The tinfoil hat crowd won’t buy it, but Goldman Sachs (GS) still insists that its AIG (AIG) exposure was fully hedged and that if the large insurer had failed it would have cost the bank $0, as in nada.
Heidi N. Moore at WSJ Deal Journal did a liveblog of the just-concluded call.
Here’s why Goldman favoured the AIG bailout, despite its claimed lack of exposure:
11:21: “It was always clear to us that had AIG failed, it would have been quite disruptive to the world’s financial markets. We would have had to spend money, other people would have had to replace transactions as well. Generally for us, volatility is good for our trading business, however it would not have been good for the financial markets as a whole, so it would not have been good for our business…We would not have been affected directly by our exposure to them, but the world’s financial system would have been affected…there would have been no losses vis a vis our credit exposure to AIG.”
The bank also says that it knew to reduce its exposure after collateral disputes:
11:24: What were the collateral disputes? “We believe that the value of these positions was larger than they believed. We could only see their side of the trade with us, so we didn’t see all the other trades with counterparties.”
Also significantly, Goldman claims it had no special meeting with then Treasury Secretary Paulson on the issue.
So there you go. That’s their story and they’re sticking to it. Anyone convinced?
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