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Everything’s Golden at Goldman Sachs

24 October, 2009

I was reading this morning about Goldman Sachs’ (GS) board considering buying AIG in late June, 2008…so the firm could use AIG’s premium float for capital (rather than becoming a bank holding company and using deposits to fund trades or as collatoral for leveraged trading).  Strangely, GS’s board didn’t realize that GS was questioning the “mark to market” valuations that AIG was making on its swaps.  For all I have read about GS doing so well, I am surprised that its board would have even considered buying AIG in the summer of 2008 as AIG had revised its Nov and Dec 07 losses from $1b to $5b.  GS and AIG had the same public accountant (Price), which GS was using to get AIG to down-value the value of its assets.  Perhaps GS came out so well not so much due to its “talent” in its business, but on account of its (strategic?) alums in government (esp. at Treasury).  Goldman was, after all, trading on its own capital and was highly leveraged, though it did avoid getting involved in the sub-primes.  So maybe a bit of talent as well as political connections…though not as much talent as one would suppose prime facie.

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