AIG eyes action vs Goldman over CDOs: report

LONDON Tue Apr 20, 2010 4:11am EDT

People enter the Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, in New York's lower Manhattan, April 19, 2010. REUTERS/Brendan McDermid

People enter the Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, in New York's lower Manhattan, April 19, 2010.

Credit: Reuters/Brendan McDermid

LONDON (Reuters) - U.S. insurer AIG (AIG.N) is considering pursuing investment bank Goldman Sachs (GS.N) over losses incurred on $6.0 billion of insurance deals on mortgage-backed securities, the Financial Times said.

Quoting people close to the situation, the newspaper said the securities were similar to those that prompted U.S. regulator the Securities and Exchange Commission (SEC) to file civil fraud charges against Goldman on Friday.

The FT said government-controlled AIG, which made a loss of about $2.0 billion over the deals, was reviewing transactions to insure $6.0 billion-worth of collateralized debt obligations (CDOs) issued by Goldman in the run-up to the financial crisis.

But it added AIG had yet to decide whether to take action.

The SEC's complaint is focusing on one of a family of securities known as Abacus.

It accuses Goldman of falsely representing to investors that Paulson & Co, a hedge fund, would buy into the security when Paulson really wanted to bet against it -- and had influenced the selection of loans that went into the security.

If AIG and other companies discover that their transactions had disclosure issues similar to those alleged in the SEC charges, they would be able to complain to the SEC, file a private lawsuit or both, the newspaper added.

(Editing by David Holmes)

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Comments (4)
charluca wrote:
its kinda like dealing with terrorists. you can kill them , but 5 other dudes will take his place.

Apr 20, 2010 4:51am EDT  --  Report as abuse
AIG is reaching here out of desperation. They got so over exposed to derivatives that they figure one of those contracts had to have crossed the line

Apr 20, 2010 6:47am EDT  --  Report as abuse
BrianJDonovan wrote:
For a better understanding of subprime mortgage-backed credit derivatives, visit:

http://donovanlawgroup.wordpress.com/2010/02/19/how-credit-derivatives-brought-the-u-s-economy-to-the-brink-of-a-second-great-depression/

Apr 20, 2010 7:35am EDT  --  Report as abuse
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