We just got a new insight into a crucial crisis-era dispute between Goldman Sachs and AIG
The group was set up in the aftermath of the crisis by Congress to look into the causes of the crash, and the documents are a gold mine of information.
We're reading through it, and have already written about Warren Buffett's thoughts on executive compensation.
Another document thar caught our eye was a memo from an interview with Joe Cassano.
To recap, he was the chief executive of AIG Financial Products, the unit at the insurance giant responsible for the outsized losses that led to its bailout.
The business would underwrite a kind of insurance on collateralized debt obligations (CDOs). When those CDOs fell in value, AIG found itself under pressure to post more collateral to those who had bought the insurance and were on the other side of the trade.
Those collateral calls led to a dispute with Goldman Sachs. It was in some quarters accused of helping to bring down AIG by demanding collateral. Goldman's version of events is posted on its website.
The memo from the interview with Cassano sets out his version of events, and his dealings with Michael Sherwood, co-chief executive of Goldman Sachs International, and David Viniar, the former chief financial officer.
In short, Goldman's early collateral calls kept changing, which Cassano thinks is evidence that "no one could get a handle on the market." Other companies also sought collateral from AIG, but Goldman was asking for the most.
Even as late as January 2008, as it disputed Goldman's collateral demands, AIG was assuming full value for some of the securities. That's something Goldman executives described as "incredible."
Goldman Sachs' chief, Lloyd Blankfein, according to a separate memo from an interview with him, told the commission that he became aware of the dispute in late 2007.
"I was posted that the conversations were hard, that [AIG] owed us money and weren't paying it, and were being very stubborn about the valuation issue," he said, according to the memo.
Blankfein said that he spoke to AIG CEO Martin Sullivan to encourage a resolution, and that he recalled Sullivan expressing deference to Cassano on the call, conveying the view that AIG was confident in its marks.
Here is the excerpt from the Cassano memo: