Who’s the biggest beneficiary of the AIG (AIG) bailout?
No, not AIG — which is a penny stock — but Goldman Sachs (GS) which was one of the firm’s biggest counterparties.
Now where was CEO Ed Liddy before he arrived at AIG… that’s right, he was a boardmember at Goldman. And he still has a considerable stake in his former company.
Tim Carney* writes: As we saw with the political eruption over the bonuses his company paid out last month, Liddy needs government approval for his actions. The federal government owns 79.9% of AIG, and so Liddy, in effect, works for the government. In theory, then, Liddy works for the American people.
Yet he is not covered by the same ethics and financial disclosure rules that govern real government employees, specifically, conflict of interest rules don’t apply to him. Thus, Liddy observed in a recent Washington Post oped that “my annual salary is $1. My only stake is my reputation.”
But he has acute financial stake in one of AIG’s counterparties—namely, his $3.2 million personal investment in Goldman Sachs.
This is an awful situation for Liddy to be in. His interests aren’t aligned with either the taxpayer or AIG (given his $1 salary), they’re only aligned with AIG’s big counterparties.
Meanwhile, there’s an ongoing controversy about why AIG hasn’t been driving a harder bargain with its counterparties. Perhaps the situation would be smoother with a CEO that didn’t have a whiff of conflict of interest.