Did Rescue of Insurer Save Goldman? COMMENTARY

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THE Goldman Sachs spokesman could not have been firmer.

"We have said many times on the record that our exposure to AIG was, and is, not material. Our exposure to AIG is offset by collateral and hedges and is not material to Goldman Sachs in any way." That was back in September, just after the investment bank had raised $10 billion from a stock offering, of which $5 billion came from Warren Buffett -- about as good an endorsement as it is possible to get.

Buffett does not invest in bust banks.

But AIG's disclosure that Goldman is the biggest beneficiary of the Federal Reserve's decision to save the insurer from collapse scrapes at old wounds and raises a key question: might Goldman have gone under without this bailout? The $13 billion it has received from the US taxpayer is a serious amount of money even for such a giant institution -- Goldman's "not material" line looks increasingly open to question.

It insists it was hedged against this AIG exposure and that there was never a real risk of it being in trouble. But we only have the bank's word for that.

The true extent of its potential losses and the possible fate of Goldman and other banks had AIG been allowed to go bankrupt will never -- perhaps thankfully -- be known. Even Goldman can't be sure what would have happened in those circumstances. …


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