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Former NY Gov. Spitzer On AIG Mess

Former New York. Gov. Eliot Spitzer says the real scandal about AIG is not the bonuses, but the "astronomical" payments in full to counterparties that AIG does business with: Goldman Sachs, Bank of America, JP Morgan Chase and others.

Spitzer said that much of the $183 billion that taxpayers have given to AIG has gone in "conduit" back to Goldman Sachs, Bank of America, and JP Morgan Chase and others.

"It was given to AIG, and AIG then shipped it on through to other firms,'' he said. "That is the issue Congress should be probing. The bonuses yes, they matter, but they are penny ante compared to this money. Why, if they knew that that money was going to go back to Goldman, BofA and Morgan Chase, did they need it? What were they getting the money for and what was the premise that made them pay that money up front?"

Spitzer, who made a name for himself by prosecuting Wall Street titans as New York's Attorney General, spoke Wednesday morning on the Brian Lehrer radio show on WNYC. He also wrote an article about "The Real AIG Scandal posted Tuesday at Slate.

He elaborates on this point in his Slate article, saying "We know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already."

"It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure."

Spitzer had an eye on AIG during his tenure as New York State's Attorney General. He sued AIG and gained a $1.4 billion settlement in 2006. WNYC's Lehrer asked if at that time the AG's office investigated credit default swaps and outsized risk that has brought AIG to the brink of failure.

"We were not looking at that part of the company … but what we saw was a company, when you peeled back the first layer of the onion, that was without anything close to adequate controls and adequate structure to know what was going. The way they put their financials together was something that was absolutely beyond what was acceptable, which was why they paid a fine of $1.4 billion."

Spitzer Interview with WNYC's Brian Lehrer

"The Real AIG Scandal": Article Spitzer wrote Tuesday for Slate