Goldman Sachs (GS) seems to do everything right, even in the midst of disaster. It turns out AIG (AIG) paid it large sums of money from funds provided by the government.
According to The Wall Street Journal, Goldman got about $6 billion in the last four months of 2008. "The government's rescue of AIG helped prevent its counterparties from incurring immediate losses on mortgage-backed securities and other assets they had insured through AIG," the paper writes
Is it right that Goldman got the money? Almost certainly "yes"
The main reason the the government bailed out AIG was that it did not want to see dozens of financial firms that did business with the large insurer take billions of dollars in losses.
That might have put the global financial system in some jeopardy. Goldman had paid AIG to insure and hedge some of its positions. If AIG collapsed, Goldman and many other firms could have been driven to take write-offs and probably seek new capital.
Will the public and Congress cry "foul"? Absolutely. Was it necessary for government money to flow from AIG to Goldman? Absolutely.
Douglas A. McIntyre is an editor at 24/7 Wall St.
