Federal regulators at the Federal Reserve Bank of New York, the Federal Reserve, and the Treasury Department, however, stepped in to provide assistance to AIG, which ultimately meant covering its obligations to creditors. A prior blog entry on Dissenting Justice discusses the connections that many of the federal regulators had to Goldman Sachs, which received nearly $13 billion from AIG after the federal government rescued the company. Here is a quote from that essay:
Henry Paulson, Secretary of Treasury during the Bush administration, is a former Chairman of Goldman Sachs. Paulson was responsible for administering TARP, and he had a large role in structuring the legislation.According to the New York Times, federal auditors challenged Goldman Sachs, which argues that it should not have been forced to collect from AIG in a bankruptcy proceeding. Earlier reports (including an entry on Dissenting Justice) argued that the federal government should have forced AIG, like the auto industry, to go into bankruptcy, and that Goldman Sachs likely would not have collected nearly as much money from the troubled insurer. The auditors confirm the position taken in these previous reports.
Robert Rubin, Secretary of Treasury during the Clinton administration, was a Co-Chairman of Goldman (along with Stephen Friedman -- see below) before he earned a Cabinet post. Although Rubin does not have a formal position in the Obama administration, he has served as an informal economic advisor to the President. Also, current Secretary of Treasury Tim Geithner worked as an assistant to Rubin (and later to Lawrence Summers -- former Secretary of Treasury and current head of Obama's National Economic Council) when he headed the agency. Paulson was also a partner at Goldman when Rubin was Co-Chairman.
Mark Patterson, Geithner's Chief of Staff, is a former lobbyist for Goldman. Obama waived his anti-lobbying rules in order to secure the job for Patterson.
Tim Geithner, current Secretary of Treasury, served as the President of the Federal Reserve Bank of New York until his current position. In that capacity, he helped to structure the federal bailout of AIG. Geithner, unlike many of the other individuals listed in this article, never worked at Goldman, but he worked for Rubin during the Clinton administration and for Summers, who replaced Rubin. Summers heads Obama's National Economic Council.
Stephen Friedman, the current Chairman of the Federal Reserve Bank of New York, was the Co-Chairman of Goldman with Rubin, and he has held several other executive positions at the company. In his current position, Friedman presumably will have a significant role in the ongoing federal bailout of AIG. Friedman also sits on the board of directors of Goldman.
Goldman Sachs, however, continues to deny that it received preferential treatment; Geithner also says that Goldman Sachs did not benefit from a backroom deal. But as the auditors' report states, regardless of the parties' intent, "[t]ens of billions of dollars of government money was funneled inexorably and directly to A.I.G.’s counterparties." This story will likely continue to unfold.