Goldman had $20 bln in AIG CDS exposure-Willumstad

NEW YORK, Oct 7 (Reuters) - Goldman Sachs (GS.N) had purchased $20 billion worth of protection from American International Group (AIG.N) in the credit default swap market, and was a "significant counterparty" to the insurer, according to a former AIG chief executive.

Robert Willumstad, AIG chief executive from June through mid-September 2008, made the statement at a U.S. House Oversight and Government Reform hearing on Tuesday.

The New York Times reported last month that Goldman was AIG's largest trading partner, with $20 billion in exposure, a report that was shot down by the bank as "seriously misleading."

Goldman spokesman Michael DuVally said on Tuesday that the bank's exposure to AIG is hedged and collateralized.

"Our net exposure to AIG is not material to us," he said.

AIG sold protection to banks on pools of risky mortgages and other assets in the $55 trillion credit derivatives market.

The U.S. government bailed out AIG with a loan of up to $85 billion last month, after its stock dived and its debt costs soared on concerns over losses the company will take on those protection policies. (Reporting by Karen Brettell and Jonathan Spicer; Editing by Jan Paschal)