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http://www.businessweek.com/ap/financialnews/D971UJO80.htm
Goldman says it had no material exposure to AIG
By IEVA M. AUGSTUMS
Goldman Sachs Group Inc.'s Chief Financial Officer David Viniar said Friday his firm would not have lost money from its contracts with American International Group Inc. -- even if the insurance giant failed rather than be rescued by the federal government.
Viniar also said Goldman Sachs was "fully hedged with credit default swaps or collateral" against potential losses on its contracts with AIG, and it rejected offers to settle trades with AIG at a discount.
"We have stated consistently that Goldman Sachs did not have a significant economic exposure to AIG," Viniar said on a conference call with reporters.
He added: "We had commercial contracts with AIG. We entered into these contracts on commercial terms. We were fully hedged with either credit default swaps or collateral, so we were not in a position to take a loss."
The comments come as the investment bank faced criticism this week about its relationship with the New York-based insurer, which nearly collapsed last fall and has received a $182.5 billion federal bailout.
When the government seized control of AIG back in September, it agreed to uphold the insurer's contracts with U.S. and foreign companies; the contracts that AIG offered, which were in the form of credit default swaps, guaranteed that the companies would be reimbursed for their investment losses.
The government argued that failing to repay those debts would cause catastrophic losses at big international banks, potentially toppling the global financial system.
For months, government and AIG officials refused to say who was benefiting from AIG's billion dollar bailout. They reversed that stand last weekend, and revealed that the New York-based insurer has paid more than $90 billion in taxpayer money to keep some of the biggest names in finance from losing money, including Goldman, Citigroup Inc., Merrill Lynch & Co., Switzerland's UBS AG and French bank Societe General.
Goldman was among the biggest recipient of the AIG money, at $12.9 billion.
Viniar explained that as Goldman increased its calls for collateral from AIG to cover potential losses, AIG tried to negotiate a discounted settlement of its contracts, but Goldman refused.
"We had commercial terms. It is our responsibility to our shareholders to make sure that we are protecting ourselves," Viniar 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."
When asked if Goldman felt any guilt about its possible contribution to AIG's collapse, Viniar said: "All we did was call for what was due to us under the contracts. So you know, I don't think there's any guilt whatsoever."
Shares of Goldman Sachs fell $2.78, or 2.8 percent, to $96.52 in afternoon trading. |
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