One such deal was called Davis Square Funding VI. That CDO, assembled by Goldman in March 2006, contained mortgage securities underpinned by subprime home loans originated by firms such as Countrywide and New Century Mortgage Corp., one of the first subprime lenders to fail in 2007.
A big investor in Davis Squares top layer was Société Générale, which bought protection on it from AIG, according to the internal memo. The French bank was the largest beneficiary of the New York Feds Nov. 2008 move to pay off banks in full on their AIG insurance contracts.
A company financed largely by the New York Fed ended up owning both the Davis Square and South Coast CDOs. Société Générale received payments from AIG and the New York Fed totaling $16.5 billion. Goldman received $14 billion for its trades that were torn up, including $8.4 billion in collateral from AIG.
“A company financed largely by the New York Fed…” That couldn’t possibly be Maiden Lane III. Could it?