Hank Paulson, AIG, and ethics

The significance of the former Treasury secretary's contact with Goldman Sachs during the AIG bailout

The New York Times just “dumped a gigantic bucket of kerosene on the Goldman Sachs conspiracy fire,” said Joe Weisenthal in Clusterstock. The Times obtained records showing that then–Treasury Secretary Henry Paulson was in steady contact with Goldman, his former firm, as the government was planning the AIG bailout last September. He got ethics waivers to talk to Goldman, but that shows he was “specifically” worried about Goldman’s survival.

I’ve certainly been “skeptical” of the Goldman “conspiracy theorists,” said Andrew Clark in Britain’s The Guardian. But 26 phone calls in one week between Paulson and Goldman CEO Lloyd Blankfein? That’s “almost stalker-like behavior.” Paulson had no financial stake in helping Goldman, but since Goldman indirectly got $13 billion in the taxpayer bailout of AIG, it seems fair to question his loyalties.

Why are people looking for “behind-the-scenes winks and nods,” said Yves Smith in Naked Capitalism, when the government’s open favoritism toward Wall Street is so “blatant”? Goldman has better Washington access than other banks, but just because it was the biggest beneficiary of the AIG unwinding doesn’t mean it was the only one. Wall Street would have collapsed, along with AIG, if not for the “generosity of the American taxpayer.”

For that, Paulson actually deserves some credit—the bailout “prevented a 1929-style meltdown,” said Doug J in Ballon Juice. But it's hard to escape the fact that saving AIG and letting Lehman Brothers collapse both "benefited Goldman immensely.” I’m still not “a Goldman conspiracy theorist, but I can certainly see why a lot of people are.”