The Wall Street Journal has a major story tonight, presumably slated for page one of tomorrow’s paper, showing that Goldman Sachs (an Audit funder) had a “a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled” AIG. To say the least:

Goldman originated or bought protection from AIG on about $33 billion of the $80 billion of U.S. mortgage assets that AIG insured during the housing boom.

The picture filled in here shows Goldman as essential to AIG’s catastrophic bets. AIG was the linchpin to the credit crisis because it took so much of the credit risk off the banks’ books, which turbocharged bad lending. But Goldman was the key conduit between AIG and the toxic waste that all but brought it down. Look at this:

In Goldman’s biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner—AIG, according to the Journal’s analysis and people familiar with the trades.

The trades yielded Goldman less than $50 million in profits, which were mostly booked from 2004 to 2006, according to a person familiar with the matter. But they piled risks onto AIG’s books, which later came to haunt the insurer and Goldman. The trades also gave Goldman a unique window into AIG’s exposure to losses on securities linked to mortgages.

You can bet there’s more to come on this. It’s excellent work by the Journal.

— Speaking of, check out the Journal’s leder on Bernie Madoff: The Prison Years.

Reporter Dionne Searcey finds him socializing with Colombo crime-family boss Carmine Persico and the spy Jonathan Pollard, plays bocce ball, and is a prison dishwasher making somewhere between 12 cents and $1.15 an hour. Oh yeah, and there’s this beaut:

The 71-year-old Mr. Madoff also is salvaging something that disappeared in the outside world the moment his fraud was exposed: respect. “To every con artist, he is the godfather, the don,” says an inmate interviewed earlier this week.

And this:

Some of Mr. Madoff’s fellow inmates suspect he has money hidden somewhere and try to cozy up to him in hopes of learning its location.

Awesome.

— The Financial Times’s Krishna Guha has 14 reasons why the U.S. should impose a windfall tax on bankers—and they’re pretty good. Here are three:

2. This anger is justified because the bonuses are based in large part on windfall profits. These profits derive from taxpayer-backed interventions that stabilised the financial system, paving the way for a recovery in financial markets and collapse of risk spreads.

3. All banks benefited from this bailout - not just the ones that took or still have Tarp funds. Even the strong gained hugely from Fed liquidity and government actions to ensure none of their weaker counterparties failed (including but by no means limited to the AIG case).

4. In an ideal world, these interventions would have been structured up front in a way that ensured the value created did not leak out to banks and bankers. But they were not.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.