Goldman Sachs collected $2.9 billion from the American International Group as payout on a speculative trade it placed for the benefit of its own account, receiving the bulk of those funds after AIG received an enormous taxpayer rescue, according to the final report of an investigative panel appointed by Congress.
The details underscore the degree to which Goldman — the most profitable securities firm in Wall Street history — benefited directly from the massive emergency bailout of the nation’s financial system, a deal crafted on the watch of then-Treasury Secretary Henry Paulson, who had previously headed the bank.
“If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders,” said Joshua Rosner, a bond analyst and managing director at independent research consultancy Graham Fisher & Co., after he was read the relevant section of the report. “The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public.”
Goldman initially claimed that the money from the AIG bailout went to their clients. They didn’t know anything about $2.9 billion going directly into their own accounts. It’s a plausible lie. When you make $22 billion in profits over a two year period, it’s easy to overlook a measly $2.9 billion. All those zeros can be confusing. Besides, as George W. Bush once observed, accounting issues are not always black and white.