TARP Watchdog to Probe if AIG Victimized by Goldman in CDO Deal

Reuters has confirmed that Neil Barofsky, the special inspector general for the government’s unprecedented $700 billion Troubled Asset Relief Program [TARP], will probe whether Abacus, a synthetic CDO sold by Goldman Sachs (GS), led to losses at American International Group (AIG) and if the American taxpayer was a victim of fraud.

Barofsky said during a Senate hearing on Tuesday that he is in touch with the SEC and will possibly coordinate with the Department of Justice “to see if there are cases of fraud and if AIG and as a result, the American taxpayers, were victims of similar types of fraud.”

Barofsky made the comments in response to questions from the ranking Republican on the Senate Finance Committee, Charles Grassley, at a hearing examining the TARP.

Also in response to questions, Barofsky said his agency is considering a broader audit of the role of BlackRock (BLK) in TARP. Worth pointing out is that Larry Fink’s co. was the manager of the AIG assets that the Fed purchased with public money. Is Barofsky then implying here a deeper look into transactions of Blackrock’s-managed Tourmaline asset-backed CDO 2005-1?. Maybe.

Reuters: “We are doing a number of audits that touch on Blackrock’s role. And it is an extensive role throughout this financial crisis,” Barofsky said.

For example, current audits, including one on Citigroup Inc’s (C) asset guarantee program, touch on Blackrock, he said.

“We are considering doing a more overarching audit report on their role throughout the financial crisis,” Barofsky said without providing additional details.

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