Goldman Sachs CFO feels no “guilt whatsoever“ for being biggest beneficiary of AIG bailout money

21 March 2009

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.