New York State’s ex-Governor Eliot Spitzer, who recently was given the nicknamed “Client Number Nine” by the media, spoke out last week on CNN’s Fareed Zakaria Global Public Square (GPS) show, regarding the AIG scandal. Before Spitzer became governor of the empire state and then ruined his career by getting caught in a sex scandal, he was the NY State Attorney General who went after AIG and their accounting methods and shady transactions. Spitzer told GPS that the insurer giant was at the center of the web of transactions that have forced the taxpayers to provide a massive bailout of the U.S. financial system.

AIG is now being kept afloat by U.S. taxpayers and according to Spitzer its woes stem from certain financial practices that he first investigated as the NY attorney general. AIG’s financial tentacles stretch to every investment bank and its collapse came largely from its various financial products such as credit default swaps which most all of went bad after the U.S. housing market went south after 2006. According to Spitzer, the real outrage is not the bonuses recently given to the top executives at AIG, but rather the dynamics between AIG and the financial institutions. Much of the 170 billion given to AIG by the taxpayers is now going to the financial institutions who were the buyers of AIG’s insurance policies which can best be explained as an insurance on mortgage backed bonds.

With the housing market tumbling and foreclosure rates spiking at an alarming rate, those bonds have diminished dramatically. That forced AIG to pay out money to the financial institutions. According to Spitzer, nearly 13 billion dollars alone went to the investment bank Goldman Sachs. Why weren’t any questions asked about this? Why do we need to pay 100 cents on the dollar on those transactions? What would have happened to the financial system had it not been paid? These are the questions that should be pursued.

When Spitzer was Attorney General his inquiries led to the resignation of AIG’s longtime chairman Maurice “Hank” Greenburg back in 2005.