Golden Goldman

(Goldman Sachs Tower -- New Jersey)

American International Group (AIG) just released the ordered list of counterparty payments that it had made last fall from the taxpayers’ and the Federal Reserve Bank’s initial $115 billion in bailout money to this company. According to this morning’s NY Times, Goldman Sachs was second on this recipient list at $8.1 billion. However, since then, AIG has received an additional $58 billion from the U.S. Treasury and Goldman now tops the list at $12.9 billion in total bailout largess … presumably to make good on additional Credit Default Swaps or other financial derivatives that Goldman took out with AIG. (Other large benefactors from U.S. taxpayer’s and Fed’s money, via AIG, include Deutsche Bank @ $11.8 billion, Societe Generale @ $11.9 billion, Merrill Lynch @ $6.8 billion, Barclays Bank @$8.5 billion, and UBS @ $5 billion.)

Now, there are many questions surrounding such counterparty payments … such as:

- Did Goldman Sachs or any other counterparty buy these Credit Default Swaps at a discount and then turn around and sell them back to AIG at 100 cents on the dollar? (Question originally posed by Senator Shelby from Alabama in a recent Senate hearing.)

- Did AIG negotiate with any or all these counterparties to pay them something less than full par value for these CDSs as would be expected? (Question originally asked in a recent House hearing on AIG).

- Since Hank Paulson, the then Secretary of the Treasury under G.W. Bush, was a former Goldman Sachs Chairman and CEO … were such pass-through payments to Goldman Sachs from the U.S. Treasury and Federal Reserve Bank a possible conflict of interest? At the time, was Paulson made aware of this seeming breach of faith?

- The new Obama administration, under which an additional $58 billion has been funneled into AIG (and, as a consequence, an additional $4.8 billion into Goldman Sachs) also seems somewhat cozy with Goldman Sachs. Robert Rubin, a transition team economic advisor to Obama is an ex-Goldman co-Chairman and, according to Wikipedia, "Goldman was the second largest donor to the Barack Obama campaign." It is estimated that Goldman Sachs execs gave close to a million dollars to Obama (see Obama Donors) including James Johnson, a Goldman Sachs board member and former chairman and CEO of Fannie Mae, and Bruce Heyman, Managing Director, Private Wealth Mgt at Goldman. Also Larry Summers, Director of the President Obama’s National Economic Council; and Tim Geithner, the new Secretary of the Treasury and last fall’s head of the NY Federal Reserve Bank are both former protégés of Robert Rubin.

As far as I am concerned the current kerfuffle about the $165 million in bonuses paid out to AIG executives is a mere distraction from the much bigger mega-scandal of over $170 billion of make-good payments that AIG is funneling into the world’s financial counterparty community. This is the true AIG, Federal Reserve Bank, and U.S. Treasury misfeasance that Barney Frank and the rest of his masked bandits in Congress need to be investigating with their typical grandstanding vigor … instead of trying to grab headlines with this AIG bonus sidebar.