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NEW YORK (Reuters)—U.S. regulators are investigating whether the mortgage insurance market was improperly distressed in 2008 because of payment demands that Goldman Sachs Group Inc. and other banks made on American International Group Inc., The New York Times reported on Sunday.
On a conference call between Goldman and AIG executives early that year, the Wall Street bank wanted the insurer to pay more than the $2 billion it already paid to cover losses Goldman said it might suffer on complex securities, the paper said, citing AIG documents and an audio recording of the call.
AIG executives wanted some of the $2 billion back, saying Goldman had inflated the potential losses, the paper said, adding the call ended with nothing settled.
Then the world's biggest insurer, AIG insured Goldman's securities. It was bailed out with a $182.3 billion government aid package when the mortgage market-inspired financial crisis struck later in 2008.
Now, the U.S. Securities and Exchange Commission is examining whether the demands by banks were improper, the paper reported, citing people briefed on the matter.
"This is the New York Times' third attempt to develop a conspiracy theory about Goldman Sachs and AIG," Goldman spokesman Lucas van Praag said in an e-mail. "The theories are disgracefully contradictory and the 'facts' don't stand up to serious scrutiny."
The Federal Reserve's bailout of the insurer remains controversial because it funneled nearly $70 billion to 16 big U.S. and European banks that had bought credit default swaps from AIG.
Goldman, Societe Generale and other banks had bought those insurance-like derivatives to guard against defaults on hundreds of securities backed by subprime mortgages.
A portion of the $11 billion in taxpayer money that went to SocGen, the French bank, was later transferred to Goldman under a deal struck by the two banks, the Times also reported, citing two people with knowledge of the positions.
A spokeswoman for AIG said it had no comment. A New York-based SocGen spokesman was not immediately available.
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