Goldman execs grilled over bailout

A Goldman Sachs executive told an
inquiry panel the firm had no regrets about collecting billions of dollars in
taxpayer money for correctly predicting the demise of the U.S. housing market.
David Viniar, Goldman’s chief financial officer, said Uncle Sam had an obligation
to honour American International Group’s full debts. The firm was entitled to
be paid $12.9 billion out of the $182 billion bailout that went to crippled
insurance giant AIG – the largest federal rescue.
“The government stepped into AIG’s shoes” and therefore had to honour
its contract with Goldman, Viniar told the congressionally appointed panel
investigating the financial meltdown.
Members of the Financial Crisis Inquiry Commission couldn’t understand how
Goldman could take the full amount owed by AIG, knowing that the U.S. taxpayers
were picking up the tab at the onset of the worst recession since the 1930s.
“You were 100 percent recompensed on that deal. And the only people who
were out money were the American public,” said Brooksley Born, a panel
member.
The government “paid 100 cents on the dollar for something that was going
for 48 cents at the time” said Bill Thomas, the panel’s vice chairman and a
former California Republican who was chairman of the House Ways and Means
Committee.
AIG sold billions of dollars of credit default swaps, guarantees on mortgage
securities that ended up forcing the company to pay out billions after the subprime
mortgage bubble burst in 2007.
Goldman Sachs Group Inc. profited from its bets against the housing market
before the crisis. Its derivatives dealings have drawn harsh scrutiny. The firm
continued to reap huge profits after accepting federal bailout money and other
government subsidies.
A previously disclosed 2007 e-mail has Viniar indicating that the firm made
more than $50 million in one day on bets that the housing market would founder.

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