AM Roundup December 14th, 2009

Best Read: How Goldman Sachs Slit AIG's Throat

The Gist: "Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms' roles in the transactions.

In Goldman's biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal's analysis and people familiar with the trades.

The trades yielded Goldman less than $50 million in profits, which were mostly booked from 2004 to 2006, according to a person familiar with the matter. But they piled risks onto AIG's books, which later came to haunt the insurer and Goldman....

Additional calls for collateral from Goldman and other banks eventually led to AIG's September 2008 bailout and led the New York Federal Reserve two months later to fully cover $62 billion of insurance contracts Goldman and 15 other banks had with the financial products unit of AIG."

AM ROUNDUP

Before you get distracted this morning, clear your desk and your head and take 10 minutes to read this one. Calculated Risk offers an excellent, expert overview with "A Summary and a Look Ahead"...

...for a high-quality, high-speed macroeconomics lesson, check out The Atlantic's rundown on the question of "How Can the Shadow Banking System Be Fixed?"...

..Paul Volcker speaks up with an overall grim forecast for 2010 , overall "Looking Pretty Sluggish"...

...something we're all seeing at the local level, analyzed with numbers by Reuters: "Small Business Confidence Taking a Beating"...

...an important macro-economic fact to tuck away for later: "42% of Parents Have Paid a Child's Debt" which is hardly news to collection agents I know, but still good to have a number for...

...US Debt Watch: record deficits for the 14th straight month, say the wild conspiracy theorists at CNN Money...

...and Today's Infographic is a philosophical gem from Infomation is Beautiful -- a short, colorful visual essay on What Makes Good Information Design?