Most of the media coverage of the AIG bailout focuses on the payment of rather large bonuses to AIG executives.

Now, I will say that on the surface  it is a not unreasonable source of anger to pay several billion dollars in tax money for bonuses to those running a company whose mistakes have already cost the taxpayers $170 billion.

Perhaps the executives of AIG do not remember the fate of Marie Antoinette, and the rather, shall we say, sharp, public reaction to her excesses.

Personally, if it was my call, and the fate of the world's economic and political systems were not in the balance, I would say,"Lamposts, or Madascar, cake free of charge."

Nonetheless, in order to get at the real scandal, one must see the difference between several billion, and $170 billion: follow the money, and count the zeros.

Now although, as that wonderful wag the late Sen. Everette Dirksen once said in describing federal fiscal follies,"A billion here, a billion there, and pretty soon, you are talking real money," nonetheless, the mainstream media has missed the real story of the scandal, which I would argue, is no accident.

The real scandal in the AIG bailot, beyond a regulatory failure discussed briefly, is the role of Goldman Sachs in this debacle, as is hinted at in the title.

As Deep Throat told Woodward and Bernstein in Watergate days, the key to understanding the real scandal is " to follow the money," in this case the money flowing to Goldman Sachs directly, and, one suspects, indirectly to its clients and minions overseas.

AIG went bankrupt in fall 2008, and has been hemorrhaging money since then to the tune, remember taxpayers, of $170 billion, because of its losses on financial instruments known as Credit Default Swaps (CDS in Wall Street lingo).

For those who do not know, a Credit Default Swap (CDS) is an insurance policy for investments.

Now as the side note as was hinted at in the introduction, this crisis would not have become as severe as it has if regulators had treated Credit Default Swaps properly as insurance policies, because then actuaries would have had to guarantee that the policy premiums and reserves were sufficient to cover the potential losses of the policies.

For those who do not know, actuaries, who are actually smarter than Wall Street finance "geniuses" on average, are professionals who complete a self-study program equivalent to the Master's and Ph.D. level, maybe even harder, and are professionals who have developed very respected methods for asessing risk.

If actuaries had been the ones evaluating AIG's insurance premiums for their Credit Default Swap business line, the business would have been shut down instantly as being the equivalent of a fly-by night operator under-collecting premiums in an unsustainable fashion, and that furthermore was insufficiently capitalized to absorb the losses potentially embedded in their product line, and because of both, woud have rightly concluded that AIG was therefore endangering the stability of the entire insurance system.

So when we follow the money, the first scandal is a regulatory one, of why Credit Default Swaps were allowed to be treated as financial, rather than insurance products, and note, the failure to regulate properly has cost taxpayers $170 billion due to AIG alone.

Go see who made that happen, and let them chose between lamposts and Madagascar, with complementary cake.

I bet you find a Goldman hand in this.

By my estimate, because of this basic regulatory failure, the total amount globally that will probably be eaten by taxpayers somewhere will probably come to the high trillions of dollars, if not tens of trillions, given the $55 trillion notional in credit default swap exposure.

When we follow the money, the real scandal though comes when we examine Goldman Sachs, and its role in the crisis.

For those who do not know, Goldman Sachs is probably the single most powerful financial firm in the world.

This frightens me writing this somewhat; they do not play nice.

Its former employees infect, I mean inhabit, the U.S. government at the highest levels on a permanent basis; Treasury Secretaries Rubin, Paulson, Geithner have all logged time there, or served, as in Geithner's case, under people who worked there; nice club, if you get admitted.

Goldman, as this Whore of Babylon is known on Wall Street, was one of the biggest originators of Collateralized Mortgage Obligations and especially collateralized Debt Obligations (CMO and CDO respectively).

So what is the real scandal?

On the one hand, Goldman was making money hand over fist creating/securitizing CDO's and CMO's, telling, in effect, grandmother's seeking safe yields on their CD's, oh, these investments are safe, very safe.

The Whores of the "Rating Agencies" say so.

On the other hand, Goldman had hedge funds, and one suspects, might very well have been advising foreign clients to act in a similar manner, which could be invesitgated, that were shorting the same CDO's and CMO's as if it were the Financial End of Times for the products being created by the Whore of Babylon by buying Credit Default Swaps from... AIG.

Some analysts might conclude that Goldman was commiting a fraud on AIG and investors, knowingly creating financial instruments far more risky than they were letting on to, with AIG to pick up the tab until they went bankrupt, like Goldman rivals Bear Sterns and Lehman's, who died from the same creations of the Goldman Whore of Babylon, and then using Goldman's political power, because of their infection, I mean influence over, the "American" government to rape the American people one last time by getting the "American" government to bail out AIG to pay back Goldman.

Now that would be a nice trick, to kill off your competitors, and have the taxpayers foot the bill, and the have the Lapdogs in the "Mainstream Media/Ministry of Truth" under the thumb of the Whore of Babylon get people to focus on AIG bonuses, instead of the real crimes.

If that is what is happened, which seems pretty obvious to this analyst, I say, let Goldman chose:

"Lamposts or Madagascar, with cake of course, complementary."