William J. Holstein

The Real Question: Did Goldman Sachs Mug the United States?
Jan. 14--I watched the testimony before the Financial Crisis Inquiry Commission and feel there is a line of inquiry that is not being explored. So here it is:

We know that Goldman created securities backed by subprime mortgages that, in turn, AIG guaranteed. Then Goldman started going short on those financial instruments, meaning betting against them at the same time it was selling them. This came out in what former AIG CEO Hank Greenberg told the Wall Street Journal this past weekend, and in the testimony.

But could it be that Goldman knew that its former CEO, Hank Paulson, was now acting Secretary of the Treasury, and the most powerful financial regulator on the horizon. When all hell broke loose, we know that Paulson was in contact with key players, including his successor at Goldman, Lloyd Blankfein. Paulson was just one of several former Goldman executives who had assumed powerful positions in various arms of government, including the White House budget office.

So is it possible that Goldman created a trap for other financial institutions (and the entire system) and when the trap was sprung, Goldman and its powerful allies consciously knocked out Goldman's adversaries such as Lehman Brothers and also crippled AIG. Oh, and we know that when the feds bailed out AIG's counterparties, meaning the people it did business with, Goldman got 100 cents on the dollar. Goldman walked away scott free. It's competitors were wiped out or crippled.

Paulson is no longer on the scene and has remained mum, which is smart. But if Congress wants to get to the bottom of what happened, they have to understand the Goldman connections. It's shocking but I suspect it's true--Paulson was acting on Goldman's behalf, at least in part. No wonder that Goldman is now poised to grant record bonuses. They mugged the system and got away with it.