Goldman Sachs: It’s Worse Than You Think

So, just how greedy are the men who run Goldman Sachs?

Apparently, a whole lot greedier than we thought.

Impossible? Not after you read the government’s report on the New York Fed’s bailout of A.I.G.

As Timothy Geithner was struggling to keep the mega-insurance company afloat last year—and save all the other companies that would have gone down with the A.I.G. ship—UBS of Switzerland offered a two percent discount on what it was owed.  OK, so maybe accepting 98 cent on the dollar wasn’t going to change the fate of the world. But at least it was something.

Something Goldman Sachs could not allow. Instead, it insisted that it would be improper—and maybe illegal—to force the company take a loss. Any loss. Even a two-cents-on-the-dollar loss. This, at a time when we appeared on the verge of economic collapse. Instead, it took more than $10 billion from taxpayers who were losing their jobs, life savings, and homes.

The Fed “refused to use its considerable leverage,” in dealing with A.I.G’s trading partners writes special inspector general for the Troubled Asset Relief Program Neil M. Barofsky in his report that was officially released today.  Barofsky shredded many of Geithner’s decisions is this report, including his attempt to keep the details of the A.I.G. negotiations secret.

After public and Congressional pressure, A.I.G. disclosed the identities. Notwithstanding the Federal Reserve’s warnings, the sky did not fall; there is no indication that AIG’s disclosure undermined the stability of AIG or the market or damaged legitimate interests of the counterparties. The lesson that should be learned — one that has been made apparent time after time in the Government’s response to the financial crisis — is that the default position, whenever Government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with Government funds.”

Makes you wonder why Obama appointed Geithner to head Treasury. But it does go a long way to explain why so little has been done to change the system that gives greed preferred seating at the decision-making table.