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Deregulation

Blog Post
7/1/2010
Posted by Consumer Watchdog
Eric Dinallo, former Superintendent of the NYS Insurance Department, points out to Commissioner Keith Hennessey that AIG FP was in large part able to take on absurd amounts of risk because market perception viewed AIG FP in the context of its holding company, AIG. This meant that the risk that AIG FP had was greatly offset by the assets that AIG...
Blog Post
7/1/2010
Posted by Consumer Watchdog
In Session 2 so far, a lot of the questioning has been directed at the structural deficiencies of regulatory agencies. One large revelation has been the way in which many financial firms are able to manipulate and de facto pick which agency it would like to be regulated by. This leads, as Chairman Phil Angelides points out, to firms picking the...
Blog Post
7/1/2010
Posted by Consumer Watchdog
Towards the end of Session 1, a great deal of the questioning focused on why the government paid Goldman 100 cents on the dollar to unwind AIG's Credit Default Swaps. Some Commission members were griling GS' Viniar as to why, although the market value of these CDS were roughly 48 cents on the dollar, taxpayers paid 100 cents on the dollar for...
Blog Post
7/1/2010
Posted by Consumer Watchdog
Session 2, with opening statements occuring now (links provided), has these witnesses set to testify: Eric R. Dinallo Former Superintendant New York State Insurance Department Testimony (PDF) Video --> Gary Gensler Chairman Commodity Futures Trading Commission Testimony (PDF) Video --> Clarence K. Lee Former Managing Director for Complex...
Blog Post
7/1/2010
Posted by Consumer Watchdog
There has been an interesting colloquy of sorts between Commissioners Keith Hennessey and Bob Graham about the purpose of the Commission. Hennessey has decried his colleagues' line of questioning as not relevant to the roots of the crisis as well as the fact that the panel is questioning what he views as two "outliers" in AIG and GS....
Blog Post
7/1/2010
Posted by Consumer Watchdog
Thomas has been questioning GS' David Viniar for a good 5 minutes on whether the Federal Government paid Goldman 100 cents on the dollar for AIG contracts that was worth 48 cents on the dollar. In other words, when the government took over AIG and fulfilled AIG's contracts, did GS make the government pay 100 cents on the dollar for contracts that...
Blog Post
7/1/2010
Posted by Consumer Watchdog
Brooksley Born is asking GS execs about their derivatives operations. GS is continuing to assert that they integrate their businesses, and don't track derivatives separately, so they wouldn't have any specific information on derivatives...Brooksley Born is asking GS execs about their derivatives operations. GS is continuing to assert that...
Blog Post
7/1/2010
Posted by Consumer Watchdog
After Thomas is done questioning, Angelides interjects and is incredulous that Goldman Sachs had a "scientific" methodology of pricing that was based on the market alone. He points out that GS' first pricing of one of AIG's assets was $1.8 million, which only days later turned into $1.2 million, which itself was 400% higher than what GS...
Blog Post
7/1/2010
Posted by Consumer Watchdog
Bill Thomas, Vice Chairman and Former Ways & Means Chairman, is questioning Goldman's David Lehman on the technical aspects of how GS prices assets. GS is maintaining that they price based purely on what the market says and don't try to manipulate prices. Seems like Thomas is buying it. Thomas then proceeds to implicitly suggest to AIG's...
Blog Post
7/1/2010
Posted by Consumer Watchdog
Andrew Forster, AIG's former CFO, explains why he thinks Goldman's aggressive marking down of AIG's assets was mailicously motivated. Forster explains the rationale that Goldman has put forth, which is that prices were based on "other relevant transactions", is flawed because the market wasn't active--there simply weren't other relevant...