US Rep Cummings To Seek Probe Into AIG Counterparty Payments

The inspector general in charge of the government's bailout of AIG is being asked to probe why the troubled insurer paid out billions of dollars in bailout funding to trading partners.

Rep. Elijah Cummings, D-Md., will ask in a letter to investigate why Goldman Sachs Group Inc. (GS) received $13 billion from American International Group Inc. (AIG). Goldman, along with other international banks, received the money as part of ongoing contracts with AIG.

The letter is the latest example of pressure U.S. lawmakers are putting on AIG. Anger in Congress and the public has focused on AIG's plan to pay $165 million in bonuses to employees of a unit that caused billions in losses for the company, leading to its bailout by the federal government.

Cummings has asked 23 other members of Congress to sign the letter. Among the questions he wants answered is why Goldman needed the cash since the investment bank claimed it wouldn't have lost money if AIG had failed.

Goldman Sachs maintained in a recent conference call that AIG remains a trading partner, and that roughly $8 billion of the money it had received was owed to it as collateral. The balance was owed to it under a securities lending agreement.

-By Joe Bel Bruno, Dow Jones Newswires; 201-938-4047; [e-mail]