Richard Teitelbaum reported today (http://www.bloomberg.com/apps/news?pid=20601087&sid=ax3yON_uNe7I) that Timothy Geitner's New York Fed hid the smoking gun that proves Goldman played the key role in bringing down AIG. The only plausible explanation for hiding the document is that Geithner et.al. were protecting Goldman. Is this the worst scandal in US history? To ask the question is to answer it.

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash

http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout...

To his credit, Eric Dinallo, the New York Superintendent of Insurance, did take the brewing mess at bond insurers MBIA (under his jurisdiction, and completely intransigent) and Ambac seriously enough to try to Do Something About It. In the end, his efforts came to nought, swept aside in the tidal wave of credit messes. But MBIA and Ambac were writing policies that in economic substance were very similar to the ones issued by AIG (regulated by the Office of Thrift Supervision).

Among the causes of the ongoing financial meltdown, many experts cite the Commodity Futures Modernization Act, smuggled through Congress late on a December evening in 2000. The law exempted Credit Default Swaps (CDS) which are essentially bets on the value of securities from all regulation, including state gambling laws. This allowed Wall Street to conclude that any risk could be hedged with a bet. The result, of course, was disaster, with economic consequences that we will be feeling for a very long time.

A key question at the heart of the controversial bailout of AIG is just how much money the government lost. The Federal Reserve and Treasury Department have worked to keep that number secret and to conceal who was on the winning end.

An unredacted document obtained by the Huffington Post list the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time -- a de facto $8 billion subsidy, courtesy of taxpayers.

The truly extraordinary disclosures were that Paulson, Bernanke, and Geithner all purported to have had no involvement in one of the most expensive decisions in history -- the decision to pay 100 cents on the dollar to the least deserving of recipients (and who, if Geithner's testimony were to be believed, did not need to receive that largess) -- and the unprincipled and indefensible decision to try to get AIG to cover up that fact and the beneficiaries of that largess.

Readers: Just when it seemed like things could not get any weirder, this story seems to indicate that violating the law or even a sense of reason seems to be the standard way of doing business if it serves the interests of the Wall Street banks and their trade organization the US Federal Reserve. Perhaps it was in the water at Jekyll Island or that the franchise for endless rentier wealth also translates into no crime too flagrant to commit if it is in the name of profit.

(see also http://economics.arawakcity.org/node/370 for a copy of Shelia Bair's Testimony on Jan 14th 2010)

WASHINGTON (Reuters) - Wall Street's chiefs acknowledged taking on "too much risk" and having "choked" on their own cooking, but stopped short of an apology as they sparred with a commission looking into the origins of the financial crisis.

Barack Obama | Natural Disasters

The first public hearing of the Financial Crisis Inquiry Commission came on Wednesday as the Obama administration readies a plan to recoup taxpayer bailout funds through a special bank fee and lawmakers wrestle with changes to financial regulation.

BEIJING, Dec 29 (Reuters) - A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses.

Goldman Sachs (GS.N) was one of the foreign banks, along with Citigroup (C.N), Merrill Lynch and Morgan Stanley (MS.N), blamed by the state assets watchdog for providing "extremely complicated" and difficult to understand derivatives products. [ID:nPEK242617]