Forum Replies Created
-
AuthorPosts
-
SK in CV
Participant[quote=Allan from Fallbrook]So, in terms of counterparty risk between AIG and Goldman, I think its safe to say that there wasn’t any and I think we can also dispel the notion that Goldman would have gone hat in hand along with the other creditors had AIG gone boom. Given that they were already holding AIG cash and securities (a point Brian seems unable to comprehend) and also given that they would have gone to parties other than AIG to collect on the CDS, the notion of secured versus unsecured debts within the venue of BK becomes moot.[/quote]
I’m not convinced there wasn’t any counterparty risk. Collecting on the CDSs would still have been GS claims against other creditors, not AIG. (Very possible that would cause those issuers to go bankrupt.) And there is still the issue of their claims over and above the collateral they held. I’ve seen nothing to indicate that everything in excess of that collateral would have been anything other than an unsecured debt.
Participant[quote=Allan from Fallbrook]So, in terms of counterparty risk between AIG and Goldman, I think its safe to say that there wasn’t any and I think we can also dispel the notion that Goldman would have gone hat in hand along with the other creditors had AIG gone boom. Given that they were already holding AIG cash and securities (a point Brian seems unable to comprehend) and also given that they would have gone to parties other than AIG to collect on the CDS, the notion of secured versus unsecured debts within the venue of BK becomes moot.[/quote]
I’m not convinced there wasn’t any counterparty risk. Collecting on the CDSs would still have been GS claims against other creditors, not AIG. (Very possible that would cause those issuers to go bankrupt.) And there is still the issue of their claims over and above the collateral they held. I’ve seen nothing to indicate that everything in excess of that collateral would have been anything other than an unsecured debt.
Participant[quote=Allan from Fallbrook]So, in terms of counterparty risk between AIG and Goldman, I think its safe to say that there wasn’t any and I think we can also dispel the notion that Goldman would have gone hat in hand along with the other creditors had AIG gone boom. Given that they were already holding AIG cash and securities (a point Brian seems unable to comprehend) and also given that they would have gone to parties other than AIG to collect on the CDS, the notion of secured versus unsecured debts within the venue of BK becomes moot.[/quote]
I’m not convinced there wasn’t any counterparty risk. Collecting on the CDSs would still have been GS claims against other creditors, not AIG. (Very possible that would cause those issuers to go bankrupt.) And there is still the issue of their claims over and above the collateral they held. I’ve seen nothing to indicate that everything in excess of that collateral would have been anything other than an unsecured debt.
Participant[quote=Allan from Fallbrook]
Again, the key point is counterparty risk and the fact is that Goldman had no such risk with AIG. Using the conventional notion of a BK “clawback” is totally incorrect and completely misses the point and creates a risk where there was none. Thus my use of the term “gibberish”, which I reserve for people who don’t know what they’re talking about.[/quote]I don’t know the precise details of AIG’s debt to GS. I’ve seen enough references to counterparty debt being involved to dismiss it as a total non-issue, though the quantity is certainly unknown. As an example both verifying some of what you say and conflicting with some of it…
A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG . Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.
(note also the conflict as to the amount of the collateral)
Another problem, as eluded to yesterday, is that the current fraud charges against GS may directly affect what the value of the GS claims against AIG should have been. If there was fraud with regards to GS and it’s investors, that fraud could conceivably extend to it’s purchase of insurance products from AIG. The “protection on various toxic assets” referred to above, despite your claim otherwise, is close enough to insurance to be insurance. If X happens, we pay you Y. In either case, it’s a contractual obligation to pay upon the occurence of specified events. If any of it was related to the same assets, then collecting on the hedge could lead to civil fraud charges by AIG.
Having spent way too many years working in the bankruptcy courts, it is something I’m familiar with. There is secured debt. There is unsecured debt. And all kinds of levels, security, and collateral for each. All debt has to fall into one of those categories. Other than the collateral they held, I don’t see how any of it would be anything but unsecured debt.
Participant[quote=Allan from Fallbrook]
Again, the key point is counterparty risk and the fact is that Goldman had no such risk with AIG. Using the conventional notion of a BK “clawback” is totally incorrect and completely misses the point and creates a risk where there was none. Thus my use of the term “gibberish”, which I reserve for people who don’t know what they’re talking about.[/quote]I don’t know the precise details of AIG’s debt to GS. I’ve seen enough references to counterparty debt being involved to dismiss it as a total non-issue, though the quantity is certainly unknown. As an example both verifying some of what you say and conflicting with some of it…
A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG . Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.
(note also the conflict as to the amount of the collateral)
Another problem, as eluded to yesterday, is that the current fraud charges against GS may directly affect what the value of the GS claims against AIG should have been. If there was fraud with regards to GS and it’s investors, that fraud could conceivably extend to it’s purchase of insurance products from AIG. The “protection on various toxic assets” referred to above, despite your claim otherwise, is close enough to insurance to be insurance. If X happens, we pay you Y. In either case, it’s a contractual obligation to pay upon the occurence of specified events. If any of it was related to the same assets, then collecting on the hedge could lead to civil fraud charges by AIG.
Having spent way too many years working in the bankruptcy courts, it is something I’m familiar with. There is secured debt. There is unsecured debt. And all kinds of levels, security, and collateral for each. All debt has to fall into one of those categories. Other than the collateral they held, I don’t see how any of it would be anything but unsecured debt.
Participant[quote=Allan from Fallbrook]
Again, the key point is counterparty risk and the fact is that Goldman had no such risk with AIG. Using the conventional notion of a BK “clawback” is totally incorrect and completely misses the point and creates a risk where there was none. Thus my use of the term “gibberish”, which I reserve for people who don’t know what they’re talking about.[/quote]I don’t know the precise details of AIG’s debt to GS. I’ve seen enough references to counterparty debt being involved to dismiss it as a total non-issue, though the quantity is certainly unknown. As an example both verifying some of what you say and conflicting with some of it…
A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG . Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.
(note also the conflict as to the amount of the collateral)
Another problem, as eluded to yesterday, is that the current fraud charges against GS may directly affect what the value of the GS claims against AIG should have been. If there was fraud with regards to GS and it’s investors, that fraud could conceivably extend to it’s purchase of insurance products from AIG. The “protection on various toxic assets” referred to above, despite your claim otherwise, is close enough to insurance to be insurance. If X happens, we pay you Y. In either case, it’s a contractual obligation to pay upon the occurence of specified events. If any of it was related to the same assets, then collecting on the hedge could lead to civil fraud charges by AIG.
Having spent way too many years working in the bankruptcy courts, it is something I’m familiar with. There is secured debt. There is unsecured debt. And all kinds of levels, security, and collateral for each. All debt has to fall into one of those categories. Other than the collateral they held, I don’t see how any of it would be anything but unsecured debt.
Participant[quote=Allan from Fallbrook]
Again, the key point is counterparty risk and the fact is that Goldman had no such risk with AIG. Using the conventional notion of a BK “clawback” is totally incorrect and completely misses the point and creates a risk where there was none. Thus my use of the term “gibberish”, which I reserve for people who don’t know what they’re talking about.[/quote]I don’t know the precise details of AIG’s debt to GS. I’ve seen enough references to counterparty debt being involved to dismiss it as a total non-issue, though the quantity is certainly unknown. As an example both verifying some of what you say and conflicting with some of it…
A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG . Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.
(note also the conflict as to the amount of the collateral)
Another problem, as eluded to yesterday, is that the current fraud charges against GS may directly affect what the value of the GS claims against AIG should have been. If there was fraud with regards to GS and it’s investors, that fraud could conceivably extend to it’s purchase of insurance products from AIG. The “protection on various toxic assets” referred to above, despite your claim otherwise, is close enough to insurance to be insurance. If X happens, we pay you Y. In either case, it’s a contractual obligation to pay upon the occurence of specified events. If any of it was related to the same assets, then collecting on the hedge could lead to civil fraud charges by AIG.
Having spent way too many years working in the bankruptcy courts, it is something I’m familiar with. There is secured debt. There is unsecured debt. And all kinds of levels, security, and collateral for each. All debt has to fall into one of those categories. Other than the collateral they held, I don’t see how any of it would be anything but unsecured debt.
Participant[quote=Allan from Fallbrook]
Again, the key point is counterparty risk and the fact is that Goldman had no such risk with AIG. Using the conventional notion of a BK “clawback” is totally incorrect and completely misses the point and creates a risk where there was none. Thus my use of the term “gibberish”, which I reserve for people who don’t know what they’re talking about.[/quote]I don’t know the precise details of AIG’s debt to GS. I’ve seen enough references to counterparty debt being involved to dismiss it as a total non-issue, though the quantity is certainly unknown. As an example both verifying some of what you say and conflicting with some of it…
A brief recap of the Goldman-AIG story is necessary. Goldman has revealed that it had $20 billion in trades on with AIG, where it had bought protection on various toxic assets from AIG . Goldman believed this translated into $10 billion of risk to AIG, meaning that the mortgage assets might be worth as little as 50%. Against this $10 billion of AIG risk, Goldman had $7.5 billion in collateral from AIG. The rest of the risk, $2.5 billion, was hedged with Credit Default Swaps, whereby Goldman bought protection on AIG from a variety of highly rated banks. Goldman felt it was well-hedged, thus the repeated claim that it was not at risk if AIG defaulted.
(note also the conflict as to the amount of the collateral)
Another problem, as eluded to yesterday, is that the current fraud charges against GS may directly affect what the value of the GS claims against AIG should have been. If there was fraud with regards to GS and it’s investors, that fraud could conceivably extend to it’s purchase of insurance products from AIG. The “protection on various toxic assets” referred to above, despite your claim otherwise, is close enough to insurance to be insurance. If X happens, we pay you Y. In either case, it’s a contractual obligation to pay upon the occurence of specified events. If any of it was related to the same assets, then collecting on the hedge could lead to civil fraud charges by AIG.
Having spent way too many years working in the bankruptcy courts, it is something I’m familiar with. There is secured debt. There is unsecured debt. And all kinds of levels, security, and collateral for each. All debt has to fall into one of those categories. Other than the collateral they held, I don’t see how any of it would be anything but unsecured debt.
Participant[quote=Allan from Fallbrook]
Pat: Utter gibberish and utterly divorced from reality.
Goldman had NO counterparty risk with AIG at all. Their position was nearly fully collateralized through cash and securities and the balance was covered by insurance (in the form of CDS).
You might want to assemble the actual facts before weighing in on a topic.[/quote]
I don’t think gibberish. I’ll take your word that some of it was collateralized, though some reports I’ve found indicate that it was much less than the $11,000,0000 that you suggested.
On the insurance part, AIG is an insurance company. CDSs ARE insurance. If they go bankrupt, insurance claims against them are general credit obligations. Those contracts would have been examined and probably never sorted out. Hence my claim yesterday that it would last 10 years.
Participant[quote=Allan from Fallbrook]
Pat: Utter gibberish and utterly divorced from reality.
Goldman had NO counterparty risk with AIG at all. Their position was nearly fully collateralized through cash and securities and the balance was covered by insurance (in the form of CDS).
You might want to assemble the actual facts before weighing in on a topic.[/quote]
I don’t think gibberish. I’ll take your word that some of it was collateralized, though some reports I’ve found indicate that it was much less than the $11,000,0000 that you suggested.
On the insurance part, AIG is an insurance company. CDSs ARE insurance. If they go bankrupt, insurance claims against them are general credit obligations. Those contracts would have been examined and probably never sorted out. Hence my claim yesterday that it would last 10 years.
Participant[quote=Allan from Fallbrook]
Pat: Utter gibberish and utterly divorced from reality.
Goldman had NO counterparty risk with AIG at all. Their position was nearly fully collateralized through cash and securities and the balance was covered by insurance (in the form of CDS).
You might want to assemble the actual facts before weighing in on a topic.[/quote]
I don’t think gibberish. I’ll take your word that some of it was collateralized, though some reports I’ve found indicate that it was much less than the $11,000,0000 that you suggested.
On the insurance part, AIG is an insurance company. CDSs ARE insurance. If they go bankrupt, insurance claims against them are general credit obligations. Those contracts would have been examined and probably never sorted out. Hence my claim yesterday that it would last 10 years.
Participant[quote=Allan from Fallbrook]
Pat: Utter gibberish and utterly divorced from reality.
Goldman had NO counterparty risk with AIG at all. Their position was nearly fully collateralized through cash and securities and the balance was covered by insurance (in the form of CDS).
You might want to assemble the actual facts before weighing in on a topic.[/quote]
I don’t think gibberish. I’ll take your word that some of it was collateralized, though some reports I’ve found indicate that it was much less than the $11,000,0000 that you suggested.
On the insurance part, AIG is an insurance company. CDSs ARE insurance. If they go bankrupt, insurance claims against them are general credit obligations. Those contracts would have been examined and probably never sorted out. Hence my claim yesterday that it would last 10 years.
Participant[quote=Allan from Fallbrook]
Pat: Utter gibberish and utterly divorced from reality.
Goldman had NO counterparty risk with AIG at all. Their position was nearly fully collateralized through cash and securities and the balance was covered by insurance (in the form of CDS).
You might want to assemble the actual facts before weighing in on a topic.[/quote]
I don’t think gibberish. I’ll take your word that some of it was collateralized, though some reports I’ve found indicate that it was much less than the $11,000,0000 that you suggested.
On the insurance part, AIG is an insurance company. CDSs ARE insurance. If they go bankrupt, insurance claims against them are general credit obligations. Those contracts would have been examined and probably never sorted out. Hence my claim yesterday that it would last 10 years.
Participant[quote=Allan from Fallbrook]SK: Except, in this instance, that is not how collateral works. In this instance, Goldman was well within their rights to step in and seize the collateral and not have to wait in line. [/quote]
Can you give a quick explanation on this? Thinking it through, it makes sense that the collateral wouldn’t be the impaired assets, but I don’t understand how counter-parties to the contract would have anything other than an uncollateralized obligation. What assets exactly would they be asserting their ownership? They certainly didn’t have the right to sieze the TARP money.
-
AuthorPosts
