Semantics, it all came from the taxpayer. Specifically, the AIG went directly from Tarp to Goldman. Oh, but it was default swaps so it’s ok????
The semantics are what is important.. which side of the loan.. who owes who money.. its all semantics. The only way to prevent this transfer was to have AIG go under.. which would have caused more than $137Billion in underwritten CDS to go under.. affecting several other banks that also bought CDSs from AIG.
Specifically, AIG was insuring loans that Goldman had underwritten. Goldman was paying AIG money to do this. Goldman thought there was a possibility of the loans going bad, so they bought insurance on the principal of the loan.. this loan is known as a Credit Default Swap. Same semantic that brought down Bear Stearns.. they were on the wrong end of the Credit Default Swap.
My personal opinion is that the Fed should have allowed AIG to fail, to take possession of AIG and make the CDS(s) that it did originate good. Sell off the other parts of AIG to clear up the loss. Several banks understood the risk of the loss of principal and took out insurance, paying into AIG so that if the loan went bad, they could at least get their principal back.[/quote]
Yeah, I understand the systemic risk of AIG. Still, taxpayer money went to pay Goldman’s seemingly always correct bets. Just because things would have went haywire if GS did not get payed DOES NOT mean they are not receiving taxpayers funds. The taxpayer is still funding a casino. It’s gambling plane and simple. People tend to bet big when they know they can’t lose.
