A very interesting New York Times article explores the business relationship between Goldman and A.I.G..
“Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.”
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Makes you wonder what sort of pushing GS would have done had the government not been so “provoked.”
exactly brent,
no way would Goldman push AIG towards insolvency without explicit knowledge that they’d be made whole in such an instance.
I read the source article in the NYT and 2 things stood out for me:
1. AIG wrote some bad deals. GS could only “push” where AIG was vulnerable – and it was their own doing.
2. The best thing you can say about Treasury is that they are horrible negotiators. The articel details a year long dispute between AIG and GS on what should be paid under the contracts in play. This was a legitimate dispute. And yet when Treasury took over they paid out GS in full for their demands. Did they not consult with AIG personnel familiar with this dispute prior to agreeing to this payout? Incompetence – or worse.
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