JPMorgan Chase & Co. (NYSE: JPM) and Citigroup, Inc (NYSE: C) are among the list of banks which sold Goldman Sachs Group Inc. (NYSE: GS) insurance against the failure of American International Group (AIG), according to a report from Bloomberg. Deutsche Bank, Credit Suisse and Morgan Stanley (NYSE: MS) were also among the banks which helped Goldman Sachs Group Inc. (NYSE: GS) bet against the possibility of a collapse of AIG.
Goldman Sachs Group Inc. (NYSE: GS) has turned over a list of counterparties to the Congressional Oversight Panel and the Financial Crisis Inquiry Commission, which are reviewing how taxpayer funds have been used in financial bailouts, said the report. If the government had allowed AIG to fail in 2008 instead of rescuing the firm to a tune of $182.3 billion, banks would have likely had to make payments to Goldman Sachs.
The rescue of AIG was designed by the U.S. Treasury to prevent a wider financial collapse. To protect itself against the possibility that AIG would go under, Goldman Sachs Group Inc. (NYSE: GS) purchased credit-default swaps which would have paid out in the event of a bankruptcy of the firm. Banks including Goldman Sachs purchased a total of $62.1 billion in insurance on mortgage-linked securities from AIG.
Goldman Sachs Group Inc. (NYSE: GS) received $12.9 billion after the rescue of AIG to help the insurer honor its contracts. Because of the hedges, Goldman refused to accept anything less than full payment on the guarantees it purchased from the insurer.
“We want to know the identity of those parties, partly just to know where American taxpayer dollars went, but partly to assess Goldman’s claim,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, in a Senate hearing this week. “We cannot evaluate the credibility of their claim that they had nothing at stake one way or the other in the AIG bailout.”
