A couple of more e-mails following up on yesterday’s brief post on Goldman:

Rich: re your update: this is not so hard. AIG used its bailout money to meet its obligations to insure credit default swaps. (Failing to meet those obligations would have led to exactly the crash of interlocking debts that the USG was trying to stop.)
Presumably a fair number of these obligations were to Goldman Sachs who had bought this quasi insurance. AIG, with USG funding, having met those obligations, Goldman Sachs was not harmed by the debts it held going sour. So it’s operating profits for the quarter look ok.
So the bailout for AIG did what it was supposed to do; to keep AIG from failing to meet its insurance obligations and thus from seriously damaging all the entities that had bought insurance from it.
Rich,
The writer of zerohedge is obviously a smart guy, but like many like many people, he see’s conspiracies in the markets where there are actually none. Goldman was a counterparty to AIG and received funds the same way that all the counterparties of AIG did. That was the nature of the bailout, and was what the money was designed to be used for. You can’t support the price of an asset without inevitably transferring value to the holders of like assets. That’s the way it goes. Personally I think it was a mistake to bail them out at all, but once they decided to do it, the result was inevitable….
The bigger part of that story I think is the way that Goldman, like Wells Fargo, has told our community organizer in chief that they don’t care that he doesn’t want them to pay the TARP money back. The published narrative on his last meeting with the bank heads makes it pretty clear that he not only didn’t want them to ‘stigmatize’ the other banks (remember the ‘we should all work together’ sound bite?) but that he also wanted control over how they compensate their employees. (His quote about how ‘bonuses are unacceptable’) For Goldman and WFC this apparently doesn’t fly so they are publicly defying his wishes. It’s just speculation, but I would guess that they think they each have enough political capital elsewhere in Washington so that they don’t have to fear angering the White House, and their competitive position is better served by getting the government out of their management decision making. It’s certainly what I would do if I knew I believed I didn’t really need their money.