With the mounting crisis in Greece, another massive stash of toxic debt has revealed itself in a way that can’t be ignored.  Fears of a “contagious default” in the Eurozone hammered markets yesterday, with one Greek banker calling it a “wholesale selling off of the country.” Today, markets are rebounding on hopes for an EU bailout, and around we go again.

Though parallels to Dubai are obvious, Zero Hedge has noted the similarities between Greece and AIG due to the intimate involvement of Goldman Sachs in both crises.  Rumor has it that Goldman was a “bulk buyer” of Greek protection, ZH writes, and that thus “it is precisely Goldman, just like in the AIG case, that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance.”  This is the kind of enormous leverage that helped Goldman take AIG to the cleaners at taxpayers’ expense.

Zero Hedge’s allegations are backed up by rumors, for the most part.  But there is no denying that Goldman is mixed up in Greece, between this piece from Spiegel and this recent Financial Times article on Goldman’s prominent role in the Greece “rescue.”

If the allegations are true, Goldman is once again negotiating for a giant pass-through of taxpayer money from a world superpower. There are also signs that the bank is (once again) joined by a network of hedge fund colluders in its efforts.

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Louise Story and Gretchen Morgenson had a lengthy new story up at the Times yesterday on how Goldman bled AIG to death. The piece details negotiations over payouts on swaps that Goldman had purchased from AIG. Details of the negotiations are interesting, but this paragraph jumped out at me:

In addition, according to two people with knowledge of the positions, a portion of the $11 billion in taxpayer money that went to Société Générale, a French bank that traded with A.I.G., was subsequently transferred to Goldman under a deal the two banks had struck.

It seems that Goldman was even more of a beneficiary of the AIG bailout than we previously thought. Officially, it received more than any other counterparty, but add in the Société payments and headlines that referred to “AIG Trading Partners…” or “AIG Counterparties” would have to be revised to read “Goldman Sachs.”

This is outrageous. When was this arrangement made, and why? Did Goldman use SocGen to hide the extent to which it caused (and benefitted from) the AIG catastrophe? Would the size of its taxpayer-funded bonus pools be threatened by full disclosure of the payments? Like so many other aspects of Goldman’s business, this deserves an investigation.

The student lending reform bill is stalled in the Senate, thanks to banks’ lobbying efforts, according to the Post earlier this week and now the Times:

President Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress.

But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

Since Democrats are needed to block the reform, Sallie Mae has enlisted two of the Capitol’s biggest Democratic heavyweights, Tony Podesta and Jamie Gorelick, to lobby on its behalf. Gorelick, who is quoted in the article, became very wealthy tending the “sewer of corruption” at Fannie Mae.

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The Washington Post is reporting that AIG is set to pay $100 million in employee bonuses today:

American International Group plans Wednesday to pay another round of employee bonuses, worth about $100 million, said several people familiar with the matter, a year after similar payments at the bailed-out insurance giant infuriated many Americans and inflamed Washington.

The US government owns 80% of AIG. Lots of figures and percentages appear in the Washington Post article, but that one doesn’t. And while pay czar Ken Feinberg’s name appears throughout the piece — he seems to have played some role in approving these bonuses — the names of the three trustees charged with overseeing the government’s 80% stake are nowhere to be found. Search for their names on Google News, and you find no recent articles mentioning the trustees in the context of this decision. Did they not play a role in this decision?

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With the Geithner “wunderkind” and Summers “socratic genius” brands badly damaged, Obama faces pressure from a broad and growing spectrum to find new front men for his economic policy team.  This was in evidence last week when Paul Volcker and Austan Goolsbee were trucked in from oblivion to champion Obama’s new bank reform agenda.

Volcker and Goolsbee, though they’re only marginally more progressive than Geithner and Summers, present a serious threat to the power network behind Obama’s “bankers bonanza” economic policies.  Whereas Summers and Geithner owe their public lives to Robert Rubin–the man behind the curtain in Obama’s first year–Volcker and Goolsbee owe him relatively little, which is presumably why they were banished in the first place.  Establishing Volcker and Goolsbee more prominently in the White House coterie would present the first major threat to the Rubin axis in the West Wing, which, in addition to Summers and Geithner, includes administration insiders Peter Orszag, Michael Froman and Jason Furman.

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