I read this very eye opening letter forwarded to Mish by the brilliant Janet Tavakoli of Representative Issa's Letter to William Dudley Requesting AIG Bailout Disclosure. AIG lost billions in CDS'. AIG was the counter party of Goldman Sachs, Merrill Lynch, Société Générale and Deutsche Bank CDS'. Hence, any losses AIG takes Goldman does as well. So instead of going through fair and square free market negotiations over who takes what damage - the federal reserve under Geithner took over their settlement like a bunch of raping pillaging pirates and made AIG take 100% of their CDS losses. The catch? nobody took the losses but the American tax payers since it was all part of the big bad "bail out" plan.
Anybody else speculating on x30 x50 x100 x1000 x10,000 times leverage and losing it all would be considered a criminal and would be sentenced for 150 years of dwelling in a cell with a pedophile with NO BAIL. Wait... that sounds way too familiar.
Then I saw the season finale of Shark Tank, the very interesting venture capital (reality) show.
Besides the amazing last deal, which ended the season with a bang, there was a very micro economic concept that could be applied to the mega deals of the world on the back of the American Taxpayer, or the peasants, as Max Keiser would say:
They started to compete for a great potential start up business, when all of a sudden they realized - why compete with each other while costing themselves more while they can collude together to gain more on the expense of the developers of the start up. This isolated concept applies to Goldman-AIG scandal:
In less than 30 seconds of mega-schmega deal making, Goldman decides that AIG would take 0% losses to its counter party, and the American tax payer will be forced to take 100% of its CDS losses. All 85$ billion.
So Goldman gains 14$ billion, American tax payers lose 85$ billion - "DONE."
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