Goldman Sachs' Role in the AIG Bailout: Oversight and Government Reform Committee Hearing

Strategic Insights -

Witnesses Neil Barofsky, Thomas C. Baxter, Elias Habayeb, and Stephen Friedman testified before the House Oversight and Government Reform Committee on January 27, 2010, regarding the federal bailout of AIG. In a heated exchange, Representative Edolphus Towns questioned Friedman, a former chairman of the Federal Reserve Bank of New York and current Goldman Sachs board member, about Goldman's involvement in the AIG bailout.

Friedman stated that Goldman Sachs did not need the billions it received in counterparty payment from AIG, citing a commercial transaction where Goldman acted as an intermediary for its clients. However, when pushed by Representative Towns, Friedman acknowledged that Goldman Sachs has consistently said they did not need the $20 billion in insurance instruments they sought from AIG.

Key Takeaways:

  • Goldman Sachs received billions in counterparty payments from AIG after the bailout.
  • Stephen Friedman, a former chairman of the Federal Reserve Bank of New York and current Goldman Sachs board member, testified that Goldman Sachs did not need the billions received from AIG.
  • Friedman stated that Goldman acted as an intermediary for its clients in the commercial transaction with AIG.
  • Goldman Sachs cited risk management and hedging as reasons for entering into the transaction.
  • The committee questioned the nature of Goldman Sachs' involvement in the AIG bailout and whether the company's actions were in the public interest.
  • Representative Towns suggested that Goldman Sachs should "come clean" and acknowledge that they needed the billions received from AIG.

Statistics:

  • Goldman Sachs received $20 billion in insurance instruments from AIG after the bailout (Friedman).
  • AIG was a AAA company at the time of the transaction (Friedman).
  • Goldman Sachs acted as intermediaries for its clients in the commercial transaction with AIG (Friedman).

Sources:

  • [Federal News Service, January 27, 2010]
  • [Committee on Oversight and Government Reform, House of Representatives]