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Blog Post
7/1/2010
By Khan Shoieb
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 Khan Shoieb
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
By Khan Shoieb
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...
Blog Post
7/1/2010
By Khan Shoieb
A big focus of the hearings today will be on the Collateral Call Disputes between AIG and Goldman in the run-up to the crisis. In other words, why did Goldman mark down (price) AIG's Credit Default Swaps so much lower than other peers, coercing AIG into coming up with collateral they didn't have? How did GS lead to AIG's downfall, and thus, AIG's...
Blog Post
7/1/2010
By Khan Shoieb
Today I will be liveblogging Day 2 of the FCIC's hearings. Witnesses are giving their opening statements now. Set to testify in Session 1 (with links to their statements): Steven J. Bensinger Former Executive Vice President and Chief Financial Officer American International Group, Inc. Testimony (PDF) Video --> Andrew Forster Former Senior...
Blog Post
6/30/2010
By Khan Shoieb
Unlike the previous session with AIG's Cassano, this session with Gary Cohn, President of Goldman Sachs, and Craig Broderick, head of credit, market and operational risk, has been particularly dull. The Commissioners have wasted a valuable opportunity to ask more probing questions and discover anything of substance. On questions concerning Goldman...
Blog Post
6/30/2010
By Khan Shoieb
My wireless had been knocked out for several hours, so apologies for the blackout. We are about an hour and a half into Session 3 with Goldman, but before discussing what is going on now I'll briefly discuss the AIG session. Cassano, former head of AIG's Financial Products division, was in charge of creating the financial instruments that...
Blog Post
6/30/2010
Posted by Khan Shoieb
Representatives from AIG are asserting good faith and denying that credit default swaps (CDSs) or over-the-counter derivatives were ever sold without due diligence or with lower underwriting standards. Cassano especially is maintaining that the financial instruments are performing well now under vehicles operated by the federal government. Phil...
Blog Post
6/30/2010
Posted by Khan Shoieb
The session with the "experts" is over. It is not entirely clear if the Commission learned anything new, especially considering the disparate views held by each of the panelists. In a telling series of answers, one member asked each of the panelists to rank the causes of the financial crisis. Two said over the counter derivatives were...
Blog Post
6/30/2010
Posted by Carmen Balber
A quick interaction between members of the FCIC as they questioned their first panel of academics on derivatives this morning foreshadows the quagmire commissioners are delving into as they question AIG and Goldman Sachs executives this afternoon, concerning the derivatives deals that ultimately found AIG using taxpayer bailout funds to pay...