Goldman staff in London were briefed on the outlook and told they could look forward to the bonus hikes if the company registers, as predicted, its most profitable year ever, the report said.

The surge in projected profit can be attributed to a lack of competition and increased revenue from trading foreign currency, bonds and fixed-income products, the newspaper said, citing insiders at the firm.

Bonuses have been a point of contention between the Obama administration and Wall Street, which last fall endured a credit crisis that paralyzed the financial markets. The U.S. Treasury responded with the Troubled Asset Relief Program, which made $700 billion in loans available to banks. Goldman Sachs received $10 billion from TARP, which it repaid last week.

In letters to lawmakers last week, Goldman CEO Lloyd Blankfein said the firm is obligated to “ensure that compensation reflects the true performance of the firm and motivates proper behavior.”

What is left unsaid is that the lack of competition that has led to these record profits was engineered by Hank Paulson, former chairman of Goldman Sachs, when he was secretary of the Treasury under George W. Bush. After bailing out AIG, which then channeled billions to Goldman, Paulson then allowed its competitor, Lehman Brothers, to sink, causing a panic on Wall Street.

Speculation about why Paulson left Lehman go under mostly involved the analysis that it was not sound to bail out all the firms in trouble. But now that the bonuses have been announced and the reason for them given, it is clear that Paulson was aiding his old company. That this is going on with Tim Geithner saying nothing about it is a scandal of monumental proportions that is going largely unnoticed in most of the mainstream press.

Were there an effective Congress with a committee to investigate the causes of the financial collapse, such as the commission headed by Ferdinand Pecora in the Thirties, this inaction by Paulson regarding Lehman would raise a red flag. As it is, Lloyd Blankfein, who succeeded Paulson at Goldman, is getting away with this while people are still losing their jobs and their homes in considerable numbers.

[Editor's Postscript: Any piece that manages to peeve former Goldman broker Jim Cramer must be doing something right.]

Paulson, who was Secretary of the Treasury at the time, had been CEO of Goldman Sachs, the position currently held by Blankfein. Geithner was head of the New York Fed when the AIG bailout was adopted. He is now Secretary of the Treasury. Grilling Geithner, the House banking committee members failed to bring up Blankfein’s presence at that fateful meeting, either out of ignorance or out of deference to the man who is at the center of the everything and who is a major contributor to the Democratic Party.

Blankfein made over $60 million in 2008, chicken feed compared to the top hedge fund managers who reaped billions — on which they pay a ridiculous low rate of taxes, thanks to Senator Chuck Schumer of New York. But, with the exception of George Soros, also a major backer of the Democrats and liberal causes, most of the hedge fund managers, prefer, like Mafia dons, to remain in the shadows because the more exposure they get, the louder the outcry will be when the fracas over the AIG bonuses is over. Those bonuses amount to about $165 million, a paltry amount that the hedge funds manage get away with.

But Blankfein is another matter entirely. Goldman Sachs is not just a bank holding company. It is a political powerhouse. Robert Rubin, its former CEO, was Clinton’s Secretary of the Treasury. His co-chairman, Steve Friedman, was Bush’s economic advisor and Goldman Sachs high-flyer, Josh Bolten, was Bush’s Chief of Staff. Paulson’s advisor on the TARP bailout was a top Goldman executive and Geithner’s chief advisor is also Goldman Sachs. It is an octopus around the neck of the nation, and Blankfein is its head.

Born poor in Brooklyn, he went to Harvard on a scholarship, and then, to Harvard Law School. After a stint as a Wall Street lawyer, he joined Goldman Sachs as a gold bar and coin salesman. Driven to overcome his roots, this balding banker is seemingly addicted to money. Known to be hysterically funny in private about his own frailties, he nevertheless is, like the Sorcerer’s Apprentice, unable to stop.  He is at the epicenter of a culture of pathological greed in which there is never enough money, never enough houses, private jets, expensive clothes and cigars.

Even more disturbing, Blankfein and his ilk continue to function as though it were business as usual, using campaign contributions and lobbyists to grease the wheels of access and power. And as soon as they dislike something, they start shorting the market, engendering panic until the politicians relent. At least Morgan acted out of a sense of duty when he saved the country in 1909 and he wasn’t even that rich. What America has now is a pack of parasites like Blankfein, to whom the country is a bottomless pit they can exploit endlessly.

And while the AIG executives, joined by the Wall Street Journal, proclaim their outrage that Andrew Cuomo wants the names of those who received the bonuses, Hank Greenberg, who ran AIG for decades until he was forced out by Eliot Spitzer, denounces the bonuses as “outrageous,” saying none of them should be paid. Unlike Blankfein, Greenberg appears to have a conscience. Or maybe it’s just that he has lost billions with no way to recoup, unlike Blankfein, who continues to pull the strings of his puppet, Tim Geithner. He has announced that he plans to repay the TARP money, but has said nothing about the billions that were siphoned off to Goldman through AIG as a counterparty. Nor does he say what he has done with that money. The Goldman Sachs fund has lent fortunes to its executives to pay the taxes on their bonuses, which, in total, far exceed those of AIG. One would have thought that this could be the real Marie Antoinette moment.

The counterparties have never been disclosed but the Wall Street Journal reported that they included Goldman Sachs, Merrill Lynch, UBS and Deutsche Bank.

AIG and the Federal Reserve Bank of New York have unwound many of these contracts. To do this, they offered to buy the CDOs (collateralized debt obligations) that were originally insured by those agreements. The counterparties sold these assets at a discount, but were compensated in full in return for allowing AIG to extricate itself from the obligations. The counterparties also got to keep the $37.3 billion in collateral, according to the Wall Street Journal.

While Bear Stearns was collapsing, Goldman Sachs boasted that it had insulated itself by buying insurance against the mortgage backed derivatives. As it turns out, it was, in fact, rescued by the Fed when it bailed out AIG. In 2007, Lloyd Blankfein, Goldman Sachs’ CEO, received $70 million in compensation, including bonuses, $27 million in cash.  A Democrat, he contributed $7,000 to Hillary Clinton’s presidential campaign. At the time the New York Fed came to AIGs assistance, Secretary of the Treasury Timothy Geithner was its head.  Blankfein is still drawing down millions in compensation. The rationale for his compensation is the alleged profitability of Goldman Sachs, which raked in over $9 billion in 2006. It should also be noted that the bailout stopped Goldman stock from plummeting, thereby protecting not only Blankfein’s fortune, but that of Hank Paulson, the former chairman of Goldman Sachs, who was Secretary of the Treasury under George W. Bush.  This is perhaps the greatest financial scandal in American history but most Americans are  totally ignorant of it.

On top of this, the AIG bailout enabled John Thain to pay out billions in bonuses while he headed Merrill Lynch, just prior to its sale to Bank of America, a recipient of billions of bailout money, this while the unemployment rate is headed towards ten percent and the market collapse has caused losses in the trillions. Were the names of the banks made officially public, there would be cries of outrage so loud as to be deafening, making any further bailouts dubious for political reasons. And while Bernanke has said that he would not permit the big banks to fail, the looting of America by some of the richest and most powerful people, such as Blankfein and Thain, goes on, with no end in sight. Pandit the bandit now says Citigroup is profitable, enabling it stock to rise above a dollar, generating a temporary euphoria in the market. The cheers going up on CNBC can be heard all the way to Warren Buffett’s coffers. And American tax payers are not only bailing out the American banks,  they are also bailing out Europe. What suckers!