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Insurer American International Group Inc. paid Goldman Sachs Group Inc. $2.9 billion for the investment bank’s own account, a report said Thursday, adding new fuel to old accusations that ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s rescue was a backdoor bailout for Goldman.

A report from the Financial Crisis Inquiry Commission said Goldman was one of the largest recipients of payments from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ following the insurer’s rescue. Those payments have long led to accusations the ÌìÃÀÍøÕ¾´«Ã½´«Ã½ rescue was actually intended to save Goldman.

Goldman has long said it did not profit in any way from ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s bailout and that any money the bank received from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ for collateral payments went straight to Goldman’s clients.

The bank declined to comment Thursday’s story, but a source familiar with its trades said it did not make any profit from the $2.9 billion because it sold similar protection to clients to roughly match the guarantees it bought from ÌìÃÀÍøÕ¾´«Ã½´«Ã½.

The trades were part of the residential mortgage book where Goldman ultimately lost $1.2 billion in 2007 and 2008.

The new information comprises one paragraph in a 766-page document, part of the broader series of reports released by the commission’s members Thursday.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ also declined to comment.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½, by its own account, was within minutes of collapsing when the government bailed it out in September 2008. The company, once the world’s largest insurer, ultimately received more than $182 billion of support from the government.

After a recapitalization deal, the U.S. Treasury now owns 92 percent of ÌìÃÀÍøÕ¾´«Ã½´«Ã½. It plans to start selling that stake down in the next four months.

SYNTHETIC CDOs

The payments mentioned in the FCIC report are separate from the $14 billion in payments Goldman received from an entity called Maiden Lane III. That was the vehicle the Federal Reserve Bank of New York set up as part of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s bailout to hold all of the insurer’s bad credit default swaps.

Goldman previously acknowledged getting $14 billion in payments from Maiden Lane III, which it explained were all passed on to clients.

In those cases, it purchased protection on portfolios of corporate bonds from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ and then sold similar protection to clients. Such arrangements are sometimes known as ‘back-to-back trades,” and the money came into and went out of Goldman on roughly a one-to-one basis.

The $2.9 billion of trades the FCIC report refers to were synthetic CDOs, where Goldman bought protection from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ on a portfolio of credit derivatives instead protection on actual corporate bonds.

The source familiar with the trades said Goldman effectively conducted synthetic back-to-back trades on the synthetic CDOs, selling protection on other instruments that roughly mirrored the protection it purchased from ÌìÃÀÍøÕ¾´«Ã½´«Ã½.

While the effect was not one-to-one as it was with the Maiden Lane III trades, the source said, Goldman still did not make any money on the payments because of the overall losses on the residential mortgage book.

The source also indicated there was less of a dispute between Goldman and ÌìÃÀÍøÕ¾´«Ã½´«Ã½ on collateral for the synthetic CDOs than there was for the actual ones, minimizing the risk even absent the payments.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ fought counterparties on the size of their collateral requests in the months leading up to the bailout.

Goldman shares were up 1.5 percent in afternoon trading, while ÌìÃÀÍøÕ¾´«Ã½´«Ã½ shares were up about 0.7 percent.

(Editing by Andre Grenon)

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