How AIG Became Goldman's Toilet

Lest any argue that AIG was much too sophisticated to play the role of gullible stooge for Goldman Sachs, I need only remind people that Harvard University was fleeced for about $1 billion when financing only $2 billion of debt, using interest rate swaps. And that fleecing took place when Harvard University was being run by "banking genius" and Obama economic policy adviser Larry Summers.

If the man who is telling the U.S. how it should run its economy could get fleeced in that manner by JPMorgan Chase(JPM), then it is no great leap to believe the insurance salesmen of AIG could be Goldman's patsy.

Thus, Goldman Sachs went from (passively) using AIG as its insurance toilet, to pushing AIG to insure the same "assets" that Goldman Sachs was aggressively shorting. Then, once all the bait had been taken, Goldman began relentlessly writing down those assets at a time when all the other banksters were still maintaining their mark-to-model (i.e., fantasy) valuations.

Goldman was selling these toxic financial products to investors as long investments, while behind their backs it was not only shorting the same assets, but it was also writing down those assets -- in order to trigger the massive payouts on the CDS contracts it had conned AIG into underwriting.

In other words, apart from the market forces that were shredding the valuations of these assets quite nicely, Goldman was greasing the skids on these products (and the entire sector) by marking down their valuations far lower than any other financial institution -- in order to collect on its scams.

In short, apparently alone in the financial community, Goldman Sachs was openly and intentionally misrepresenting the values and risk levels of various assets, while attacking those assets through its own shorting and CDS scam.

With unequaled access to the White House and Treasury Department, and with advance notice of policy decisions, which is not available to even most of the other banksters, Goldman Sachs had the best and clearest view of where the U.S. economy was headed -- making their subsequent double-dealing completely unequivocal with respect to Goldman's malevolent intent.

I see no sign of any specific intent to take down AIG. Rather this former insurance Goliath was simply another mark to be played by Goldman. While the other banksters lined up only one parachute to help them bail out of their massive Ponzi-scheme (interest-rate swaps), Goldman Sachs had prepared two for itself: interest-rate swaps and AIG.

As a final note, the blog entry I cited earlier made one other extremely interesting observation: Many of these contracts written at AIG's expense were done while good old Hank "Bazooka" Paulson was CEO of Goldman Sachs. Then, as Treasury secretary, "Bazooka" Paulson ordered AIG to pay 100 cents on the dollar to Goldman on every one of those same contracts (with taxpayer money).

In the country where the concept of "conflict of interest" simply does not exist, neither Paulson nor the Bush regime saw anything wrong with Paulson handing billions of taxpayer dollars to his former employer -- as payment for contracts that (at the least) have a heavy stench of fraud. This also sheds additional light on why Paulson attempted to have himself personally exempted from any and all liability for his handling of the TARP money (a waiver so broad, it would have made him immune to even blatant acts of fraud or misappropriation).

In any other country, a scandal of this magnitude would be enough to bring down an entire government. In the U.S., however, it is merely business as usual.

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