The transfer of $12.9 billion from AIG to Goldman looks fishier and fishier.

The AIG scandal is getting ever-more disturbing. Goldman Sachs' public conference call explaining its trading relationship and exposure with AIG established, once again, that Goldman knows how to protect itself. According to Goldman, even if AIG had failed, Goldman's losses would have been minimal.

How did Goldman protect itself? Sensing AIG's weakening capital position through 2006 and 2007, Goldman demanded more collateral from AIG and covered outstanding risk with instruments from other firms.

But this raises two critical questions. The first is why $12.9 billion of taxpayer money went from AIG to Goldman. What risk—systemic or otherwise—was being covered? If Goldman wasn't going to suffer severe losses, why are taxpayers paying them off at 100 cents on the dollar? As I wrote earlier in the week, the real AIG scandal is that the company's trading partners are getting fully paid rather than taking a haircut.

Goldman's answer is that it was merely taking a commercial position—trying to avoid any losses at all on its AIG positions. I suppose we can hardly expect Goldman to reject government assistance in the form of pure cash that seems to have had no strings attached.

But what were the government officials possibly thinking? The only rationale for what we should call the "hidden conduit bailout" to AIG's trading partners is that the cascading effect of AIG's inability to pay would have been devastating. But Goldman has now said very clearly there would have been no cascade. Not even a ripple.

Is the same true of AIG's other counterparties, including several foreign banks? What examination of the impact of an AIG failure did federal officials undertake before deciding to spend countless billions bailing out AIG and its trading partners?

The government decision to bail out AIG was made after the private parties, supposedly at risk, had declined to structure a private series of investments that might have avoided the need for use of public money. Perhaps they knew the impact of an AIG default would be small, or perhaps they knew that the federal officials in the room would blink and ante up. In a post-Lehman moment when panic, not reason, was dominating the discussion, perhaps they figured they could walk away with extra billions—and, indeed, they did.

This issue cries out for immediate government inquiry. Maybe one or two of the more than two dozen government entities now beating their chests about bonuses can redirect their energies to this much larger issue confronting us: Who signed off on this $80 billion bailout—now approaching $200 billion—and why?

The second question, of course, is why Goldman was wise to AIG's declining position two years ago but nobody else appears to have known. There is always the operating premise that Goldman is better than the rest in the field, but where were the federal agencies that should have been taking a look at AIG's leverage situation and general financial health?

And were AIG's public statements accurate in revealing a decline? Or did Goldman, with its multiple trading relationships with AIG, get an early warning? This series of questions also demands immediate inquiry and resolution.