Goldman reveals where bailout cash went
Goldman Sachs received a $12.9 billion
payout from the government's
bailout of AIG, which was at one time
the world's largest insurance company.
By Karen Mracek and Thomas Beaumont, Des Moines Register
Goldman Sachs sent $4.3 billion in federal tax money to 32 entities, including many overseas banks, hedge funds and pensions, according to information made public Friday night.
Goldman Sachs disclosed the list of companies to the Senate Finance Committee after a threat of subpoena from Sen. Chuck Grassley, R-Ia.
Asked the significance of the list, Grassley said, "I hope it's as simple as taxpayers deserve to know what happened to their money."
He added, "We thought originally we were bailing out AIG. Then later on ... we learned that the money flowed through AIG to a few big banks, and now we know that the money went from these few big banks to dozens of financial institutions all around the world."
Grassley said he was reserving judgment on the appropriateness of U.S. taxpayer money ending up overseas until he learns more about the 32 entities.
Goldman Sachs (GS) received $5.55 billion from the government in fall of 2008 as payment for then-worthless securities it held in AIG. Goldman had already hedged its risk that the securities would go bad. It had entered into agreements to spread the risk with the 32 entities named in Friday's report.
Overall, Goldman Sachs received a $12.9 billion payout from the government's bailout of AIG, which was at one time the world's largest insurance company.
Goldman Sachs also revealed to the Senate Finance Committee that it would have received $2.3 billion if AIG had gone under. Other large financial institutions, such as Citibank, JPMorgan Chase and Morgan Stanley, sold Goldman Sachs protection in the case of AIG's collapse. Those institutions did not have to pay Goldman Sachs after the government stepped in with tax money.
Shouldn't Goldman Sachs be expected to collect from those institutions "before they collect the taxpayers' dollars?" Grassley asked. "It's a little bit like a farmer, if you got crop insurance, you shouldn't be getting disaster aid."
Goldman had not disclosed the names of the counterparties it paid in late 2008 until Friday, despite repeated requests from Elizabeth Warren, chairwoman of the Congressional Oversight Panel.
"I think we didn't get the information because they consider it very embarrassing," Grassley said, "and they ought to consider it very embarrassing."