Will they ever be prosecuted? http://www.nakedcapitalism.com/2009...-actions-crosses-into-criminal-territory.html Readers may have noticed Janet Tavakoliâs recent article at Huffington Post on Goldman Sachs and AIG. While much of it covers territory that Yves and I already wrote about previously, Ms. Tavakoli stops short of telling the whole story. While she is very knowledgeable of this market, perhaps she is unaware of the full extent of the wrongdoings Goldman committed by getting themselves paid on the AIG bailout. The Federal Reserve and the Treasury aided and abetted Goldman Sachs in committing financial and ethical crimes at an astounding level. She notes, accurately, that Goldman used AIG to hedge its bet on CDOâs, either for itself with the Abacus deals, or for its clients, with the Davis Square deal. Had AIG failed, Goldman would have been on the hook for the losses: to execute the CDO with synthetic mortgage bonds, Goldman went âlongâ the CDS and then turned around and went âshortâ with AIG, effectively taking the risk of the mortgage bonds defaulting and then transferring it to AIG. But Ms. Tavakoli fails to note that the collapse of the CDO bonds and the collapse of AIG were a deliberate strategy by Goldman. To realize on their bet against the housing market, Goldman needed the CDO bonds to collapse in value, which would cause AIG to be downgraded and lead to AIG posting collateral and Goldman getting paid for their bet.