Wonder of Wonders: Greenberg and Spitzer Agree on Goldman Sachs

(MoneyWatch)  Talk about the best interview since "Frost-Nixon." How about Blodget-Spitzer? Henry Blodget interviewed former New York Attorney General and Gov. Eliot Spitzer, who ran Blodget out of Wall Street. Both are bloggers/columnists, both have suffered disgrace and both are looking for redemption.
And wonder of wonders, during the interview Spitzer was in agreement with yet another of his former targets, the peripatetic Hank Greenberg. The former CEO of American International Group is another in a long line of bosses who lost their jobs to Spitzer's tough investigative tactics.

Spitzer probably wouldn't want to admit that he essentially repeated what Greenberg said last December, and which BNET Finance ran: that the real villain in the AIG bailout wasn't Greenberg or Spitzer; it was Goldman Sachs, the investment bank whose tentacles reached into the highest levels of government.

"One of the biggest offenses to the taxpayer to date has been the transfer of $13 billion directly from an imploding AIG into the coffers of the once-again-triumphantly successful Goldman Sachs," Spitzer said during the Blodget interview, going on to describe it as an outrage.

AIG's Financial Products unit, formerly run out of London by Joseph Cassano, accumulated about $20 billion in unhedged liabilities. Even with a trillion dollars in assets AIG couldn't meet its obligations to its trading partners because the bulk of it was unavailable.

So should AIG have been saved? If it couldn't pay what it owed to its partners, the whole financial system could collapse (or so the argument went), and the whole country would go down with AIG.

But whose rationale was this anyway? None other than then Treasury Secretary Henry Paulson, a former CEO of investment bank Goldman Sachs. And, by coincidence, just who did AIG owe $13 billion to? You guessed it, Goldman Sachs.

Spitzer has his faults, but he always had, and probably still has, a keen sense of smell. And when he said something smelled rotten in the state of New York, it usually did. As for Greenberg, you can criticize his way of doing business, but, apart from losing his job at AIG and paying what amounted to a minimal (for him) fine to the U.S. Securities and Exchange Commission, no one's laid a glove on him.

And as for Goldman Sachs, it paid back the TARP money it borrowed and is giving out multi-million dollar bonuses to its employees and partners. But no one can object because the federal government no longer has a stake in the company.

Even Blodget is gainfully employed. And that makes him luckier than ten percent of all Americans, victims of the recession, who remain unemployed.