* AIG rescue helped Goldman avert losses - report
* Goldman has said it was hedged against AIG trades
(Updates to add Goldman comment)
NEW YORK Nov 18 Goldman Sachs Group Inc (GS.N)
could have suffered dramatic losses if the federal government
had not intervened to prop up American International Group Inc
(AIG.N), according to a government report.
The report by the special inspector general for the
government bailout program raises doubts about Goldman's
previous claims that it was hedged against potential AIG
Last fall, as the financial services industry stood on the
brink of collapse, the government stepped in with an
unprecedented effort to rescue the system. AIG was among the
companies that received billions of dollars from the U.S.
Treasury's Troubled Asset Relief Program.
If AIG had collapsed, it would have made it difficult for
Goldman to liquidate its trading positions with AIG, even at
discounts, the report said. It also would have put pressure on
other counterparties that "might have made it difficult for
Goldman Sachs to collect on the credit protection it had
purchased against an AIG default."
Finally, the report said, an AIG default would have forced
Goldman Sachs to bear the risk of declines in the value of
billions of dollars in collateralized debt obligations.
A Goldman spokesman called the risks discussed in the
report a "moot point."
"Goldman Sachs has consistently said its exposure with AIG
was collateralized and hedged and therefore we had no direct
credit exposure," Goldman Spokesman Michael DuVally said.
"Given the hedges, collateral, and government backing as a
result of the bailout, the additional risks of declining market
values in the event of an AIG default are a moot point."
AIG has received pledges of up to $180 billion in taxpayer
aid since last fall to help save it from collapse. It was
revealed in March that Goldman received $12.9 billion in
payments and collateral from AIG.
David Viniar, Goldman's chief financial officer, in March
told reporters that the Wall Street bank did nothing wrong when
it accepted payments to close out trades with AIG.
The full report can be viewed at:
(Reporting by Steve Eder; editing by John Wallace and Tim