Wow. I'm getting more than a little CT (conspiracy theory) on this story it has so many twists and turns. Blackrock supposedly released documents which prove Goldman Sachs was willing to tear up contracts, in other words take a hair cut on the back door bail out.

Bloomberg:

A month before the September 2008 rescue, Goldman Sachs approached AIG about tearing up contracts protecting the bank against losses on collateralized debt obligations, or holdings backed by mortgages, according to a BlackRock Inc. presentation dated Nov. 5, 2008. Goldman Sachs was the only counterparty willing to cancel the credit-default swaps and bear the risk of further CDO losses, provided that AIG make payments based on the bank’s larger-than-average estimate of market declines.

“Goldman Sachs is the least risk-averse counterparty,” according to the presentation, which was prepared by the asset manager for AIG and later given to the Federal Reserve Bank of New York. The firm is “the only counterparty willing to tear up CDS with AIG at agreed-upon prices and retain CDO exposure.” The document was obtained by the Congressional panel scheduled to hold a hearing tomorrow on AIG’s $182.3 billion bailout.

Recall last week documents were released which showed the New York Fed told AIG to stand down on any attempts to negotiate a partial payment, or a hair cut on a host of credit default swaps (little insurance policies) on the defaulted mortgage backed derivatives, credit default obligations (CDOs).

Also last week, Goldman Sachs said they were never asked to take a haircut during the back door bail out.

I also want to link to David Fiderer's article on Goldman Sachs and AIG. If you want to get your CT neck hairs all standing on end, enjoy.

Here on EP, when this went down, we knew something very smelly was bubbling over, like thieves were robbing the Louvre smelly. That said, who really architected this glorified theft of U.S. taxpayer money, who is responsible?

I believe looking for just one person as the scapegoat is the wrong course. What needs to happen is Congress passes some tough regulation and derivatives legislation so screw jobs like this one can never happen again.

The hearing is tomorrow and the rats are left scrambling as the ship is sinking. Wanna bet the one holding the cheese is not the one who suffers?

Oh yeah, regardless of the process, Goldman Sachs did make out like a bandit in all of this:

AIG posted about $6 billion in collateral to Goldman Sachs on the contracts before the bailout, according to the BlackRock document, a third of the sum that the insurer turned over to banks. Goldman Sachs’s bets accounted for about 22 percent of the assets insured by AIG through the swaps.

Goldman Sachs, the most profitable securities firm in Wall Street history, was allowed to keep collateral, including $2.5 billion posted after the bailout, and given $5.6 billion from Maiden Lane III in exchange for the CDOs in the deal to retire the swaps.

Zero Hedge posted some email, but unless I'm not clicking on the right thing, that's no smoking gun documentation to me.

So what the hell is going on? To be discovered, but someone somewhere is lying.

This story is getting as complicated as a CDS daily evaluation on a AAA rated CDO based on mortgages in swampville.

Stay tuned.