Goldman Sachs has again been all over the news this week from the business pages to the front pages.
There is no shortage of opinions on the Securities and Exchange Commission’s (SEC) charges of fraud against the investment bank. The details are out there so I won’t spend too long rehashing them.
The SEC says that Goldman marketed a collateralised debt obligation (CDO) to investors with one hand while enabling the hedge fund Paulson & Co to bet on its failure. The investors lost around $1bn while coincidentally Paulson made around the same amount.
Although it was not a direct investor in this particular CDO it again looks like American International Group will suffer financial losses as Goldman were in the process of ‘doing God’s work”.
According to this article in Business Insurance, AIG leads the directors’ and officers’ liability coverage for Goldman Sachs Group.
In short AIG will end up covering Goldman’s legal costs as the bank defends itself against charges that it favoured some clients over others.
Meanwhile, AIG is said to be looking at recovering losses of around $2bn related to guarantees on Goldman’s CDOs suggesting that it was not amongst those favoured clients itself.
Whichever way the insurance giant turns it appears Goldman remains one step ahead of it.