffington Post:
Paulson, according to a September 27, 2008 New York Times piece by Gretchen Morgenson, led a team of regulators and bankers in early September to determine what to do with the most severely wounded financial institutions.One of the participants in those meetings was Lloyd C. Blankfein, Paulson's successor at Goldman Sachs.
Out of those meetings came the controversial and heavily criticized decision to allow Lehman Brothers, a Goldman competitor, to go belly up, and to bail out AIG. Starting with $85 billion from the Fed, taxpayers have pumped a total of $170 billion into the giant insurance company. The bailout was crucial to Goldman in that it permitted AIG to pay off its $12.6 billion debt to the firm, $8.1 billion of which was to cover AIG-backed credit derivatives.
Huffington Post:
Paulson, according to a September 27, 2008 New York Times piece by Gretchen Morgenson, led a team of regulators and bankers in early September to determine what to do with the most severely wounded financial institutions.One of the participants in those meetings was Lloyd C. Blankfein, Paulson's successor at Goldman Sachs.
Out of those meetings came the controversial and heavily criticized decision to allow Lehman Brothers, a Goldman competitor, to go belly up, and to bail out AIG. Starting with $85 billion from the Fed, taxpayers have pumped a total of $170 billion into the giant insurance company. The bailout was crucial to Goldman in that it permitted AIG to pay off its $12.6 billion debt to the firm, $8.1 billion of which was to cover AIG-backed credit derivatives.
On November 25, 2008, Goldman became the first bank in the nation to benefit from the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program (TLGP), issuing $5 billion in government-secured debt at 3.367%, substantially less than the market rate facing banks which issued unsecured debt.
And what is the advantage for Paulson to help bailout the big corporate banks and investment banks? Answer: Goldman Sachs. In order to understand this point, let's look back at Paulson as the former CEO of Goldman:
Goldman has more subprime debt outstanding than companies such as Credit Suisse, which has almost $10 billion; Citigroup, with $6.8 billion; or JPMorgan Chase, with $7.8 billion. Paulson's tenure at Goldman was from May 1999 through June 2006. Goldman paid Paulson was $38.5 million for 2005. We still don't know how much subprime mortgages contributed to profits at Goldman at the time Paulson was CEO.
However I posted this on the JL blog in March 2007:
Goldman Goes Hunting In Battered Loan Sector After a Record QuarterSeeing growing turmoil in the market for risky home loans as an opportunity, Goldman Sachs Group Inc. is looking at pushing deeper into the business, ramping up its own subprime-lending operation and pondering the purchase of another.
On the heels of reporting record and expectation-smashing fiscal first-quarter profits that kicked off Wall Street's earning season, Goldman Chief Financial Officer David Viniar indicated that the brokerage is perusing the subprime sector for fire-sale prices.
It is safe to say that Paulson reap the rewards from his former employer through:
1.Being a counterparty for payments for AIG
In September 2008, Barclays plc acquired Lehman Brothers. And Barclays received billions of dollars from its insurance arrangements with AIG. And AIG disclosed a list of major recipients last week of collateral postings and payments under credit default swaps, guaranteed investment plans, and securities lending agreements. Two of those recipients were Barclays and Goldman Sachs.
And what is the advantage for Paulson to help bailout the big corporate banks and investment banks? Answer: Goldman Sachs. In order to understand this point, let's look back at Paulson as the former CEO of Goldman:
Goldman has more subprime debt outstanding than companies such as Credit Suisse, which has almost $10 billion; Citigroup, with $6.8 billion; or JPMorgan Chase, with $7.8 billion. Paulson's tenure at Goldman was from May 1999 through June 2006. Goldman paid Paulson was $38.5 million for 2005. We still don't know how much subprime mortgages contributed to profits at Goldman at the time Paulson was CEO.
However I posted this on the JL blog in March 2007:
Goldman Goes Hunting In Battered Loan Sector After a Record QuarterSeeing growing turmoil in the market for risky home loans as an opportunity, Goldman Sachs Group Inc. is looking at pushing deeper into the business, ramping up its own subprime-lending operation and pondering the purchase of another.
On the heels of reporting record and expectation-smashing fiscal first-quarter profits that kicked off Wall Street's earning season, Goldman Chief Financial Officer David Viniar indicated that the brokerage is perusing the subprime sector for fire-sale prices.
It is safe to say that Paulson reap the rewards from his former employer through:
1.Being a counterparty for payments for AIG
In September 2008, Barclays plc acquired Lehman Brothers. And Barclays received billions of dollars from its insurance arrangements with AIG. And AIG disclosed a list of major recipients last week of collateral postings and payments under credit default swaps, guaranteed investment plans, and securities lending agreements. Two of those recipients were Barclays and Goldman Sachs.
2. Goldman Sachs being a bank holding company
Goldman Sachs and Morgan Stanley, the last two independent investment banks [investment banks Bear Stearns, Lehman Brothers, Merrill Lynch, and AIG went under] became bank holding companies. For Goldman theaccounting rule changes of becoming a bank holding company would benefit them.and gave Goldman access to the discount window of the Federal Reserve.
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