Note to lawmakers: Goldman had more subprime debt outstanding under Paulson's watch

Written by Biloxi

As more information is coming out with the cozy relationship between Goldman Sachs and AIG, lawmakers and media have ignored the important nugget: Goldman Sachs had more outstanding subprime debt on their books when now former Treasury Secretary Hank Paulson was CEO of Goldman.

According to Bloomberg, Goldman Sachs had some $13 billion of almost $37 billion in bonds that were backed by subprime loans or second mortgages that were created by Paulson. Goldman had more subprime debt outstanding than companies such as Credit Suisse, which has almost $10 billion; Citigroup, with $6.8 billion; or JPMorgan Chase, with $7.8 billion. Paulson's tenure at Goldman was from May 1999 through June 2006.

Follow the money. Better yet, the key was to follow the connections to the collapse of AIG and payouts to the AIG counterparties. Former NY Governor Eliot Spitzer warned to watch for AIG's payout and  not the bonuses. Spitzer looked at AIG's financial practices as the NY attorney general, an inquiry that led to the resignation of the insurance giant's longtime chairman Maurice "Hank" Greenberg in 2005.

Here again is the list of the counterparties that received payments from AIG. Notice some of the banks received the TARP money:



Bank of Montreal

Danske

Société Générale

BNP Paribas

Calyon

Deutsche Bank

Dresdner Kleinwort

Deutsche Zentral-Gen

DZ Bank

KFW

Dresdner Bank AG

Landesbank Baden-

ING

Rabobank

Banco Santander

UBS

Credit Suisse

Barclays

HSBC Bank USA

Royal Bank of Scotland

Goldman Sachs

States and Cities

Merrill Lynch

Bank of America

Citigroup

Wachovia

Morgan Stanley

AIG International Inc.

JPMorgan

Citadel

Paloma Securities

Reconstruction Finan


Total: 43.5 billion

Read more from an old Justice League posting last year.  Click here.  AIG had collapsed stemmed largely from financial products such as credit-default swaps, which went housing market in the U.S. turned south after 2006. keep in mind that Paulson was still Goldman CEO until June 2006. And now we have learned, according the documents on the Senate Finance Committee website, that Goldman had purchased credit protection on A.I.G.  However, those companies wrote credit default swap protection on AIG for Goldman, meaning that in the event of an AIG default [and of course, AIG collapsed in 2008], those companies would have been responsible for paying Goldman Sachs. The real question to ask is that did Goldman Sachs know that AIG was going to collapse, did Goldman put themselves in a financial position to protect their companies of a huge loss from the AIG collapse and financial crisis, clean the credit default swaps off their books, and come ahead of all their investment competitors and did Goldman position themselves to be a bank holding company [Note: Investment firms such Bear Stearns, Merrill Lynch, and Lehman Brothers were not bank holding companies]  to benefit for low interest rates by the Federal Reserve to receive TARP money?

These questions should be asked by the lawmakers.