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Friday: Now, let me get this straight…

Outland by Berkeley Breathed

Outland by Berkeley Breathed

Goldman-Sachs (G-S) and AIG go to the government last fall for money.  Hank Paulsen, our former Treasury secretary is a former CEO of G-S.  AIG hires a new CEO because the old one was under fire.  The new one, Edward Liddy, takes up the thankless task for token compensation- and $3M dollars for sitting on the board of…

wait for it

…Goldman-Sachs.

Yes, this is the same G-S that produced the faniciful earnings statement that ingeniously did away with the month of December 2008.  Yep, didn’t exist.  You know that painfully awkward holiday dinner you spent with the fam?  Never happened.

This is the same G-S who miraculously “raised” $10B dollars so that it can now give back the TARP money that it got from the government.  And the reason they want to give it back is because they don’t want no stinkin’ government telling them how much money they can give their stellar executives in bonuses.  It’s not the American Way.  It’s unnatural.

But this very same G-S, whose bank board member, Edward Liddy now sits as head of AIG, was funneled mucho dinero from the last bailout from AIG to cover its losses while other investors were forced to take losses.  No conflict of interest there:

He has said that he considers his work at A.I.G. to be a public service, performed on behalf of the taxpayers, who ended up with nearly 80 percent of the insurance company. His goal is to dismantle the company and sell its operating units, using the proceeds to pay back the rescue loans. On Thursday, A.I.G. said it had sold its car insurance unit, 21st Century Insurance, to the Zurich Financial Services Group for $1.9 billion.

Along the way, Mr. Liddy has clearly disclosed that A.I.G. was serving as a conduit, with much of the rescue money passing through and ending up in the hands of A.I.G.’s trading partners.

Goldman has said in the past that it had collateral and hedges to reduce the risk of its exposure to A.I.G.

Still, his stake could represent a potential conflict and is likely to reignite questions about Goldman’s involvement in A.I.G., and about why taxpayer money was used to shield A.I.G.’s trading partners from losses, when asset values plunged everywhere and most investors suffered greatly.

Had A.I.G. simply declared bankruptcy, the financial institutions doing business with it would have ended up in court, as they did in the case of Lehman Brothers, fighting to get pennies on the dollar for their claims.

Instead, Goldman Sachs received $13 billion of the Federal Reserve’s rescue money to close out various contracts it had outstanding with A.I.G. It was one of the biggest beneficiaries of the government rescue.

Yes, Edward Liddy is performing a public service no less valuable than the social worker who handles hundreds of foster care cases or the firefighter or the friendly and helpful IRS phone support that helps you finish your tax return on time.  Surely, SURELY, Mr. Liddy deserves some respect for the sacrifices he is making on our behalf.

Simon Johnson is very concerned about the possible conflict of interest and the criminality of this setup.  He has some very Watergate-esque questions for these dedicated public servants:

According to the NYT report, Mr Liddy has an apparent conflict of interest.  Please answer these question as simply and directly as possible, because otherwise they will be repeated indefinitely.  When did Mr Liddy disclose this and to whom at the Federal Reserve Bank of New York (or to which other responsible government officials)?  What did Hank Paulson, then Secretary of the Treasury and former CEO of Goldman Sachs, know and when did he know it?

Tut=tut, Mr. Johnson.  You are behaving like these men are criminals.  Is that any way to speak to people who are doing us a favor in these troubled times?  Antitrust indeed!  These are our betters.  You’re British.  You understand noblesse oblige and upstairs/downstairs stuff better than we do.  Why can’t you just accept the natural order and show us Americans how it’s done?

Meanwhile, Paul Krugman is being a fricking crepe-hanger again and stamping all over everyone’s greenshoots.  It’s spring, Paul, fergawdssakes.  Go outside and smell the periwinkle.

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