GM Prepares IPO While UAW Jobs Continue Exodus To Red China

GM posts $1.33 billion profit, a sign of strength?

General Motors Co. said Thursday it made $1.33 billion in the second quarter, a sign it’s getting healthier as it prepares to sell stock to the public.

It was the second straight quarterly profit for GM, which made $865 million in the first quarter.

CEO Ed Whitacre said last week that the company is eager to sell shares in an initial public offering so it can end its dependence on the government and pay off $43.3 billion in bailout funds that were converted into a majority stake in the company. [The GM finance arm, previously known as GMAC, now rebranded as ALLY Bank, owes $17 billion in bailout funds for a total of $60 billion owed to U.S. taxpayers – the Federal Governments “official” TARP website reports a total of $57.6 billion owed, “with the U.S. government investing a total of US$57.6 billion under the Troubled Asset Relief Program]

Whitacre said the company plans to file paperwork in the near future for the IPO. But it’s unclear if the recent record of profits – $2.2 billion for the first half of 2010 – is enough to convince investors. GM lost $88 billion in the five years before it filed for bankruptcy protection last June. [GM lost far more than $88 billion – GM wrote off 100’s of billions in debt in Bankruptcy – at present GM has $40 billion in unfunded pension and medical liabilities] 

GM’s second-quarter revenue totaled $33.2 billion, up 5.3 percent from the first quarter on growing sales in every region except Europe. In the U.S., GM saw strong sales of new and redesigned models like the Chevrolet Equinox wagon and Buick LaCrosse sedan.

GM said it earned $2.55 per share for the quarter. [Per share of what? GM has no stock – this article is about the upcoming IPO – Initial Public Offering – remember – projecting per share value when there are no outstandng shares – the writer should be fired]  GM didn’t report second-quarter results last year because it spent part of the quarter in bankruptcy protection, but on Thursday, GM said it lost $12.9 billion in the second quarter of 2009, or $21.12 per share.

So far, GM’s results are a reversal of fortune from 2009, when it lost $4.3 billion from July 10, the day it exited bankruptcy court, through Dec. 31. Before the first-quarter results, GM hadn’t reported a profit since the second quarter of 2007.

GM said it ended the quarter with $32.5 billion in cash, down from $36 billion in the first quarter.

Read the full article here: http://www.deseretnews.com/article/700056092/GM-posts-133-billion-profit-a-sign-of-strength.html

McAuleys World Commments:

I’ve never read more blatant BS in my life… GM’s entire “alleged” profit came from its increased sales in Communist China… GM sold 1.8 million cars in 2009 in Red China compared to 1.9 million cars in the US. http://www.huffingtonpost.com/2010/01/04/gm-china-sales-up-67-perc_n_410252.html  GM’s sales increase in Red China was nearly an 70% increase. http://www.businessweek.com/news/2010-07-02/gm-s-first-half-china-sales-surge-past-the-u-s-.html

GM hasn’t brought its overdue payments to the UAW Health and Welfare Fund current since bankruptcy … (The UAW Welfare Fund owns 12% of GM)… GM has not kept current with it’s obligations to fund its retiree pensions either – GM’s underfunded pension and medical payments have grown from $20 billion to $40 billion since bankruptcy …. a $20 billion dollar increase in just over 1 year … despite the rapid growth in Red China.

Meanwhile GM is moving operations out of the US.  This from July, 19, 2010, “Reflecting China’s importance to GM, the company has relocated its international headquarters to Shanghai, where it has a joint venture with Chinese automaker SAIC.”  http://news.yahoo.com/s/afp/20100719/bs_afp/chinausautoresearchgm . http://www.manilatimes.net/index.php/motoring/21874-change-china-and-chevrolet

Meanwhile GM also announced the building of a 3rd “Advance Research Facility” in Communist China at an expense of $250 million dollars … this 3rd research facility in Red China will open in 2011. GM has moved Advanced RD to China also. http://www.thetruthaboutcars.com/gm-moves-advanced-rd-to-china/

http://news.yahoo.com/s/afp/20100719/bs_afp/chinausautoresearchgm

The first “Research Facility” was built at a cost of 2.5 billion dollars and resulted in the transfer of at least 2500 high paying RD jobs to Red China. (September 16, 2008 – GM Working on Chinese Tech Center). You remember September 2008 – two months later GM was in Washington with their hand out getting the $60 billion dollar bailout – the first $2.5 billion of the bailout went to build the Red China Tech Center. http://www.chinacartimes.com/2008/09/16/gm-working-on-chinese-tech-center/

While GM received $60 billion from American taxpayers – GM has invested $30 billion in its Red China operations. http://www.chinadaily.com.cn/english/doc/2004-06/08/content_337473.htm , http://www.associatedcontent.com/article/299829/uaw_furious_over_new_gm_plant_in_china.html , http://www.state.gov/e/eeb/ifd/2008/103668.htm ,

The Government of Communist China has also announced a joint venture with GM to build and sell cars in India. (July 2010) – GM’s initial cost $1 billion… http://www.huffingtonpost.com/2010/01/04/gm-china-sales-up-67-perc_n_410252.html , I reference this cite below.

GM is projecting that it will manufacture and sell more cars in Red China (over 2 million) than it will manufacture and sell in the US in 2010. http://www.thedetroitbureau.com/2010/07/gm-china-sales-surpass-u-s-for-first-time/

UPDATE: Yesterday I posted a comment on the net and stated that GM is a failed business model and that “fudging” the US numbers can’t hide that fact. In the post I mistakenly credited GM with having 70,000 American employees and 180,000 American retirees to support with the 70,000 active employees. As it turns out, GM doesn’t have 70K US employees – not 60K, not 50K, GM now employs approximately 48,000 US employees and must support 180,000 retirees on the production of 48,000 US workers. 3.75 US retirees for every active US worker…

GM hasn’t paid a penny of its bailout debt back yet…

However, in January 2010, GM borrowed an additional $13.5 billion to build 3 new assembly plants in Thailand … http://www.bangkokpost.com/breakingnews/166905/thai-gm-signs-b13-5bn-loan-deal 

The Obama Administration has “run” GM for 2 years now and under the Obama Administration GM’s investment and the transfer of assets and production capabilities to Red China has escalated …

The UAW membership had better wake up and smell the coffee – the Membership needs new leadership – NOW!

See this article by liberal Clinton Administration Advisor and former Secretary of Labor Robert Reich, where he claims that GM now employs 52,000 American Workers and 39,000 in Red China. (My sources indicate 48,000 in the US and  46,000 in China – which means the Chinese would be “more productive” than their Americans counterparts as they are making more vehilces with fewer workers – if the American work force is more productive than the Chinese then GM must be employing more workers in China as they manufacture and sell more vehicles in Red China than in the US.  If Reich’s numbers are correct, GM’s Chinese workers are making 30% more autos with a 25% smaller work force. For those who are interested, GM employed, roughly 470,000 U.S. workers in 1970. http://www.laprogressive.com/economic-equality/decoupling-corporate-profits/ 

Reich specifically addressed the bogus claim frequently made by the “deniers” that US Taxpayer money was being spent on Chinese expansion when he noted the following, “You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember? GM officials say no American taxpayer money is being used to expand in China. But money is fungible. Because of our generosity, GM can now use the dollars it doesn’t have to spend in the United States meeting its American payrolls and repaying its creditors, for new investments in China.” Reich went on to note, “So with all this money and profit, they’ll start hiring again, right? Wrong … First, lots of their profits are coming from their overseas operations. So that’s where they’re investing and expanding production…” http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/31/INV91EKOIV.DTL#ixzz0wQeWBPHP

“First-quarter global vehicle sales rose 23 percent to nearly 2 million units, led by China where sales doubled. U.S. sales were up 17 percent from a year earlier.” http://www.reuters.com/article/idUSTRE64G3LA20100517
Remember when Ed Whitacre said this on January 11, 2010, “GM CEO says taxpayers will profit, as China becomes world’s largest auto market”. Specifically Whitacre said, “GM Chairman and CEO Ed Whitacre made a bold statement today, telling reporters at the Detroit auto show that he expected American taxpayers to profit from the $6.7 billion emergency Treasury loans.” http://business2press.com/2010/01/11/gm-ceo-says-taxpayers-will-profit-china-becomes-worlds-largest-auto-market/
Good ole Ed, never did acknowledge the second and third loans or the full $60 billion dollar debt GM owed to the U.S. Taxpayer. Strange thing though, it the China business was such a good deal for the Taxpayer, why did Ed give up control of GM China to the Communist Chinese Government two months later? He actually paid $985 miilion dollars of U.S. Taxpayer cash to have the Red Chinese take over majority control  of GM’s top money maker… what a negotiator … (until that day GM China was a 50/50 joint venture)   http://online.wsj.com/article/SB10001424052748704007804574575573918638980.html 

 
March 08, 2010
“The year of 2009 was very successful for GM in the China market. We forecast further growth in 2010 as we are confident in the Chinese government’s active moves to support the local economy in such a global slowdown,” said Tim Lee, president of Shanghai-based GM International Operations, which directs GM’s operations in all markets outside North America.
He continued: “GM will continue to invest business here, not only bringing more products but also adding capacity for every joint venture.”

In addition to expanding its capacity through adding production shifts and developing its existing assembly lines to meet robust market demand, Lee said that GM was still considering building a new plant in China in the near future to accommodate strong growth in the world’s largest auto market.

“We have enough capacity to build the cars we need to sell this year and we need to continue to look for ways of increasing our capacity. That will mean we will have to add a new plant some time in the near future,” said Kevin Wale, president and managing director of GM China.

For the first two months of 2010, GM’s sales in China rose 73.6 percent from a year earlier to a record 393,498 units.

In December, GM announced a plan to cede control of its key Chinese joint venture Shanghai GM Corp to local partner SAIC. In return for the move, GM will partner SAIC to push into India and other emerging markets. [Cede control to the Chinese Communist Government – and also pony up $1 billion in cash – GM had to kick in $1 billion into the joint venture in India – I’ve cited an article above in the Huffington Post for confirmation]

According to the plan, SAIC would pay about $85 million for the added 1 percent share, boosting its total stake in Shanghai GM to 51 percent, enabling it to consolidate the venture’s accounts on to its balance sheet. [Note: this is the first time in the history of the world that any Company ceded control of its largest money maker for the purpose of letting someone else do the books – as the US taxpayer owned 61% of GM why did the Obama Administration allow this to happen? GM actually paid the Chinese Communist Government to take over majority control of GM’s top money maker – do the math – GM received $85 million (85,000.000) for the 1%  but had to pony up $1 billion ($1,000,000,000) for the joint venture, a net payout by GM of $915 million dollars (915,000,000)]

and this ….

But GM’s decision to cede control of Shanghai General Motors to SAIC left analysts puzzled. GM has had huge success in China in recent years and has worked hand in hand with SAIC to achieve it.

“(With) General Motors and SAIC, everything was done jointly, all decision-making was split right down the middle,” said Tim Dunne, director of Asia-Pacific market intelligence for JD Power & Associates. “Is there something that we’re not seeing? I don’t know, but it’s not typical … to just cede management control over the budget and who runs the company.”

The deal comes on the heels of GM’s board and CEO Fritz Henderson parting ways Tuesday, the board upset that the automaker’s turnaround wasn’t moving more swiftly and Henderson frustrated with second-guessing, two people close to the former CEO said. Board Chairman Ed Whitacre Jr. has taken over as CEO while a global search is conducted.

http://blog.taragana.com/business/2009/12/04/gm-chinese-partner-to-join-forces-in-india-as-us-automaker-reduces-stake-in-china-venture-6789/

GM Fudges Numbers In Advance of IPO – UAW Jobs Continue Exodus To Red China

GM posts $1.33 billion profit, a sign of strength?

General Motors Co. said Thursday it made $1.33 billion in the second quarter, a sign it’s getting healthier as it prepares to sell stock to the public.

It was the second straight quarterly profit for GM, which made $865 million in the first quarter.

CEO Ed Whitacre said last week that the company is eager to sell shares in an initial public offering so it can end its dependence on the government and pay off $43.3 billion in bailout funds that were converted into a majority stake in the company. [The GM finance arm, previously known as GMAC, now rebranded as ALLY Bank, owes $17 billion in bailout funds for a total of $60 billion owed to U.S. taxpayers – the Federal Governments “official” TARP website reports a total of $57.6 billion owed,with the U.S. government investing a total of US$57.6 billion under the Troubled Asset Relief Program]

Whitacre said the company plans to file paperwork in the near future for the IPO. But it’s unclear if the recent record of profits – $2.2 billion for the first half of 2010 – is enough to convince investors. GM lost $88 billion in the five years before it filed for bankruptcy protection last June. [GM lost far more than $88 billion – GM wrote off 100’s of billions in debt in Bankruptcy – at present GM has $40 billion in unfunded pension and medical liabilities] 

GM’s second-quarter revenue totaled $33.2 billion, up 5.3 percent from the first quarter on growing sales in every region except Europe. In the U.S., GM saw strong sales of new and redesigned models like the Chevrolet Equinox wagon and Buick LaCrosse sedan.

GM said it earned $2.55 per share for the quarter. [Per share of what? GM has no stock – this article is about the upcoming IPO – Initial Public Offering – remember – projecting per share value when there are no outstandng shares – the writer should be fired]  GM didn’t report second-quarter results last year because it spent part of the quarter in bankruptcy protection, but on Thursday, GM said it lost $12.9 billion in the second quarter of 2009, or $21.12 per share.

So far, GM’s results are a reversal of fortune from 2009, when it lost $4.3 billion from July 10, the day it exited bankruptcy court, through Dec. 31. Before the first-quarter results, GM hadn’t reported a profit since the second quarter of 2007.

GM said it ended the quarter with $32.5 billion in cash, down from $36 billion in the first quarter.

Read the full article here: http://www.deseretnews.com/article/700056092/GM-posts-133-billion-profit-a-sign-of-strength.html

McAuleys World Commments:

I’ve never read more blatant BS in my life… GM’s entire “alleged” profit came from its increased sales in Communist China… GM sold 1.8 million cars in 2009 in Red China compared to 1.9 million cars in the US. http://www.huffingtonpost.com/2010/01/04/gm-china-sales-up-67-perc_n_410252.html  GM’s sales increase in Red China was nearly an 70% increase. http://www.businessweek.com/news/2010-07-02/gm-s-first-half-china-sales-surge-past-the-u-s-.html

GM hasn’t brought its overdue payments to the UAW Health and Welfare Fund current since bankruptcy … (The UAW Welfare Fund owns 12% of GM)… GM has not kept current with it’s obligations to fund its retiree pensions either – GM’s underfunded pension and medical payments have grown from $20 billion to $40 billion since bankruptcy …. a $20 billion dollar increase in just over 1 year … despite the rapid growth in Red China.

Meanwhile GM is moving operations out of the US.  This from July, 19, 2010, “Reflecting China’s importance to GM, the company has relocated its international headquarters to Shanghai, where it has a joint venture with Chinese automaker SAIC.”  http://news.yahoo.com/s/afp/20100719/bs_afp/chinausautoresearchgm . http://www.manilatimes.net/index.php/motoring/21874-change-china-and-chevrolet

Meanwhile GM also announced the building of a 3rd “Advance Research Facility” in Communist China at an expense of $250 million dollars … this 3rd research facility in Red China will open in 2011. GM has moved Advanced RD to China also. http://www.thetruthaboutcars.com/gm-moves-advanced-rd-to-china/

http://news.yahoo.com/s/afp/20100719/bs_afp/chinausautoresearchgm

The first “Research Facility” was built at a cost of 2.5 billion dollars and resulted in the transfer of at least 2500 high paying RD jobs to Red China. (September 16, 2008 – GM Working on Chinese Tech Center). You remember September 2008 – two months later GM was in Washington with their hand out getting the $60 billion dollar bailout – the first $2.5 billion of the bailout went to build the Red China Tech Center. http://www.chinacartimes.com/2008/09/16/gm-working-on-chinese-tech-center/

While GM received $60 billion from American taxpayers – GM has invested $30 billion in its Red China operations. http://www.chinadaily.com.cn/english/doc/2004-06/08/content_337473.htm , http://www.associatedcontent.com/article/299829/uaw_furious_over_new_gm_plant_in_china.html , http://www.state.gov/e/eeb/ifd/2008/103668.htm ,

The Government of Communist China has also announced a joint venture with GM to build and sell cars in India. (July 2010) – GM’s initial cost $1 billion… http://www.huffingtonpost.com/2010/01/04/gm-china-sales-up-67-perc_n_410252.html , I reference this cite below.

GM is projecting that it will manufacture and sell more cars in Red China (over 2 million) than it will manufacture and sell in the US in 2010. http://www.thedetroitbureau.com/2010/07/gm-china-sales-surpass-u-s-for-first-time/

UPDATE: Yesterday I posted a comment on the net and stated that GM is a failed business model and that “fudging” the US numbers can’t hide that fact. In the post I mistakenly credited GM with having 70,000 American employees and 180,000 American retirees to support with the 70,000 active employees. As it turns out, GM doesn’t have 70K US employees – not 60K, not 50K, GM now employs approximately 48,000 US employees and must support 180,000 retirees on the production of 48,000 US workers. 3.75 US retirees for every active US worker…

GM hasn’t paid a penny of its bailout debt back yet…

However, in January 2010, GM borrowed an additional $13.5 billion to build 3 new assembly plants in Thailand … http://www.bangkokpost.com/breakingnews/166905/thai-gm-signs-b13-5bn-loan-deal 

The Obama Administration has “run” GM for 2 years now and under the Obama Administration GM’s investment and the transfer of assets and production capabilities to Red China has escalated …

The UAW membership had better wake up and smell the coffee – the Membership needs new leadership – NOW!

See this article by liberal Clinton Administration Advisor and former Secretary of Labor Robert Reich, where he claims that GM now employs 52,000 American Workers and 39,000 in Red China. (My sources indicate 48,000 in the US and  46,000 in China – which means the Chinese would be “more productive” than their Americans counterparts as they are making more vehilces with fewer workers – if the American work force is more productive than the Chinese then GM must be employing more workers in China as they manufacture and sell more vehicles in Red China than in the US.  If Reich’s numbers are correct, GM’s Chinese workers are making 30% more autos with a 25% smaller work force. For those who are interested, GM employed, roughly 470,000 U.S. workers in 1970. http://www.laprogressive.com/economic-equality/decoupling-corporate-profits/ 

Reich specifically addressed the bogus claim frequently made by the “deniers” that US Taxpayer money was being spent on Chinese expansion when he noted the following, “You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember? GM officials say no American taxpayer money is being used to expand in China. But money is fungible. Because of our generosity, GM can now use the dollars it doesn’t have to spend in the United States meeting its American payrolls and repaying its creditors, for new investments in China.” Reich went on to note, “So with all this money and profit, they’ll start hiring again, right? Wrong … First, lots of their profits are coming from their overseas operations. So that’s where they’re investing and expanding production…” http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/07/31/INV91EKOIV.DTL#ixzz0wQeWBPHP

“First-quarter global vehicle sales rose 23 percent to nearly 2 million units, led by China where sales doubled. U.S. sales were up 17 percent from a year earlier.” http://www.reuters.com/article/idUSTRE64G3LA20100517
Remember when Ed Whitacre said this on January 11, 2010, “GM CEO says taxpayers will profit, as China becomes world’s largest auto market”. Specifically Whitacre said, “GM Chairman and CEO Ed Whitacre made a bold statement today, telling reporters at the Detroit auto show that he expected American taxpayers to profit from the $6.7 billion emergency Treasury loans.” http://business2press.com/2010/01/11/gm-ceo-says-taxpayers-will-profit-china-becomes-worlds-largest-auto-market/
Good ole Ed, never did acknowledge the second and third loans or the full $60 billion dollar debt GM owed to the U.S. Taxpayer. Strange thing though, it the China business was such a good deal for the Taxpayer, why did Ed give up control of GM China to the Communist Chinese Government two months later? He actually paid $985 miilion dollars of U.S. Taxpayer cash to have the Red Chinese take over majority control  of GM’s top money maker… what a negotiator … (until that day GM China was a 50/50 joint venture)    
 
March 08, 2010
“The year of 2009 was very successful for GM in the China market. We forecast further growth in 2010 as we are confident in the Chinese government’s active moves to support the local economy in such a global slowdown,” said Tim Lee, president of Shanghai-based GM International Operations, which directs GM’s operations in all markets outside North America.
He continued: “GM will continue to invest business here, not only bringing more products but also adding capacity for every joint venture.”

In addition to expanding its capacity through adding production shifts and developing its existing assembly lines to meet robust market demand, Lee said that GM was still considering building a new plant in China in the near future to accommodate strong growth in the world’s largest auto market.

“We have enough capacity to build the cars we need to sell this year and we need to continue to look for ways of increasing our capacity. That will mean we will have to add a new plant some time in the near future,” said Kevin Wale, president and managing director of GM China.

For the first two months of 2010, GM’s sales in China rose 73.6 percent from a year earlier to a record 393,498 units.

In December, GM announced a plan to cede control of its key Chinese joint venture Shanghai GM Corp to local partner SAIC. In return for the move, GM will partner SAIC to push into India and other emerging markets. [Cede control to the Chinese Communist Government – and also pony up $1 billion in cash – GM had to kick in $1 billion into the joint venture in India – I’ve cited an article above in the Huffington Post for confirmation]

According to the plan, SAIC would pay about $85 million for the added 1 percent share, boosting its total stake in Shanghai GM to 51 percent, enabling it to consolidate the venture’s accounts on to its balance sheet. [Note: this is the first time in the history of the world that any Company ceded control of its largest money maker for the purpose of letting someone else do the books – as the US taxpayer owned 61% of GM why did the Obama Administration allow this to happen? GM actually paid the Chinese Communist Government to take over majority control of GM’s top money maker – do the math – GM received $85 million (85,000.000) for the 1%  but had to pony up $1 billion ($1,000,000,000) for the joint venture, a net payout by GM of $915 million dollars (915,000,000)] 

G.M. Uses Taxpayer Bailout Funds To Build New Mexican Auto Plant

GM to Build New Vehicle at Plant in Mexico

Will invest $500 million at plant in Ramos Arispe

General Motors will invest $500 million to produce a new vehicle and eight-cylinder engines in a plant in northeastern Mexico, a company spokesman said on August 4.

The decision was announced at a meeting on August 3 between GM management and Mexican officials, the spokesman said, without giving details of the new vehicle.

The investment in the GM plant in Ramos Arispe, Coahuila state, would generate 390 jobs, he added.

General Motors has been present in Mexico since 1935, where it has some 11,000 workers, four factories, an engineering center and a test circuit.

Copyright Agence France-Presse, 2010

http://www.industryweek.com/articles/gm_to_build_new_vehicle__at_plant_in_mexico_22462.aspx

GM’s investments in Mexico have been dwarfed by GM’s investment in Red China … GM has redirected “GM Bailout cash” into expanding production and facilities in Red China – rather then refurbishing American auto plants – GM Prepares IPO While UAW Jobs Continue Exodus To Red China

Goldman Sachs Details Where Bailout Cash Went: $4.3 Billion to European Banks

International banks and financial companies were indirect beneficiaries of the government’s 2008 bailout of American International Group Inc., according to newly released documents.

The documents released by Sen. Chuck Grassley, R-Iowa, contain a list of the 27 banks, hedge funds and financial companies that received 3). $4.3 billion from Goldman Sachs Group Inc.. The money was to reimburse them for losses on investments called credit default swaps that plunged in value during the financial crisis.

Senator Chuck Grassley

The money trail actually began with AIG, which sold the swaps to Goldman. The big investment bank in turn sold them to its customers, including the international banks and financial companies. When AIG received a bailout worth $182.5 billion, it reimbursed Goldman and other banks, which then repaid their customers.

Credit default swaps are essentially contracts that insure against the default of bonds and corporate debt. Sellers of swaps, such as AIG, are obligated to repay customers if the value of the underlying bonds or debt declines.

Much of the federal rescue money for AIG was used to pay its obligations to its Wall Street trading partners on credit default swaps. 1).The biggest beneficiary of the AIG money was Goldman Sachs, who received $12.9 billion.

According to Grassley, the documents show that the five banks or companies ultimately receiving the largest amount of taxpayer money were DZ Bank AG in Germany, which received $1.18 billion; Banco Santander Central Hispano SA of Spain, which received $484 million; Ireland’s Zulma Finance PLC, which received $416 million; Infinity Finance PLC in Britain, which received $277 million; and Britain’s Sierra Finance PLC, which received $223 million.

Another $173 million went to Hongkong & Shanghai Banking Corp., which has HSBC operations throughout the U.S.

Goldman had previously disclosed that it had made payments to its customers, but did not say who the recipients were. It gave the information to Grassley after he threatened to subpoena the bank. Grassley released the documents showing the payments late Friday.

The payments have been controversial because of concerns that the banks should have absorbed more losses on their investments rather than be reimbursed with taxpayer money. Last month, a watchdog panel raised new doubts over the likelihood taxpayers will be fully repaid for the government’s bailout of AIG.

Former Treasury Secretary Henry Paulson - Former Goldman Sachs Chairman & CEO

The government determined that a collapse of AIG would be systemically disastrous,” Goldman Sachs spokesman Lucas van Praag said. “And of course if a systemic problem had ensued, we along with every company in the world would likely have been affected.”

[Yes, and exactly how would have Goldman been affected? Read on …]

http://www.washingtonpost.com/wp-dyn/content/article/2010/07/24/AR2010072401702.html

Remember this story:

Goldman Sachs Made BILLIONS Shorting AIG, March 2009

Goldman Sachs (GS) reiterated its claim this morning that it wouldn’t have lost anything had AIG (AIG) been allowed to fail. Indeed, the bank says, it was fully hedged. Actually, it was far more than that. It was not just fully hedged — Goldman Sachs had positioned itself to profit big-time from the fall of AIG.

Zero Hedge runs the numbers:

In a nutshell – Goldman had bought billions in AIG CDS in the 2004 to 2006 timeframe. Whether this was predicated by their expectation that subprime would blow up, or their very early understanding just how bad things at AIG were, one will never know, especially not the SEC. However, one look at the CDS chart below shows what prevailing levels for AIG’s CDS was in that time frame. As one can see, AIG 5 yr CDS traded in a range of 4 bps to 52.50 bps between October 1, 2004 (only goes back so far) and December 31, 2006. Indicatively 5 yr CDS closed yesterday at a comparable running spread equivalent of 1,942 bps.

Purchasing $10 billion in CDS (roughly in line with what Viniar claims happened) at a hypothetical average price of 25 bps (and  realistically much less than that) and rolling that would imply that at today’s AIG 5 yr CDS price of 1,942 bps, 2). the company made roughly $4.7 billion in profit from shorting AIG alone!

http://www.businessinsider.com/goldman-sachs-made-billions-shorting-aig-2009-3#ixzz0uhk3rigy

 [So let’s review the numbers from above:

Observation 1). AIG makes its largest single payment to Goldman Sachs – $12.9 billion dollars, however,

Observation 2). Goldman has stated that they were fully hedged and would not have lost a penny had AIG failed, in fact, Goldman is reported above, to have made $4.7 billion “shorting” AIG CDS.

Observation 3). Goldman paid out a reported $4.3 billion to European partners who purchased AIG CDS and we, the U.S. Taxpayers, have no idea if Goldman’s partners “shorted” the AIG CDS … making a profit on the CDS investment by following Goldman’s example of “shorting”. It is entirely possible that, like Goldman, these “partners” never lost a dime on their CDS “investments” with AIG, but actually profited from them.

Question 1). Regardless if Goldman’s partners made a dime, where did the remainder of the money go. Goldman received 12.9 billion and then made 4.7 billion shorting the CDS for a “net income” of 17.6 billion. Goldman paid out $4.3 to its “partners” based on the documents obtained by Senator Grassley. 17.6 billion minus 4.3 billion leaves $13.3 billion unaccounted for … $13.3 billion. Was that amount simply a “gift” from U.S. taxpayers? You can dole out some hefty bonuses with $13.3 billion…

 and this story

 Wall St. Helped to Mask Debt Fueling Europe’s Crisis

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and

Former New York Reserve - Current Obama Tresury Secretary Tim Geithner

 undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.

Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.

Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.

The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.

Federal Reserve Chairman Ben Bernanke

A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.

While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.

“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.

Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.

“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.

Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.

Such derivatives, which are not openly documented or disclosed, add to the uncertainty over how deep the troubles go in Greece and which other governments might have used similar off-balance sheet accounting.

The tide of fear is now washing over other economically troubled countries on the periphery of Europe, making it more expensive for Italy, Spain and Portugal to borrow.

For all the benefits of uniting Europe with one currency, the birth of the euro came with an original sin: countries like Italy and Greece entered the monetary union with bigger deficits than the ones permitted under the treaty that created the currency. Rather than raise taxes or reduce spending, however, these governments artificially reduced their deficits with derivatives.

Derivatives do not have to be sinister. The 2001 transaction involved a type of derivative known as a swap. One such instrument, called an interest-rate swap, can help companies and countries cope with swings in their borrowing costs by exchanging fixed-rate payments for floating-rate ones, or vice versa. Another kind, a currency swap, can minimize the impact of volatile foreign exchange rates.

But with the help of JPMorgan, Italy was able to do more than that. Despite persistently high deficits, a 1996 derivative helped bring Italy’s budget into line by swapping currency with JPMorgan at a favorable exchange rate, effectively putting more money in the government’s hands. In return, Italy committed to future payments that were not booked as liabilities.

“Derivatives are a very useful instrument,” said Gustavo Piga, an economics professor who wrote a report for the Council on Foreign Relations on the Italian transaction. “They just become bad if they’re used to window-dress accounts.”

In Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money.

Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.

These kinds of deals have been controversial within government circles for years. As far back as 2000, European finance ministers

Senator Chris Dodd

 fiercely debated whether derivative deals used for creative accounting should be disclosed.

The answer was no. But in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales.

Still, as recently as 2008, Eurostat, the European Union’s statistics agency, reported that “in a number of instances, the observed securitization operations seem to have been purportedly designed to achieve a given accounting result, irrespective of the economic merit of the operation.”

While such accounting gimmicks may be beneficial in the short run, over time they can prove disastrous.

George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005. The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.

Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.

In 2005, Goldman sold the interest rate swap to the National Bank of Greece, the country’s largest bank, according to two people briefed on the transaction.

In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued,

Congressman Barney "There is nothing wrong with Fannie or Freddie" Frank

 according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.

Edward Manchester, a senior vice president at the Moody’s credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.

Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”

http://www.nytimes.com/2010/02/14/business/global/14debt.html?pagewanted=2&_r=1

McAuley’s World Comments:

The fraud that Congress just passed, the aptly named Dodd – Frank Bill, or the Financial Reform Act as it is more commonly called, does nothing to prevent or control these types of activities:

1). Fannie and Freddie are not covered or even addressed in the Dodd-Frank Bill. 

2). Sovereign debt is not covered by the Bill either…

So in summary … AIG was bailed out to the tune of $180 billion plus U.S. dollars, all from the American Taxpayer. As the financial crisis unfolded, up until the present day, Obama’s current Treasury Secretary Tim Geithner, Geithner’s predecessor as Treasury Secretary, Henry Paulson (a prior Chairman and CEO of Goldman Sachs) and current Federal Reserve Chairman Ben Bernanke all testified before Congress and the American people that the Financial Bailout was a necessity to prevent a complete collapse of our financial systems… That AIG’s failure would lead to the failure of Goldman Sachs … and Goldman Sach’s failure would lead to… and so on and so on… Only now do we find out that even had AIG failed, Goldman Sachs stood to profit from the failure, that the true beneficiaries of the AIG bailout were European banks and the anonymous purchasers of AIG Credit Default Swaps, purchasers who may have, like Goldman Sachs, completely hedged their investment in the AIG CDS in the first place … American Taxpayers may find out one day that, like TARP, the Troubled Asset Relief Program, a “Program” that never purchased even one “Troubled Asset”, that the true beneficiaries of the “Financial Industry Bailout”, were not the “advertised” beneficiaries at all …  and that, at a minimum, there is at least $13.3 billion dollars given to Goldman Sachs that isn’t accounted for…

 http://www.whorunsgov.com/Profiles/Henry_Paulson

http://www.whorunsgov.com/Profiles/Ben_Bernanke

http://www.whorunsgov.com/Profiles/Timothy_Geithner

Tim Geithner: Too Close to Goldman Sachs to Be Treasury Secretary, Critic Says     01/21/2009  

Tim Geithner apologized for not paying his taxes and some Republicans criticized his involvement in the TARP program at today’s hearing, but Barack Obama’s nominee for Treasury Secretary appears on track for confirmation.

Congress is “all in a panic” and “really clueless” about this all-important member of Obama’s cabinet, says Christopher Whalen, managing director and co-founder of Institutional Risk Analytics. “I’m just not sure Tim Geithner is the guy we should have driving the bus.”

Beyond his tax gaffe, which will mainly serve to politically weaken Obama’s pick, Whalen says Geithner is the wrong many for the job because of his decision-making as President of the New York Fed.

“I believe Tim Geithner only represents part of Wall Street – Goldman Sachs,” he says, suggesting Goldman was the “primary beneficiary of the AIG bailout” and notes Goldman alum Stephen Friedman serves on the board of the NY Fed. (Hank Paulson and Robert Rubin, with whom Geithner had frequent meetings in the past year, are also Goldman alum.)

Whalen further questions the inconsistency of the Fed’s decision to rescue Bear Stearns – in the end, their debt and shareholders got something – while letting Lehman Brothers “go to hell.” 

In the end, Whalen says he’ll fully support Geithner if and when he’s confirmed: “We have to be successful,” he says. “This is not about personality.”

Check out the video embedded in this article.

http://finance.yahoo.com/tech-ticker/article/161374/Tim-Geithner-Too-Close-to-Goldman-Sachs-to-Be-Treasury-Secretary-Critic-Says?tickers=GS,C,BAC,XLF,MS,JPM,%5EDJI 

ALSO SEE: AIG’s Secret Bailout Partners – AIG Bailout Funds Funneled To Secret Partners – Partial List Of Cash Recipients Released : A list obtained by Fortune includes the names of many foreign banks – as well as U.S. giants such as Goldman Sachs. An article that details the “payments” made to foreign banks by AIG directly, payments made in addition to the “indirect payments” made by Goldman Sachs.

https://mcauleysworld.wordpress.com/2010/06/30/financial-crisis-inquiry-commission-studies-derivatives-is-government-owned-aig-selling-cds/

https://mcauleysworld.wordpress.com/2009/03/17/senator-chris-dodds-latest-ethics-investigation-by-the-london-england-times/

http://www.freerepublic.com/focus/f-news/2121215/posts

GM, “head over heals in debt” to U.S. Government, to buy AmeriCredit for $3.5 billion.

McAuley’s World Comments:

GM has yet to pay off its debt to the U.S. Government. G.M. is still owned by the U.S. Taxpayer through the debt owed to the Government. The U.S. Government still owns 61% of G.M.. G.M. owes the U.S. Taxpayer billions of dollars…  

See: General Motors Busted For Loan Repayment Scam. Repayment made with “other” Bailout Funds

 G.M. has not finalized its plan to present an IPO or initial public offering to sell public stock and reimburse the American Taxpayer.

There is little interest in the investment community to purchase GM shares and to enter into a business or investment relationship with the UAW as a silent partner and GM’s recent bankruptcy history… just ask the previous G.M. bond holders and the private owners of thousands of closed G.M. dealerships …

AmeriCredit specializes in “substandard auto loans” and “substandard auto leases”, the same types of loans made by GMAC, GM’s former lending unit…  GMAC is in bankruptcy and was one reason for the original GM/GMAC bailouts…. the purchase and control of AmeriCredit by GM will simply help to “re-inflate” the “substandard”  auto loan/lease “bubble”.

G.M. is paying a 24% premium to purchase this company and re-enter the “substandard auto loan/lease” business … pay a 24% premium with money loaned by the U.S. Government … G.M. continues to work with GMAC under the “rebranded” name Ally Financial or Ally Bank … Can’t Ally Bank write bad auto loans/leases quick enough to generate the numbers G.M. and the Obama Administration want?

What is next, a return of the “pull ahead” lease or “pull ahead” financing? A practice that resulted in the automaker making $30,000 loans to purchasers of $20,000 vehicles.

Who will be on the hook after the re-inflated substandard auto loan/lease” bubble” collapses.

Didn’t Congress just pass a “Financial Reform Act” … and promise that we, the American people, would never see this type of activity again?

If a Democrat’s lips are moving – they are telling us another lie …

I don’t object to this business plan because of its structure … I object to the plan because G.M. is not a privately owned company”. Stop giving public money to companies that can’t find “private investment” to support its business plans.

GM’s proposed plan is politically motivated … The November elections are just months away … G.M. and the Obama Administration are desperate to generate “good numbers” … making substandard auto loans/leases that are doomed to fail are of little consequence to these “players” … look to the “mortgage loan modification program” for an example …. 100’s of billions of U.S. taxpayer dollars wasted on a “political” program designed to “create” false numbers. Sadly, 90% of those to receive “mortgage modifications” have seen their loans fall into “foreclosure” …  

GM agrees to buy AmeriCredit for $3.5 billion in cash

LONDON (MarketWatch) — General Motors Co. on Thursday announced a deal to buy car-financing giant AmeriCredit Corp. for $3.5 billion, in an effort to fill the pothole left in 2006 when the automaker gave up controlling interest in GMAC.

Terms of the agreement call for AmeriCredit stockholders to receive $24.50 in cash for each of their shares.

The hefty premium sent AmeriCredit /quotes/comstock/13*!acf/quotes/nls/acf (ACF 24.01, +4.31, +21.88%) shares up more than 22% in opening trades in New York.

The transaction, which has already been approved by the boards at both companies, is expected to close by the end of the fourth quarter.

“This acquisition supports our efforts to design, build and sell the world’s best vehicles by expanding the financing options we can offer to consumers who want to buy GM vehicles,” Chairman and CEO Ed Whitacre said.

GM said the move, in conjunction with a program the two companies launched nearly a year ago, will help reach more subprime customers as the Detroit giant progress toward a massive public offering. Launching its IPO will allow the U.S. government to cut its GM stake down from the 61% it currently holds.

Ft. Worth, Tex.-based AmeriCredit also plans to get back into the leasing business, which will open the door for more leasing options for GM customers.

“We’ve set up a very competitive solution for our financing needs, which will be resilient through credit and business cycles,” said Chris Liddell, GM’s chief financial officer.

Ally Financial, formerly GMAC, will continue to support GM, Liddell added.

AmeriCredit’s management team will remain intact following completion of the transaction, GM said.

“We’ll continue to offer our loan products to the more than 11,000 dealers across the country we serve today,” noted Daniel Berce, president and CEO of AmeriCredit.

David Silver, an analyst at WStreet.com, praised the deal and said it increases the future value of GM stock. But he still urged some caution.

“This could also indicate that the company is worried about the next few months in terms of sales as it is looking to generate additional cash flow to help stem that weakness,” he said.

http://www.marketwatch.com/story/gm-agrees-to-buy-americredit-for-35-billion-cash-2010-07-22?siteid=rss&rss=1

Greek Bailout Failing! Is AIG Selling Credit Default Swaps To Greece? Will American Taxpayers Be “On The Hook” Again?

First: The Financial Bailout of Greece is failing.

The bailout is “failing” by this measurement – Greece has been buying Credit Default Swaps or CDS to “insure” its national debt. The cost for Greece to purchase the “insurance” or CDS is skyrocketing ……..

THE RETURN OF THE CDS – WHY YOU SHOULD BE CONCERNED

Remember, Credit Default Swaps or CDS, were one of the culprits behind the “toxic mortgage scam” that brought down the US economy.

At the behest of their Democratic political masters Fannie and Freddie “provided” mortgages to millions who could not pay. Then Fannie and Freddie sold the “toxic mortgages” as investment securities with the help of the likes of Goldman Sachs. Finally, AIG “insured” the “securities” by selling Credit Default Swaps to back up the worthless mortgages and put the US taxpayer on the hook for paying off the “toxic debt”. While most of the parties made billions – the US taxpayer got stuck with bill. 

Fannie & Freddie Toxic Mortgages Toxic Mortgage Securities 

Credit Default Swaps  Collapse  Bailout

Fast Forward To Greece

Is AIG creating a Greek Debt Bubble – just like the “housing bubble” AIG helped create?

Greece, which is broke, obtained an international “bailout”. More on that “bailout” below.

Greece is purchasing Credit Default Swaps (CDS) to insure its national debt.

If the ‘Greek Bailout” was working – the cost to buy the “insurance” that the CDS provides should be going down …. it is not …. the cost to insure the Greek debt is skyrocketing ….. http://www.businessinsider.com/europe-bailout-fail-2010-5

“Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, and prices decline as perceptions of creditworthiness improve. A basis point equals $1,000 annually on a contract protecting $10 million of debt.” http://www.businessweek.com/news/2010-05-11/bank-swaps-libor-show-doubts-on-europe-bailout-credit-markets.html

“Soberness is returning quicker than most market participants had expected as investors start to evaluate the long-term consequences of the bailout measures,” Stefan Kolek, a credit strategist at UniCredit SpA in Munich, wrote in a client note. http://www.businessweek.com/news/2010-05-11/bank-swaps-libor-show-doubts-on-europe-bailout-credit-markets.html

Credit swaps on Greece dropped 44 basis points to 541, after tumbling 329.5 basis points yesterday, the biggest decline since March 2005, according to CMA. http://www.businessweek.com/news/2010-05-11/bank-swaps-libor-show-doubts-on-europe-bailout-credit-markets.html

“Thus markets aren’t quite buying the latest bailout, since they price-in a higher chance of default than just a month ago. Moody’s isn’t buying the bailout either. Which is odd, because theoretically Greece has been just provided a life-line that should at the very least allow it to meet its current outstanding debt obligations. It’s as if markets don’t believe the European bailout fund will actually happen to the full extent as it’s described to.” http://www.businessinsider.com/europe-bailout-fail-2010-5#ixzz0oCde77uo

A Greek Credit Default: AIG – CDS & US Taxpayer Liability

AIG & The Bailout Of Greece – The Return of Credit Default Swaps (CDS) – Are US Taxpayers “On The Hook” Again?

Posted on May 13, 2010 by mcauleysworld | Edit

Please, tell me it isn’t so!

First, in case you missed it, the country of Greece is dead butt broke ….. flat busted.  The BBC has announced that Greece will receive an initial bailout of $146 billion US dollars from various parties, http://news.bbc.co.uk/2/hi/business/8656649.stm , while the Euro Zone sets up a $1 trillion US dollar bailout fund. http://www.business-standard.com/india/news/germany-okays-trillion-dollar-euro-zone-bailout-plan/94028/on , http://money.cnn.com/2010/05/10/markets/dollar/?eref=aol .

Reminds me of AIG – really – an intial bailout – with a huge amount of “follow-on” cash a few weeks later. 

The initial cost of the Greek bailout to US Taxpayers is being estimated at something between $56 billion and $170 billion dollars. The estimates are based on the fact that the IMF or International Monetary Fund, will contribute $284 billion to start and may commit up to $1 trillion dollars. http://money.cnn.com/2010/05/10/markets/dollar/?eref=aol

At present the United States Taxpayer provides $54 billion annually in IMF funds. http://www.house.gov/jec/imf/11-18-03.pdf  The US pays, at a minimum, 17% of the IMF’s debts. 17% of $1 trillion is $170 billion.

Wait, this isn’t the worst of it.

The American Taxpayer maybe assuming the entire national debt of Greece.

Sounds crazy doesn’t it. I hope to heck it is crazy and not true. America simply can’t afford it!

AIG and the Greek Bailout

Enter AIG, the former international insurance giant currently owned by the American Taxpayer, thanks to the US Government and the US Government’s bailout programs.

AIG, American Internation Group, the international insurance giant was ”nationalized” in September 2008 and given an initial infusion of $85 billion in taxpayer cash. http://online.wsj.com/article/SB122156561931242905.html

Additional taxpayer cash was provided to AIG and at present the total amount “fronted to AIG” is at least $135 billion taxpapaer dollars.                                                         http://www.propublica.org/ion/bailout/item/how-big-is-aigs-bailout-really707  http://online.wsj.com/article/SB122627437470412029.html

The amount “fronted” to AIG may be in excess of $180 million, it is hard to tell because the US taxpayer has not had a recent accounting of how much additional cash has been funnelled to AIG. http://www.propublica.org/ion/bailout/item/how-big-is-aigs-bailout-really-707

AIG used much of the money to pay off French & German banks who had invested in “toxic mortgage securities” or related securities sold by AIG called “Credit Default Swaps” or CDS. http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html

In the initial payoff, French and German banks received $36 billion in US taxpayer funds, paid through AIG by the Obama Administration. The payout to the French and German banks took place in March 2009 during the first 3 months of the Obama Administration under the direction of Obama Treasury Secretary Geithner.  http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html 

Almost $60 billion dollars of the initial US Taxpayer payout to AIG went to foreign banks. http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html

You might remember that Neil Barofsky, the Special Inspector General for the $700 billion financial bailout, reported to Congress that the Obama Administration had mismanaged the intial payouts, resulting in billions more than necessary being paid out to foreign and US banks and brokerages. http://www.chinadaily.com.cn/world/2009-11/17/content_8984419.htm

The whole issue of paying out US Taxpayer dollars in satisfaction of AIG’s debt was so “mucked up” that current Treasury Secretary Geithner first refused to disclose who got what and when, in the deals. Inspector General Barofsky faulted Secretary Geithner and the Federal Reserve for refusing at first to reveal which banks had received the billions of American taxpayer dollars supposedly intended to save AIG. Geithner and the Fed released the banks’ names and the amount of their payoffs only after the American Public demanded greater transparency and the US Congress responded to that demand.   http://www.chinadaily.com.cn/world/2009-11/17/content_8984419.htm                  http://www.marketwatch.com/story/geithner-paulson-defend-182-bln-aig-bailout-2010-01-27

Is AIG at it again?

The international press has reported on how President Obama is pushing for a bailout of Greece’s new Socialist Government. http://www.businessinsider.com/now-obama-is-making-emergency-calls-to-merkel-over-greek-aid-2010-4

For years the Socialists in Greece’s Government have fudged the numbers concerning the Greek National Debt. “To keep within the monetary guidelines of the European Union, the government of Greece has been found to have consistently and deliberately misreported, in other words falsified, the country’s official economic statistics.[17][18] In the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees (CDS fees or “premiums”)  arranging transactions that hid the actual level of Greek borrowing.[19] The purpose of these deals …. was to enable them to spend beyond their means, while hiding the actual deficit from the EU overseers.[20]. http://en.wikipedia.org/wiki/2010_European_sovereign_debt_crisis

“Speculation in the CDS market began after 4 October 2009, as the Greek Socialists celebrated their election victory. Two weeks later the newly-elected government informed its Euro-partners that the deficit for 2009 was going to lie at 12.7 percent of economic performance (GDP).”  “The new estimate for the budget deficit called onto the stage the first hedge funds, reports a London CDS-dealer working for a large American bank.http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/

Speculation in the CDS market? 

Now the Eurpoean Press is reporting that AIG is selling CDS or Credit Default Swaps once again. Only this time, AIG is “insuring” Greece’s debt with the instruments not “toxic mortgage securities”.

In any case, the CDS-wager has gone up because more and more true-believers in the Greek State have come to feel the need to insure their holdings. This rapidly-rising demand for insurance has been set off by the escalation of the debt crisis. But it is past Greek governments that have to answer in the first place for the exhausted budget situation. The higher demand for insolvency protection that has driven up the CDS price follows from the evidently poorer estimation of Greek credit-worthiness.”

Greek banks as insurers
On the other hand, whoever expected Greece’s rescue by Europartner countries would have had to position himself on the CDS market as an insurer, that is, as a seller of payment protection. The take in premiums from insurance protection sold provides increased revenue. But it’s on the seller-side that the weak points of the CDS market become evident. It’s still unclear who has sold insurance protection for Greece. In one study analysts from the major French bank BNP Paribas referred to market-rumors that Greek banks had insured a large sum by CDS. If this is correct, then the payment protection they have provided is worth nothing. Greek banks hold State debt of over 40 billion euros. This corresponds roughly to the entire amount of equity in the Greek credit market. A bankruptcy of the State would lead to a collapse of the banking system.”

“London investment bankers name AIG as a further CDS-seller. That company had to be nationalized during the financial crisis due to its having written insolvency insurance on American mortgages. This debt-load would have led to the collapse of the world’s biggest insurer. Prior to the financial crisis AIG is said to have widely held State credit-risk. If yet-larger insurance positions on Greece exist, then the American government would have a strong interest in preventing that country’s insolvency.”
http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/

Read the full article in Germany’s Frankfurter Allgemeine Zeitung GmbH, the German equivalent of the Wall Street Journal. The original article, in German, can be read here: http://www.faz.net/s/Rub645F7F43865344D198A672E313F3D2C3/Doc~EC22CF3FE26F8487A9B4E8E99B0DA384E~ATpl~Ecommon~Scontent.html

The english translation here: http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/ 

What might this mean to the US taxpayer? Well that will depend on several things.

First, Greece’s total National Debt is a bit of a mystery. The Politicans in Greece have been fudging the numbers for so long, that it is hard to accurately estimate the total debt and without knowing the total debt, it is nearly impossible to estimate how much may have been “insured” by purchasing CDS and how much of the CDS business may have passed through AIG. 

Surprisingly similar to the “financial collapse” isn’t it? 

A Greek Debt bubble, insured through AIG with CDS.

What is clear is this, if AIG is selling CDS to “insure” the Greek National Debt, the American people have not been told exactly why this is being done, nor have we been told how much we are on the hook for and who is making a buck off the deal. Two of the “usual suspects” are on the sceen, AIG & Goldman Sachs, two large and powerful players in the international financial scene and Democratic to their cores.   You can bet on one thing, the average Jack or Jill Taxpayer isn’t going to make a dime on these dealings.    

Meanwhile the Greeks Socialists and Anarchists are rioting in the streets over proposed and desperately needed budget cuts and the US is agreeing to bailout Greek workers while US workers run out of unemployment benefits.

Contact Your Congressperson today and insist that they investigate these reports. The US Taxpayer should not be “on the hook” for the Socialist Greek Government’s mismanagement of the Greek economy. Lets put our house in order before we try to prop up foreign Socialists Governments and their failed welfare states. 

Lets practice saying “NO” to California by saying “NO” to Greece first!

http://www.usa.gov/Contact/Elected.shtml

Revisit the March 2009 post on AIG’s collapse: https://mcauleysworld.wordpress.com/2009/03/18/the-story-behind-aigs-collapse-bad-mortgages-credit-default-swaps-accounting-irregularities/

The Bailout of Greece – AIG & Credit Default Swaps – Are US Taxpayers On The Hook Again?

Please, tell me it isn’t so!

First, in case you missed it, the country of Greece is dead butt broke ….. flat busted.  The BBC has announced that Greece will receive an initial bailout of $146 billion US dollars from various parties, http://news.bbc.co.uk/2/hi/business/8656649.stm , while the Euro Zone sets up a $1 trillion US dollar bailout fund. http://www.business-standard.com/india/news/germany-okays-trillion-dollar-euro-zone-bailout-plan/94028/on , http://money.cnn.com/2010/05/10/markets/dollar/?eref=aol .

Reminds me of AIG – really – an intial bailout – with a huge amount of “follow-on” cash a few weeks later. 

The initial cost to US Taxpayers is being estimated at something between $56 billion and $170 billion dollars. The estimates are based on the fact that the IMF or International Monetary Fund, will contribute $284 billion to start and may commit up to $1 trillion dollars. http://money.cnn.com/2010/05/10/markets/dollar/?eref=aol

At present the United States Taxpayer provides $54 billion annually in IMF funds. http://www.house.gov/jec/imf/11-18-03.pdf  The US pays, at a minimum, 17% of the IMF’s debts. 17% of $1 trillion is $170 billion.

Wait, this isn’t the worst of it.

The American Taxpayer maybe assuming the entire national debt of Greece.

Sounds crazy doesn’t it? I hope to heck it is crazy and not true. America simply can’t afford it!

AIG and the Greek Bailout

Enter AIG, the former international insurance giant currently owned by the American Taxpayer, thanks to the US Government and the US Government’s bailout programs.

AIG, American Internation Group, the international insurance giant was “nationalized” in September 2008 and given an initial infusion of $85 billion in taxpayer cash. http://online.wsj.com/article/SB122156561931242905.html

Additional taxpayer cash was provided to AIG and at present the total amount “fronted to AIG” is at least $135 billion taxpapaer dollars.                                                         http://www.propublica.org/ion/bailout/item/how-big-is-aigs-bailout-really707  http://online.wsj.com/article/SB122627437470412029.html

The amount “fronted” to AIG may be in excess of $180 million, it is hard to tell because the US taxpayer has not had a recent accounting of how much additional cash has been funnelled to AIG. http://www.propublica.org/ion/bailout/item/how-big-is-aigs-bailout-really-707

AIG used much of the money to pay off French & German banks who had invested in “toxic mortgage securities” or related securities sold by AIG called “Credit Default Swaps” or CDS. http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html

In the initial payoff, French and German banks received $36 billion in US taxpayer funds, paid through AIG by the Obama Administration. The payout to the French and German banks took place in March 2009 during the first 3 months of the Obama Administration under the direction of Obama Treasury Secretary Geithner.  http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html 

Almost $60 billion dollars of the initial US Taxpayer payout to AIG went to foreign banks. http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html

You might remember that Neil Barofsky, the Special Inspector General for the $700 billion financial bailout, reported to Congress that the Obama Administration had mismanaged the intial payouts, resulting in billions more than necessary being paid out to foreign and US banks and brokerages. http://www.chinadaily.com.cn/world/2009-11/17/content_8984419.htm

The whole issue of paying out US Taxpayer dollars in satisfaction of AIG’s debt was so “mucked up” that current Treasury Secretary Geithner first refused to disclose who got what and when, in the deals. Inspector General Barofsky faulted Secretary Geitner and the Federal Reserve for refusing at first to reveal which banks had received the billions of American taxpayer dollars supposedly intended to save AIG. Geithner and the Fed released the banks’ names and the amount of their payoffs only after the American Public demanded greater transparency and the US Congress responded to that demand.   http://www.chinadaily.com.cn/world/2009-11/17/content_8984419.htm                  http://www.marketwatch.com/story/geithner-paulson-defend-182-bln-aig-bailout-2010-01-27

Is AIG at it again?

The international press has reported on how President Obama is pushing for a bailout of Greece’s new Socialist Government. http://www.businessinsider.com/now-obama-is-making-emergency-calls-to-merkel-over-greek-aid-2010-4

For years the Socialists in Greece’s Government have fudged the numbers concerning the Greek National Debt. “To keep within the monetary guidelines of the European Union, the government of Greece has been found to have consistently and deliberately misreported, in other words falsified, the country’s official economic statistics.[17][18] In the beginning of 2010, it was discovered that Greece had paid Goldman Sachs and other banks hundreds of millions of dollars in fees (CDS fees or “premiums”)  arranging transactions that hid the actual level of Greek borrowing.[19] The purpose of these deals …. was to enable them to spend beyond their means, while hiding the actual deficit from the EU overseers.[20]. http://en.wikipedia.org/wiki/2010_European_sovereign_debt_crisis

“Speculation in the CDS market began after 4 October 2009, as the Greek Socialists celebrated their election victory. Two weeks later the newly-elected government informed its Euro-partners that the deficit for 2009 was going to lie at 12.7 percent of economic performance (GDP).”  “The new estimate for the budget deficit called onto the stage the first hedge funds, reports a London CDS-dealer working for a large American bank.http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/

Speculation in the CDS market? 

Now the Eurpoean Press is reporting that AIG is selling CDS or Credit Default Swaps once again. Only this time, AIG is “insuring” Greece’s debt with the instruments not “toxic mortgage securities”.

In any case, the CDS-wager has gone up because more and more true-believers in the Greek State have come to feel the need to insure their holdings. This rapidly-rising demand for insurance has been set off by the escalation of the debt crisis. But it is past Greek governments that have to answer in the first place for the exhausted budget situation. The higher demand for insolvency protection that has driven up the CDS price follows from the evidently poorer estimation of Greek credit-worthiness.”

Greek banks as insurers
On the other hand, whoever expected Greece’s rescue by Europartner countries would have had to position himself on the CDS market as an insurer, that is, as a seller of payment protection. The take in premiums from insurance protection sold provides increased revenue. But it’s on the seller-side that the weak points of the CDS market become evident. It’s still unclear who has sold insurance protection for Greece. In one study analysts from the major French bank BNP Paribas referred to market-rumors that Greek banks had insured a large sum by CDS. If this is correct, then the payment protection they have provided is worth nothing. Greek banks hold State debt of over 40 billion euros. This corresponds roughly to the entire amount of equity in the Greek credit market. A bankruptcy of the State would lead to a collapse of the banking system.”

“London investment bankers name AIG as a further CDS-seller. That company had to be nationalized during the financial crisis due to its having written insolvency insurance on American mortgages. This debt-load would have led to the collapse of the world’s biggest insurer. Prior to the financial crisis AIG is said to have widely held State credit-risk. If yet-larger insurance positions on Greece exist, then the American government would have a strong interest in preventing that country’s insolvency.”
http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/

Read the full article in Germany’s Frankfurter Allgemeine Zeitung GmbH, the German equivalent of the Wall Street Journal. The original article, in German, can be read here: http://www.faz.net/s/Rub645F7F43865344D198A672E313F3D2C3/Doc~EC22CF3FE26F8487A9B4E8E99B0DA384E~ATpl~Ecommon~Scontent.html

The english translation here: http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/ 

What might this mean to the US taxpayer? Well that will depend on several things.

First, Greece’s total National Debt is a bit of a mystery. The Politicans in Greece have been fudging the numbers for so long, that it is hard to accurately estimate the total debt and without knowing the total debt, it is nearly impossible to estimate how much may have been “insured” by purchasing CDS and how much of the CDS business may have passed through AIG. 

Surprisingly similar to the “financial collapse” isn’t it? 

A Greek Debt bubble, insured through AIG with CDS.

What is clear is this, if AIG is selling CDS to “insure” the Greek National Debt, the American people have not been told exactly why this is being done, nor have we been told how much we are on the hook for and who is making a buck off the deal. Two of the “usual suspects” are on the sceen, AIG & Goldman Sachs, two large and powerful players in the international financial scene and Democratic to their cores.   You can bet on one thing, the average Jack or Jill Taxpayer isn’t going to make a dime on these dealings.    

Meanwhile the Greeks Socialists and Anarchists are rioting in the streets over proposed and desperately needed budget cuts and the US is agreeing to bailout Greek workers while US workers run out of unemployment benefits.

Contact Your Congressperson today and insist that they investigate these reports. The US Taxpayer should not be “on the hook” for the Socialist Greek Government’s mismanagement of the Greek economy. Lets put our house in order before we try to prop up foreign Socialists Governments and their failed welfare states. 

Lets practice saying “NO” to California by saying “NO” to Greece first!

http://www.usa.gov/Contact/Elected.shtml

See the March 2009 post on AIG’s collapse: https://mcauleysworld.wordpress.com/2009/03/18/the-story-behind-aigs-collapse-bad-mortgages-credit-default-swaps-accounting-irregularities/

%d bloggers like this: