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Goldman Sachs Reaps $6B After $1M Obama Contribution
He campaigned on a promise to restore trust in the U.S. government by making it more transparent, but after a confidential report showing how taxpayer money to American International Group (AIG) landed in the back pocket of Goldman Sachs was leaked to the Wall Street Journal, many have questioned Barack Obama’s commitment to transparency.

With lawmakers now clamoring for names and the Federal Reserve balking at such disclosures, Capitol Hill is embedded in controversy surrounding the vitality of the AIG bailout. It started at $83 billion and has since swelled to $173 billion....

...But it was the $6 billion that landed in the back pockets of Goldman Sachs, a bank with close ties to Mr. Obama, which raised a number of ethical questions of how and why taxpayer dollars were covertly funneled to one of the president’s largest campaign backers.

According to OpenSecrets.com, those at Goldman Sachs were second only to the University of California in terms of being an Obama top donor. While the organization itself did not donate the money, such donations were made either through employees, owners, the immediate families of such members and/or through the organization’s PAC.

During the 2008 campaign, those at Goldman Sachs donated $955,473 to the Obama campaign. Morgan Stanley, though further down the list, still made the top 20 with a bundled donation of $485,823.

Mr. Obama has also dipped in the Goldman Sachs pool in making his presidential appointments. U.S. Treasury Secretary Timothy Geithner’s loyalty to Goldman Sachs has been an issue of contention and, upon assuming his post at the Treasury Department, he named Mark Patterson, a former Goldman Sachs lobbyist, as a top aide.

And as early as last December, reports Mr. Geithner favored Goldman Sachs surfaced when the New York Times Editorial Board questioned the motivation of then New York Federal Reserve President Timothy Geithner’s decision to let Lehman Brothers fail. Then, two days later, he advocated for the bailout of AIG and its counterparties.

Add to the mix Mr. Geithner arranged a September meeting to discuss the AIG bailout, and Goldman Sachs CEO Lloyd Blankfein was the only Wall Street leader at the meeting. At the time, Goldman Sachs was AIG’s largest trading partner, which raises more questions.

During the campaign, Mr. Obama had strong connections with Goldman Sachs, as he was invited to a private Goldman Sachs dinner in May 2007 when his candidacy was in its infancy....

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New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers
Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter. ...

...After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.

Habayeb, who left AIG in May, did not return phone calls and an e-mail.

Goldman Sachs

The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article. ...

...Janet Tavakoli, founder of Chicago-based Tavakoli Structured Finance Inc., a financial consulting firm, says the government squandered billions in the AIG deal.

“There’s no way they should have paid at par,” she says. “AIG was basically bankrupt.” ...