How Goldman Killed AIG

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Data from the report by the inquiry commission describes the role that Goldman Sachs played in bringing AIG down. Goldman had purchased insurance from AIG on its mortgage backed securities that required AIG to post collateral if the value of the securities fell or if AIG lost its AAA status. Since the securities were not traded on an exchange, Goldman could determine the value of the securities by marking them to its view of the market value. This led other banks with insurance from AIG to also demand collateral. This ultimately brought AIG down and caused the government to pay off claims against AIG. During this period, Goldman had also taken a short position which benefited from the fall in the value of the securities it had insured. The Commission stated the Goldman owed the world an apology for its behavior.