Richard Spencer

March 16, 2009

It?s becoming increasingly clear what the bailouts are really about?and it?s something far worse than the ?socialism? and ?big government? the conservative movement and GOP have harping on since Obama got elected.

This from Bloomberg:

American International Group Inc., under pressure to reveal how it spent taxpayer funds since the September bailout, said $105 billion flowed to U.S. states and banks led by Goldman Sachs Group Inc., Societe Generale SA and Deutsche Bank AG.

Banks that bought credit-default swaps or traded securities with AIG got $22.4 billion in collateral, $27.1 billion in payments from a U.S. entity to retire the derivatives, and $43.7 billion tied to the securities-lending program, AIG said yesterday in a statement. States, including California and Virginia, got $12.1 billion tied to guaranteed investment contracts.

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Goldman Sachs led beneficiaries, with $12.9 billion, followed by SocGen, France?s No. 3 bank, with $11.9 billion, and Deutsche Bank, Germany?s biggest lender, with $11.8 billion. New York-based AIG and the Fed had previously refused to reveal the counterparties, saying the contracts were confidential and that the information could damage AIG?s business prospects.

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Henry Paulson, former CEO of New York-based Goldman Sachs, made the decision to save AIG while he was Treasury Secretary. He appointed AIG CEO Edward Liddy, formerly CEO of Allstate Corp., whom he knew from the executive?s service on the board of Goldman Sachs.

As Justin grasped early on, the socialist idea might have failed miserably in the Soviet Union, but it?s been given new life in Washington?this time with Wall Street bankers and the super wealthy, and not the ?the proletariat? of yesteryear, as the intended beneficiaries.

Goldman Sachs seems to be the wiliest of the bunch, as the firm has managed to collect billions while avoiding the taint of direct government injections and partial nationalization (as with Citigroup and AIG). The Goldman Boys went to Washington a long time ago and reappear like snakes from the head of Medusa as the men enlisted to manage our ?economic recovery?: At the treasury, the former Goldman Co-CEO Hank Paulson was replaced by a prot?g? of Robert Rubin (another Goldman guy and former Treasury Secretary), Tim Geithner; and before Paulson left, he had honeycombed his department with former employees (including the Goldman technology investor Neel Kashkari, whose name made the whole affair seem like some kind of allegorical farce.)   

I remember being at an alumni function shortly after the collapse of Lehman Brothers and the beginnings of the bailouts and chatting over drinks with a Wall Street guy, a self-described ?conservative Republican.? He told me his good friend ?Hank? had let Lehman collapse so as to show everyone what would happen if Washington failed to act. In retrospect, it seems more likely that the main reason Lehman didn?t get bailed was that Goldman wanted to knock off one of its rivals in the investment biz. One of the more brutal episodes in what?s turning out to be the biggest heist in American history.