In AIG flap, it's not just about bonuses anymore

Scrutiny of bailout terms expands as critics question federal officials' longtime ties to aid recipients.

By Tom Hamburger and Janet Hook
LA Times
March 19, 2009

Reporting from Washington — The firestorm over American International Group is spreading beyond executive bonuses, with lawmakers and policy experts now questioning virtually all aspects of the taxpayer-financed rescue package for the insurance giant.

Among other issues, critics are asking why AIG was allowed to use federal bailout money to repay $13 billion in debt obligations to Wall Street powerhouse Goldman Sachs, as well as debts to foreign banks.

Prominent Republicans, joined by some Democrats, suggested that the answer could be found in longtime ties linking Washington to Wall Street.

Former Treasury Secretary Henry M. Paulson was once chief executive of Goldman Sachs, for example, while AIG's chief executive, Edward M. Liddy, was a member of Goldman's board. The Treasury official who is in charge of the bailout, Neel Kashkari, is a former Goldman executive.

(More here.)