Goldman nabbed $3 billion in AIG bailout

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Goldman Sachs received nearly $3 billion from AIG for "proprietary" transactions after the insurance company had been bailed out by the government, according to a federal inquiry.

The Financial Crisis Inquiry Commission said Goldman submitted documents that showed it received $3.4 billion in 2008 from AIG related to credit default swaps, a type of insurance policy, on bundles of mortgage-backed securities.

"Of that $3.4 billion, $1.9 billion was received after, and thus made possible by, the federal bailout of AIG," the commission writes in its final report on the causes of the crisis.

The report says $2.9 billion of the $3.4 billion total -- including some of the money made possible by the bailout -- was for "proprietary trades," which suggests the money went directly to Goldman, rather than to a client.

The payments were separate from the $14 billion Goldman received for credit default swaps from Maiden Lane, the limited liability company set up by the Federal Reserve Bank of New York to resolve CDSs from AIG, according to the FCIC.

"Thus, unlike the $14 billion received from AIG on trades in which Goldman owed money to its own counterparties, this $2.9 billion was retained by Goldman," the report says.

AIG was one of the largest purveyors of credit default swaps, or CDSs, during the financial crisis. At one point, it had written $79 billion worth of CDSs on pools of mortgage-backed securities, or credit default obligations, according to the FCIC.

Goldman (GS, Fortune 500), once one of the most respected firms on Wall Street, paid $550 million to settle charges brought by the Securities and Exchange Commission last year that it misled investors in the sale of a credit default obligation.

However, a source familiar with the trades said the report misuses the term "proprietary." The source said Goldman had "equivalent hedges" that would have offset any losses, and that it was acting as a "market maker" for AIG and other undisclosed market participants.

"The notion that Goldman received this great windfall from these transactions is inaccurate," the source claimed. To top of page

Just the hot list include
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Sponsors

Sections

Bankrupt toy retailer tells bankruptcy court it is looking at possibly reviving the Toys 'R' Us and Babies 'R' Us brands. More

Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.