Goldman and AIG: A Tale of Two Tales

Hank Greenberg

The New York Times, in a display of wicked irony, today published in its online edition two stories connected at more than the hip. The articles, placed adjacent to one another on the paper's splash page. concerned Goldman Sachs and A.I.G. At one point during the day, a third feature, focusing on former A.I.G.'s chairman Hank Greenberg's nemesis, Eliot Spitzer, joined the twosome. Well, someone at the Times certainly had a sense of humor.

In 2008, A.I.G. and its house of subprime loans collapsed. The Federal Reserve essentially seized the firm. Bernanke's minions arranged for Goldman Sachs and a select few other Wall Street institutions to receive one hundred percent on the dollar for its A.I.G. debt. Let's just say that action is highly unusual in a de facto bankruptcy process. Hank Greenberg, who knows the inside game perhaps better than anyone, was "upset."

The former Army Ranger took his umbrage to court, suing the government for what Greenberg perceived as unfair treatment of his former firm. The case was considered a long shot. However, a federal judge today ruled in favor of Greenberg's suit.

Andrew Ross Sorkin
(Image: marketwatch.com)

The Times' lead financial dog, Andrew Ross Sorkin, expressed something close to disbelief in the judicial decision. He also got others to assert on the record that the judgment would create chaos the next time too-big-to-fail....um....fails. In fairness, Sorkin has a subtle understanding of the complex events of the 2008 crash. However, Greenberg happened to be right about the looting of A.I.G. for Goldman Sachs' (and other institutions') benefit.

One wonders what Greenberg thought when he saw today's Times story about Goldman. The Wall Street firm intends to get into the online, retail loan business. Yes, small-time loans would be a new profit center for the Masters of the Universe. In the event of default, guess who gets one-hundred percent on the dollar. Again.