Wednesday :: Aug 5, 2009

Open Thread

by Mary

Michael Lewis debunks the rumors bashing Goldman Sachs.

Rumor No. 2: “When the U.S. government bailed out AIG, and paid off its gambling debts, it saved not AIG but Goldman Sachs.”

The charge isn’t merely insulting but ignorant. Less responsible journalists continue to bring up the $12.9 billion we received from AIG, as if that was some kind of big deal to us. But as our CFO David Viniar explained back in March, we were hedged. Our profits from AIG “rounded to zero.”

People who don’t work at Goldman Sachs, of course, find this implausible: How could $12.9 billion round to zero? Easy, but you just need to understand the mathematics.

Let’s assume AIG transferred $12,880,560,250.34 of taxpayer money to Goldman Sachs. A Goldman outsider, asked to round this number, might call it $12,880,560,250.00. That’s not how we look at it; at Goldman we always round to the nearest $50 billion, so anything less than $25 billion rounds to zero.

Think of it that way and you can see that $12,880,560,250.34 isn’t even close to not rounding to zero.

That's some fine rumor debunking.

Mary :: 12:00 AM :: Comments (4) :: Digg It!