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This firm is not a giant vampire squid.

That could be the subtitle of an unusually long and detailed letter to shareholders from Goldman Sachs Group Inc. released yesterday. In it, the firm fired back at accusations that it bet against its clients in the housing market, hastened the demise of American International Group Inc. and later prospered in the government's rescue of the insurer.

Such controversies are part of what led a writer for Rolling Stone magazine to memorably describe the company as a huge money-sucking cephalopod.

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While Goldman was highly successful last year - its revenues were second only to the record high in 2007 - it faced a barrage of criticism of its behaviour during and after the financial crisis.

By defending itself, Goldman is attempting to lift a cloud that has shadowed its stock price and complicated its relationship with customers.

The firm felt it was important to address "various issues that merit broader discussion and a presentation of the facts," a spokesman said in an e-mailed statement.

In the eight-page letter to shareholders introducing Goldman's annual report, CEO Lloyd Blankfein and chief operating officer Gary Cohn describe the company as a conservative middleman in markets whose focus is serving clients and managing its own risk.

Where critics see an aggressive pursuit of profits, Goldman sees prudent bets and an abundance of caution. As the housing market began what would prove to be an inexorable descent in late 2006, for example, the company decided to pare back its overall exposure to the sector, the letter said.

"The firm did not generate enormous net revenues or profits by betting against residential mortgage-related products, as some have speculated," it said. "Rather, our relatively early risk reduction resulted in our losing less money than we otherwise would have."

Goldman made bets against the housing market in 2007, it said, but such "short" positions were not a wager against the firm's clients, some of whom held the opposite view. "Rather, they served to offset our long positions" and were part of its function as a financial intermediary.

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In the case of AIG, Goldman portrayed its interaction with the insurer as a normal trading relationship. By the time the government rescued AIG in September, 2008, Goldman said, most of its exposure to the insurer was already covered by collateral it held and the rest through various "risk mitigants."

In other words, a possible failure of AIG didn't directly threaten Goldman. On the other hand, it noted, every financial institution "benefited from the continued viability of AIG," whose failure would have been "extremely disruptive."

Much of the money Goldman received from AIG after the government's rescue either wasn't retained or would have been obtained even without a bailout, it added.

Some market-watchers welcomed Goldman's move to clear the air. "For Goldman, the dissection has been done and now it is back to business," wrote Mike Mayo, a banking analyst at Credit Agricole Securities in New York.

But others said much work remained, particularly with the firm's customers. If you were a Goldman client, "you would feel their main concern is themselves, and that they have an incredible ability to get themselves off the hook," said Simon Johnson, a former chief economist at the International Monetary Fund. "Goldman has really damaged its brand."

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