When the recipients of AIG's bailout funds were recently revealed, bonus payouts came in for a lot of criticism. At the same time, investment bank Goldman Sachs also came under the scanner for being the biggest beneficiary of AIG's largesse. (See: AIG discloses bailout recipients)

Yesterday, the bank's CFO said the company did no wrong when it accepted payments to close out trades with AIG.

CFO David Viniar, in a conference call, answered questions about Goldman's trading relationship with AIG, which was given $180 billion of taxpayer funds in the last four months of 2008 to save it from collapse.

The bailout sparked public outrage amid revelations that $90 billion of those funds were funnelled quickly to banks that traded with AIG. Goldman received $12.9 billion in payments and collateral, while most AIG investors were wiped out and the mounting cost of the bailout sparked outrage.

Viniar told reporters the trades with AIG were "commercial contracts" and the insurer was obligated to make good. "We don't think we did anything wrong," he said. "We had commercial terms. It is our responsibility to our shareholders to make sure that we are protecting ourselves."

Critics have complained that Goldman, whose alumni populate the halls of government, benefited unfairly from connections and favoritism. Henry Paulson, Treasury secretary when the AIG bailout was arranged last fall, is a former Goldman chief executive. The chairman of the Federal Reserve Bank of New York, Steve Friedman, is a former Goldman chairman.

Viniar disclosed that Goldman held $7.5 billion of collateral against $10 billion of AIG exposure when the insurance company was bailed out. The remaining $2.5 billion was hedged in the marketplace. Goldman's AIG exposure originally had a face value of $20 billion before market deterioration set in. Currently, Goldman has $6 billion of AIG exposure, offset in part by $4.4 billion in collateral.

Viniar said the bank had no material direct exposure to AIG and has no net exposure now. Goldman amassed most of its AIG trading exposure in 2006, he said, but scaled back its dealings starting in 2007 as it grew increasingly worried about sub-prime markets.

Starting in July 2007, Goldman began to mark down certain "super senior" AIG risk, and the two companies had some disputes over collateral, he said. During this period, Viniar said that Goldman CEO Lloyd Blankfein never held talks with Paulson about potential problems at AIG.

AIG had broached the idea of settling some trades at a discount, both before and after it received its first bailout on 16 September, but Goldman declined to accept, Viniar said. While the rescue has become a political flashpoint, Goldman was only demanding what was due, he said.

"That's why we enter into these contracts. That's why we have collateral terms in the first place, to make sure that we are protected," he said. "And all we did was call for the collateral that was due to us under the contracts. I don't think there's any guilt whatsoever."

Viniar repeated Goldman's stance that it would not have been hurt by AIG's failure because its exposure was either fully collateralized or hedged. While Goldman had no direct exposure to AIG, an AIG collapse would have disrupted the world's financial markets and likely caused indirect harm to Goldman, he said.