Goldman Will Shut It Down

As exasperated as I am with Congress, they do seem to know how to investigate, if they don't always get the follow-through right. And they seem to be looking in the right places. For instance, Elijah Cummings wants to know about the counter-party payments from AIG:

He's currently circulating (and I have obtained) a letter to colleagues, seeking their support for a TARP inspector general investigation into every aspect of the payments AIG made, with government money, to counterparties whose risky investments it had insured.

"Goldman Sachs claimed in September that they had no material exposure to AIG; however, after AIG released the counterparty information on March 15, we found out that Goldman Sachs received almost $13 billion in counterparty payments.

The Special Inspector General for the Troubled Assets Relief Program was created to ensure that transparency and accountability stay firmly rooted in the government's efforts to revive and sustain the American economy. This letter proposes that the Special Inspector General examine the nature of the counterparty payments - including the recipients, the process by which they were made whole, and the justification, if any, for that level of payment."

In addition, investigators for the House Oversight Committee are delving into Joseph Cassano, the former head of the AIG Financial Products unit and essentially Patient Zero of the global financial crisis.

Investigators for the House Oversight committee intend to interview Cassano about his role in the firm's collapse, and have already contacted his lawyer, a committee staffer told TPMmuckraker.

As CEO of AIG Financial Products, Cassano, based in the unit's London office, was the prime mover behind the credit default swaps, whose implosion brought the firm to its knees. He stepped down in March 2008, signing a $1 million-a-month "consulting" contract with the firm. (The contract was canceled last September.)

Federal investigators, as well as Britain's Serious Fraud Office, are also probing AIGFP. The Feds are reportedly focused in particular on whether Cassano and then-AIG CEO Martin Sullivan made false or misleading pubic statements about the company's potential exposure to losses on its credit default swaps. A December 2007 shareholder presentation the two men made is said to be of special interest.

The focus appears to be those counter-party payments from AIG, and how they made big international banks whole on their CDS bets. What worries me is that all roads lead to Goldman Sachs, which clearly has its tentacles around the Administration. Goldman vowed yesterday to return all the TARP money it received while neglecting to mention that they received even more government relief from AIG and other sources. And Goldman is a linchpin to the Geithner plan for toxic assets:

Tim Geithner suggested that Goldman Sachs could be one of five institutions helping to manage the public-private partnership program to buy up a bunch of toxic legacy assets from ailing banks.

Goldman has played a central role in this drama. As an institution, it's been extremely close to the Treasury department. And, as Josh noted, it's also about to pay off all of its TARP money (with the help, perhaps, of the other government money it received as an AIG counterparty) which will free it up to return to a status quo of paying enormous bonuses.

It's also, of course, one of the institutions that helped bring the financial system to its knees--it holds many of the toxic assets in question and may be well placed to bid them up and inflate their prices at auction. (How you manage the fund to rescue financial institutions with toxic assets while you yourself hold those same assets has yet to be sussed out by committee members.)

My point is that Goldman may be the eventual white whale for Congressional investigators, but the Treasury Department as currently structured will work overtime to shield them from any harm.

Sigh.

"And Robert Novak, of all people..."

That was Rep. Diane Watson (D-Los Angeles) this morning at the House Oversight and Government Reform Committee hearing, where she and the rest of the panel heard the testimony of Valerie Plame, her first public words in four years since her outing as a spy.

Plame was very impressive in her opening statement (here it is). But the most interesting part of the testimony to me came under questioning from Rep. Elijah Cummings, where he revealed that (a) CIA Director Michael Hayden acknowledged that Plame was covert, (b) the CIA vetted Rep. Waxman's opening statement which included phrases like "Valerie Plame was covert" and "her position at the CIA was classified," and (c) Plame had been on secret missions outside the United States within the past three years. All of that was new information to me.

The blogosphere is acutely interested in the Plame case because it encapsulates everything that this Administration has done, which can be boiled down to: rewarding political friends, punishing political enemies. We see this again in the case of the Purged Prosecutors, but the CIA Leak Investigation was even more cut and dried. Valerie Plame was serving her country, working to keep America safe from WMD, and because her husband - not even her but her husband - criticized the White House and particularly the Vice President, her career was ruined. Her life's work was trashed. Her life and that of her colleagues were torn upside down. And in a very real way, lives were put into jeopardy. All to rebut criticism. And then the progenitors of this smear started lying about their role in it, which led us to Scooter Libby's conviction last week.

We now have a Congress that will not take this kind of thuggish behavior from the White House any longer. Rep. Stephen Lynch mentioned during testimony that he and his colleagues have been trying to get Plame to testify for four years. Only now, with the Democratic majority, has this been realized. And in every case where Democrats have gone searching for malfeasance so far in the 110th Congress, they've found it. And there's plenty to find:

We're sitting here listening to the Plame testimony in the House. And the exchange has just come to focus on the 2004 Senate Select Committee on Intelligence Iraq intel report. If you've been a longtime reader of this site, you know that the Niger story was one I reported on extensively for almost two years. The fallout from the story has now spilled out in many directions, not least of which was the recent Libby conviction. But I do hope we can finally have review and scrutiny of that report. The section of the report dealing with Niger, Wilson and Plame is simply a tissue of lies. It's a shame on the Democrats who served on the committee who got gamed into approving it.

You can read through our archives for detailed discussions of the report's contents. But it is a deliberate construction of half-truths, flat out lies and intentional misdirection -- all quite conscious on the part of the authors -- meant to discredit Wilson and thus protect the president. Then-Chairman Roberts (R-KS) prostituted his office by working in concert with the White House to obstruct and misdirect the investigation he was supposedly in charge of leading. And of course the conclusions of the report have become socially acceptable lies repeated endlessly by virtually every Republican in Washington and every conservative editorialist, most recently David Brooks in the Times, but certainly by many others.

This is going to be a long 22 more months for the President and his staff, and it's all their own fault.