Monday, February 08, 2010

The AIG/Goldman Taxpayer shakedown

Goldman and AIG used their considerable connections within both the Federal Reserve and the Bush and Obama administrations to extort billions from the taxpayers under the "too big to fail" ruse. It was the heist of the young century. This NYTimes article focuses in the AIG-Goldman conflict but also offers insight into the government/financial industry complex that served Goldman and AIG so well.

Behind-the-scenes disputes over huge sums are common in banking, but the standoff between A.I.G. and Goldman would become one of the most momentous in Wall Street history. Well before the federal government bailed out A.I.G. in September 2008, Goldman’s demands for billions of dollars from the insurer helped put it in a precarious financial position by bleeding much-needed cash. That ultimately provoked the government to step in.

With taxpayer assistance to A.I.G. currently totaling $180 billion, regulatory and Congressional scrutiny of Goldman’s role in the insurer’s downfall is increasing. The Securities and Exchange Commission is examining the payment demands that a number of firms — most prominently Goldman — made during 2007 and 2008 as the mortgage market imploded.

The S.E.C. wants to know whether any of the demands improperly distressed the mortgage market, according to people briefed on the matter who requested anonymity because the inquiry was intended to be confidential.