Goldman: AIG's failure wouldn't have toppled us

Despite a $20 billion relationship with AIG, the investment bank says it had the means to protect itself.

Robert Caplin/Rapport/Newscom
Goldman Sachs's chief financial officer said Friday that the company would not have been weakened by an AIG default. Pictured: Goldman Sachs headquarters.

What would have happened if the government had not rescued AIG?

In the case of Goldman Sachs, one of AIG’s largest trading partners, the answer is “nothing.”

At least that’s what David Viniar, the company’s chief financial officer, maintained on Friday during a conference call with reporters. Instead, the company, which had a total of $20 billion in business with AIG, had either enough collateral or had hedged its trades with AIG so it would not have made a difference if AIG had gone out of business.

“Goldman would have been unaffected by the failure of AIG,” said Mr. Viniar. “We would have had no credit losses if they failed,” he stated.

Systemic risk

One of the major reasons the government intervened in the case of AIG was to prevent the risk of big losses rippling through the financial system, hitting especially hard those companies with financial holdings insured by AIG, such as Goldman Sachs.

Does this mean there was no such risk?

If AIG had not been saved by the US government—an effort that has now cost $170 billion—the financial markets would have gone into further turmoil, Viniar said. “For us volatility is usually good for our trading business,” he added. “But it’s not good for the financial markets as a whole.”

AIG exposure remains

Even today, Goldman continues to have an exposure of $4.4 billion to AIG. However, Viniar says that the company has gotten enough collateral from AIG to protect itself against a loss.

When AIG collapsed there were reports Goldman Sachs had pushed the company over the edge by demanding additional collateral. Viniar says the value of the assets it was holding was declining and it was within its commercial rights to demand additional collateral.

“We didn’t do anything wrong,” he said. “We had a responsibility to our shareholders to make sure we were protected. We called for the collateral due on the contracts. We have no guilt whatsoever.”

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