Goldman Pushed AG to the Edge

That is the headline and the storyline by Gretchen Morgenson and Louise Story, writing in the New York Times.  Goldman Sachs (GS) kept making requests for more payments on insured mortgage securities throughout 2007 and 2008.  Other banks did, as well, but Goldman is reported to have made the biggest claims.  When government funds were eventually supplied to keep AIG from collapsing, it was Goldman that received the largest pay-off, nearly $13 billion.  Morgenson and Story say that Goldman also received a portion of the payments made to France's  Société Générale, the second largest beneficiary of government funds ($11 billion) through the AIG bailout.  Prior to the infusion of government bailout money, the article states that GS had already received $7 billion in payments from AIG.

So Goldman had claims paid of more than $20 billion by AIG.  That is not only a push to the edge, but maybe over, when added to the lesser claims of other banks.  Of course, Goldman is not really the only villain, merely the vulture that feasted on the road kill that resulted when all the misguided debt guarantees written by AIG went south.  If ignorance can be villainous, AIG would certainly have to get a nomination.

Both the SEC and Congress are looking into this.  According to Morgenson and Story:

 

With taxpayer assistance to A.I.G. currently totaling $180 billion, regulatory and Congressional scrutiny of Goldman’s role in the insurer’s downfall is increasing. The Securities and Exchange Commission is examining the payment demands that a number of firms — most prominently Goldman — made during 2007 and 2008 as the mortgage market imploded.

The S.E.C. wants to know whether any of the demands improperly distressed the mortgage market, according to people briefed on the matter who requested anonymity because the inquiry was intended to be confidential. 

Anyone think that something significant will come of this "scrutiny"?

Disclosure: No positions.