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AIG considers action on Goldman

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Insurance giant AIG may pursue Goldman Sachs on losses from six billion dollars of insurance deals similar to those that prompted recent SEC fraud charges, the Financial Times reported Tuesday.

The US government-backed insurer, saved from collapse in 2008, lost two billion dollars in the deals on mortgage-backed securities, the financial daily said, citing sources close to the situation.

The civil suit from the Securities and Exchange Commission involved Goldman deals on subprime mortgage-backed securities, a key contributor to the financial crisis because many contained risky mortgages, the FT reported. AIG’s actions might prompt others to redress their losses on the complex bundles, it said.

If the insurance firm established that their transactions had had disclosure issues like the SEC allegations, they could file a lawsuit, complain to the SEC, or both, said the daily. Last Friday’s SEC charges against Goldman are thought to be the first against a Wall Street firm for speculating on the collapse of the housing market, still struggling to emerge from the worst financial crisis in decades.

The investment bank is accused of “defrauding investors by misstating and omitting key facts” in the deals. Earlier this month Goldman Sachs refuted allegations that it had profited improperly from the state rescue of insurance giant AIG. The bank, noting that in the last year its relationships with AIG had attracted much interest, said that it had handled its credit arrangements with AIG in the same way as with other big groups.

Washington, April 19, 2010 (AFP)