Goldman Sachs stands by AIG deals

City A.M. Reporter
GOLDMAN Sachs said that it believed its trades with the bailed out insurer AIG during the financial crisis were accurate and its collateral calls made to AIG were reflective of the conditions in a deteriorated market.

In a response submitted to the Financial Crisis Inquiry Commission (FCIC) last week, Goldman said it priced the collateral posted by AIG based on the best available market information at the time, including observed trades, actionable bids or offers from other parties.

"We made those collateral calls based on prices that reflected the deteriorating conditions in the market for the underlying collateral in Residential Mortgage Backed Securities and CDOs," Goldman said in its report to the FCIC that was obtained by Reuters.

On 23 July, a source told Reuters that Goldman Sachs had turned over a list of the counterparties to the FCIC following a recent hearing exploring the links between Goldman and AIG.

Goldman has long been criticized for benefiting from the US taxpayer bailout of AIG. Taxpayers pledged up to $182bn (£115.7bn) to address problems at AIG's financial products division.

"The foundation of our approach to risk management is based upon disciplined mark-to-market accounting," Goldman said.

Goldman said it had also used other market information obtained through its franchise for pricing collateralized debt obligations (CDOs) posted by AIG.

The bank added: "From July of 2007 through November of 2008 there was observable market data which provided the basis for our collateral requests to AIG."