Here is a follow up on Goldman Sach

Remember when AIG got an $85 billion dollar bailout because it was too big to fail. AIG had been a main proponent of the credit default swaps that motivated the mortgage industry to make any and every loan it could.

You got it, the same credit default swaps that drove the housing bubble.

Of course looking back we see that these loans were insane to be written, helped to undercut the housing market, and is a key component to the recession that we are in now. And made the lives of millions of American’s miserable.

Well today the Wall Street Journal has uncovered that out of the bailout the fine folks at Goldman Sachs was a key driver behind AIG’s disastrous decisions. The same Goldman Sachs that has given us Henry Paulson, the Treasury Secretary that put the deal together for the AIG bailout.

A Wall Street Journal analysis of AIG’s trades, which were on pools of mortgage debt, shows that Goldman was a key player in many of them, even the ones involving other banks.

Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom. That is roughly twice as much as Société Générale and Merrill Lynch, the banks with the biggest exposure to AIG after Goldman, according an analysis of ratings-firm reports and an internal AIG document that details several financial firms’ roles in the transactions. via the WSJ

So as Lehman Brothers was going under and Merrill Lynch was on the ropes, so was Paulson’s Goldman Sachs. The firm was on the hook for 33 billion of the worthless credit default swaps.

Now this is pure conjecture, but look at what happened:

• AIG gets an 85 billion dollar credit line from the Federal Government orchestrated by Henry Paulson.
• Goldman Sachs is protected from an impending financial disaster and gets 14 billion dollars from the government.
• Paulson’s old firm, Goldman Sachs, posts record profits while other banks are worrying about their survival.

Okay, maybe not that much conjecture after all.

The only saving grace is that even the top 30 Masters of the Universe at Goldman Sachs are feeling the heat and are not taking cash bonuses this year. Oh, they are still taking bonuses in shares, so the nobility is just postponed as they know they have their hand so deep in government now they are safe. It seems like the only safe bet in the market today is that Goldman Sachs will make money.

And don’t forget the 31,000 other employees at Goldman Sachs who will still get their higher than normal cash bonuses. Hey, 2009 was a great year to be in the financial business, right? Right?

So while we in the real estate world are suffering with an industry pummeled by terrible decisions made at Goldman Sachs and backed up by AIG and belts across America will be tightened up this Christmas, the folks at Goldman Sachs will be getting ready to spend their windfall.

Their windfall that came via the Federal Government.

The windfall of your tax money or more realistically money that they are borrowing from our children’s future.

The windfall that Henry Paulson arranged for his buddies back at Goldman Sachs.