Goldman Sachs Group Inc. said it made payments to banks including Germany’s DZ Bank AG and Banco Santander SA of Spain for mortgage-related losses as it received U.S. taxpayer funds through the American International Group Inc. bailout in 2008.
The list of 32 counterparties to Goldman Sachs on collateralized debt obligations was released today by U.S. Senator Charles Grassley. The largest payments were to European lenders that also included the London branch of Rabobank Nederland NV, Zuercher Kantonalbank and Dexia Bank SA.
“The majority of these beneficiaries appear to be foreign entities,” Grassley wrote in a set of questions directed at Elizabeth Warren, chairman of the Congressional Oversight Panel, and published on his website. “Can you please explain how ensuring that these institutions were paid in full, rather than required to suffer the consequences of the risks that they took, benefited the U.S. taxpayer?”
Goldman Sachs turned over the list to the Congressional Oversight Panel and Financial Crisis Inquiry Commission, which are reviewing the use of taxpayer funds in financial bailouts. Grassley, the ranking Republican on the Senate Finance Committee, had suggested Goldman Sachs could be subpoenaed if the New York-based bank didn’t provide the information.
Goldman Sachs executives including Chief Operating Officer Gary Cohn and Chief Financial Officer David Viniar had defended the firm’s collection of $8.1 billion after AIG’s bailout, tied to swaps contracts. The money helped Goldman Sachs pay out offsetting contracts with other parties, they said, without naming the companies until now. In addition, Goldman Sachs received $4.8 billion after the bailout for securities lending contracts.
Buyers and Sellers
“We had transactions on the other side,” Cohn, 49, told members of the Financial Crisis Inquiry Commission at a hearing earlier this month. “In AIG, we sat in the middle of buyers and sellers.”
The documents released by Grassley’s office show that Goldman Sachs’s counterparties received a total of about $14 billion in payments for the bonds that ended up going into the Maiden Lane III special purpose vehicle established by the Federal Reserve for AIG’s bailout.
Other names on the list include the Hospitals of Ontario Pension Plan and a GSAM Credit CDO Ltd., a collateralized debt obligation managed by Goldman Sachs Asset Management. Collateralized debt obligations, or CDOs, are securities backed by pools of financial instruments such as mortgage bonds or loans.