[quote=patb]
Pat: Actually, I’m quite familiar with clawback and referenced it in an earlier post on this very thread. Its doubtful you read that post, and its doubtful you read any of my other posts describing Goldman’s position in re AIG.
BK didn’t have dick to do with any of this, especially given the fact that Goldman was IN POSSESSION of AIG’s cash and securities as collateral on the owed monies and whatever difference that existed was covered by CDS from other third parties.
They would have been paid EITHER WAY.
This tiresome discussion on BK is utterly pointless. There would have been no clawback, in that Goldman ALREADY HELD THE FUNDS.
I don’t know if you are being intentionally obtuse or you simply don’t understand how collateral works in the securities industry. They did NOT have have counterparty risk, so what is your point?[/quote]
i saw that post, after i had posted, but, while I will grant you do appear to understand the securities trade, i’d venture you don’t understand the bankruptcy trade.
Yes, Goldman was holding collateral, one could even argue that made Goldman a “Secured” creditor.
However even secured creditors still need to go to
court.
a judge could easily determine that it wouldn’t be in the best interests of AIG to allow Goldman to seize that collateral.
look at all those people sitting in default, filing bankruptcy to delay foreclosure.
if a judge determined that something in the AIG contracts was “Unconscionable, inactionable or
a policy violation” they could easily toss the case.
Goldman was defecating in their loafers and desperate until Paulsen saved their lunch.
if they weren’t they would never have joined TARP.[/quote]
Pat: Actually, I’ve worked on more than my share of BKs (for clients of the insurance brokerage where I worked). I’m familiar with 7 and 11 and DIP (Debtor-in-Possession), as well as how secured and unsecured creditors are defined.
The thrust of my discussion with SK centered on the differences in terminology between commercial and securities, especially when one discusses things like “insurance” and “collateral”.
A credit default swap is not the same thing as a term life policy from State Farm. It may behave somewhat similarly, in terms of its function (as SK correctly pointed out), but its contractual nature and triggering mechanisms are far different.
Same goes for collateral in the securities sense of the word. This isn’t a jointly held asset, or a depository account where both parties are signatories. Rather, the assets (such as they are) are held by the party clearing the trades (Goldman Sachs). The way the clearing contracts are executed prevents a clawback and this is an intentional function of that same contract.
