Speaking of Goldman Sachs investigations, McClatchy adds another installment to its Goldman series, reporting that the bank now admits that it used AIG to make proprietary bets (meaning, for itself—not a client) against the housing market.

That appears to be news, and McClatchy says it contradicts what Goldman has been saying.

But boy is the rest of this thing hard to follow. In fact, I can’t follow it, really. It’s overlong and reads like a reporter’s notebook dump.

For instance, why are these paragraphs in the story?

For years, Goldman and AIG have shared the same auditor, PricewaterhouseCoopers, a firm that AIG retained even after the SEC in 2006 directed it to find “an independent auditor.”

They’re also represented by the same New York law firm, Sullivan & Cromwell, which boasted on its website of its “significant experience in offshore reinsurance matters.” The firm’s senior chairman, Rodgin Cohen, is known as one of Wall Street’s most formidable attorneys.

These follow some information about Goldman possibly having inside information about AIG’s financial state. So, I guess these would be “vampire squid” graphs, but there’s not much there there. PricewaterhouseCoopers and Sullivan & Cromwell are hardly some strip-mall auditor or Long Island-based penny-stock broker. They’re retained by a lot of blue-chip companies out there.

The rest of the story is a jumble. I don’t think the average reader can unpack this, for example. I sure can’t:

Until now, however, Goldman has said that the insurance-like contracts it bought from AIG from 2004 to 2006 — deals that have cost the insurer some $15 billion — were made to offset similar swaps the investment bank had written for clients who wanted to bet on a housing downturn.

The companies have revealed few details of some $6 billion in so-called synthetic deals, in which the parties bet on the performance of designated securities that neither side purchased.

A person familiar with the matter, who declined to be identified because of its sensitivity, said that additional synthetic swap contracts between AIG and Goldman with a face value of $3 billion have yet to be unwound by the teams of specialists tasked with scaling down AIG’s more than $2 trillion in exotic risks.

The proprietary trades occurred in the same Abacus series of synthetic securities that Goldman bundled offshore, according to the senior Goldman official. Another one of those 16 deals prompted the government to sue Goldman on civil fraud charges in April.

Meantime, McClatchy continues to claim that it was the first to report on Goldman’s (an Audit funder) secret bets against the housing market. That’s just not the case. Kate Kelly, then of The Wall Street Journal, reported that in December 2007 in a major page-one story:

The group’s big bet that securities backed by risky home loans would fall in value generated nearly $4 billion of profits during the year ended Nov. 30, according to people familiar with the firm’s finances. Those gains erased $1.5 billion to $2 billion of mortgage-related losses elsewhere in the firm…

The question now being raised: Why did Goldman continue to peddle CDOs to customers early this year while its own traders were betting that CDO values would fall?

McClatchy has done first-rate work on the Goldman story (not to mention the credit-raters and other aspects of the financial crisis), including the November series it’s self-referencing. This isn’t up to that level.

Maybe it’s got some stuff here that I’m missing, but even that would just show how it needs to explain itself better.

Further Reading:

McClatchy Tightens Ties Between Goldman and Predatory Lenders: Reexamining where the big bank fits into the mortgage crisis.

As Goldman Turns.

McClatchy: Goldman Laid Down with Dogs: How Wall Street fueled the mortgage crisis and was deeply connected to the shadier parts of the housing industry.


Job Well Done
: WSJ shines light on Wall Street ‘hairball’

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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.