WASHINGTON — Beleaguered Wall Street powerhouse Goldman Sachs Group switched to offense Friday, contending that the $13 billion the firm received from bailed-out American International Group Inc. was fully justified and in fact was good for taxpayers.
But that did little to quell the criticism that Goldman and other financial institutions should have taken less than they were owed on insurance for their risky bets on the subprime housing market.
Goldman Chief Financial Officer David Viniar said his company simply was trying to protect its shareholders -- which now include taxpayers after the firm received $10 billion in financial rescue money last fall.
"If we had taken a discount, then we would have taken a loss to Goldman Sachs," Viniar said in a conference call with reporters convened by the company to address its involvement with AIG. "We also have taxpayer money at Goldman Sachs and it's part of our responsibility to protect that money and not lose it."
But some lawmakers and others contended that holders of the insurance should have been forced to take less than 100% -- a haircut in Wall Street parlance -- because they would have gotten much less if AIG had been allowed to slip into bankruptcy.
"If you invest in GM you're asked to take a huge haircut," said Rep. Brad Sherman (D-Sherman Oaks).
Sherman noted that terms of the federal bailout of General Motors Corp. required it to renegotiate deals with company bondholders.
"But those who put their money in the AIG casino are told that you will be paid in full at the cost of the federal government," Sherman said.
Goldman received $13 billion -- more than any other financial institution -- in payment for AIG investment guarantees after the federal government stepped in with bailout commitments that now total as much as $172 billion to keep the insurance giant from failing.
In the wake of outrage over its payment of $165 million in employee retention bonuses, AIG this week disclosed the names of dozens of banks and other institutions that it had paid last year after being bailed out by the Federal Reserve and Treasury Department.
Sherman said Goldman should return the $13 billion it received from AIG to the Treasury.
"And it may well be that if Goldman can't repay that money, that the best thing for the country is for Goldman to be in receivership," he said.
