As Goldman Sachs Group Inc executives sought to defend the firm's pricing of illiquid mortgage derivatives during two days of hearings in Washington, a Goldman Sachs executive told the inquiry panel on Thursday that the firm had no regrets about collecting billions of dollars in taxpayer money for correctly predicting the demise of the US housing market.
Gary Cohn, Goldman Sachs's president and chief operating officer, and chief financial officer David Viniar argued that the firm's prices in 2007 and 2008 reflected what it saw in the market. Financial crisis inquiry commission members questioned whether the investment bank deliberately discounted prices to push markets lower because it had bet on a decline in the value of subprime mortgage-backed debt.
Viniar said the US government had an obligation to honour American International Group's full debts. The firm was entitled to be paid $12.9 billion out of the $182 billion bailout that went to crippled insurance giant AIG - the largest federal rescue.
"The government stepped into AIG's shoes" and therefore had to honor its contract with Goldman, Viniar told the congressionally appointed panel investigating the financial meltdown.
Members of the commission couldn't understand how Goldman could take the full amount owed by AIG, knowing that the US taxpayers were picking up the tab at the onset of the worst recession since the 1930s.
"You were 100-per cent recompensed on that deal. And the only people who were out money were the American public," said Brooksley Born, a panel member.