NEW YORK - GOLDMAN Sachs had purchased US$20 billion (S$29 billion) worth of protection from American International Group in the credit default swap market, and was a 'significant counterparty' to the insurer, according to a former AIG chief executive.

Mr Robert Willumstad, AIG chief executive from June through mid-September 2008, made the statement at a US House Oversight and Government Reform hearing on Tuesday.

The New York Times reported last month that Goldman was AIG's largest trading partner, with US$20 billion in exposure, a report that was shot down by the bank as 'seriously misleading.'

Goldman spokesman Michael DuVally said on Tuesday that the bank's exposure to AIG is hedged and collateralised.

'Our net exposure to AIG is not material to us,' he said.

AIG sold protection to banks on pools of risky mortgages and other assets in the US$55 trillion credit derivatives market.

The US government bailed out AIG with a loan of up to US$85 billion last month, after its stock dived and its debt costs soared on concerns over losses the company will take on those protection policies. -- REUTERS