Breaking: AIG’s CEO owns stake in Goldman Sachs!
This is shocking. Does this explain why Goldman Sachs has been recovering so quickly and is seeking to repay government bailout funds? The New York Times reports that AIG’s CEO Edward Liddy still holds about US$3M in Goldman:
Edward M. Liddy, the dollar-a-year chief executive leading the American International Group since its bailout last fall, still owns a significant stake in Goldman Sachs, one of the insurer’s trading partners that was made whole by the government bailout of A.I.G.
Mr. Liddy earned most of his holdings in Goldman, worth more than $3 million total, as compensation for serving on the bank’s board and its audit committee until he stepped down in September to take the job at A.I.G. He moved to A.I.G. at the request of Henry M. Paulson Jr., then the Treasury secretary and a former Goldman director.
Goldman Sachs has its key figures in power, namely former CEO-turned-Treasury Secretary Henry Paulson under President Bush in 2008, who oversaw the first US$350bn of the TARP funds. That $350bn was not under any oversight then. What happened to that money? No one knows. What did Goldman do with its share of money?
Secondly, Goldman Sachs received about US$13bn from AIG earlier in March this year when AIG sent out bailout money to other financial institutions. Why did AIG send money to Goldman? Is Edward Liddy serving AIG in his capacity as its CEO or as representative of Goldman? Is Goldman using any of this money to repay its US$10bn loan from the Treasury? Further, NYT also reported this separately:
Let me try to help. Goldman’s explanations sometimes do not ring true, even if they are. When it announced its profits this week, it buried an important fact in the tables on page 10 of a news release, and did not mention it in the text of the release. That fact was that Goldman had lost a lot of money in December, which would have been part of the quarter had the firm not changed its fiscal year. As a result, that loss does not show up in any quarterly number. Goldman won’t say if a December-to-February quarter would have been profitable.
Was Goldman’s disclosure misleading? Legally, no. There was full disclosure. But the existence of the orphan month, with its big loss, was largely overlooked in the initial news stories. When it was reported later, Goldman was left looking as if it had tried to pull a fast one.
Something similar happened with regard to Goldman’s relations with A.I.G., which owed Goldman a lot of money that it was able to recover thanks to the bailout. Mr. Viniar says that Goldman was fully protected if A.I.G. did default, and that A.I.G.’s bailout had little if any effect on Goldman’s earnings.
Congress needs to subpoena Goldman’s CEO (along with AIG’s CEO Liddy) to explain what exactly he did with the US$13bn received from AIG.