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Originally Posted by ijusluvit
What you did not mention about the Goldman Sachs travesty was that they targeted AIG to insure that mountain of sub-prime trash. Goldman knew exactly what they were doing, including that these transactions would destroy AIG. Goldman did it out of sheer greed and because greatly weakened banking regulations allowed it. Need I remind anyone who spent billions to bail out AIG?
So. IMHO, the SEC should find ANY conceivable reason to sue Goldman.
And remember, in the name of free enterprise, it was the previous administration which presided over the final dismantling of finance regulations. Hindsight's 20/20, and I don't really blame the Republican majority for this. Just like Alan Greenspan, it was WHAT THEY BELIEVED WAS BEST. But we are hopefully smarter now, have proof that greed trumps everything, and hopefully we will continue what the current administration is doing until Wall Street, the banks and the insurance companies can no longer control and steal from us.
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I sure won't argue that the Goldman guys weren't greedy. (Remember Gordon Gecko's "greed is good" statement in the original
Wall Street movie?)
But I have a different take on why AIG wound up as the most damaged of the insurers, requiring billions of our money to bail them out.
- They were big, maybe the only insurance company large enough to take on the kinds of risks being created by Wall Street.
- They were sophisticated. They understood the risk positions they were taking as counterparties to the Wall Street derivative deals. They were wrong, but they understood. I can't think of another insurer who had the expertise to take the positions AIG took.
- AIG went out of their way to establish the business subsidiary to take on the Wall Street risks in places that weren't subject to any regulation, state or federal. They set up the subsidiary that took on all these risks in London, where they were not subject to any regulatory oversight.
- And yes, during the first half of the decade of the 1990's the Congress then in power gutted the financial regulatory system that had served the country very well since 1933. That's where free-market greed and the absence of any oversight met to create the perfect storm.
Note that the SEC's action is a civil lawsuit, not a criminal indictment for the violation of a federal law or regulation. Firat, the regulations were quite weak or non-existent. More importantly, a civil case requires much weaker rules of evidence and will be far easier for the SEC to prove legally.