Goldman's ever-troubling roll in AIG mess

We've heard a lot about the Goldman Sachs (GS) dogfight with AIG (AIG) that ultimately led to billions of dollars in bailout funds going to Goldman Sachs via AIG to pay off CDS obligations. Thanks to the New York Times, we now have a lot more color as to what happened.

We're still left with the big question: Why was Goldman entitled to 100 cents on the dollar for its contracts; in a situation like that, surely some sort of discount was warranted, right? But there's a lot of interesting detail about the bully stick that Goldman Sachs was able to wield to demand payments that no other client of AIG was entitled to. The firm plays hardball, that's for sure. It reminds me of a high-stakes poker showdown, the kind that involves a single big whale who can single handedly break a bank. It has happened before. Of course, rarely does the poker player try to determine casino policy.

In any case, as this drama unfolded, the insiders surely sensed that the very solvency of AIG was on the line. More fodder for the conspiracy theorists: "On Aug. 18, 2008, Goldman's equity research department published an in-depth report on AIG. 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." It also asked why, as a partner, "would it accept anything less than the full amount of protection for which it had paid?" Interesting. 

For more:
- here's the article

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