Putting The Gold In Goldman

clipped from www.realclearmarkets.com This suggests that Goldman sold its protection to counterparties that knew materially less about the actual risk of AIG than Goldman did. Remember that this bailout was specifically designed to avoid an AIG default, the event that forces Credit Default Swaps to be triggered. Goldman, in frequent conversations with Paulson and Geithner, knew that the government had just committed $85 billion to avoid exactly this outcome. This would mean that while most of AIG's counterparties got 100 cents on the dollar, Goldman actually got far more. Criticism of Geithner seems appropriate. Paying counterparties 100 cents on the dollar was unnecessary. Keeping the whole thing a secret was indefensible. Allowing windfall profits was unconscionable. But the Fed's behavior may not be the worst element of this episode. Frankly, it is hard to see how, in having sold its AIG protection before March 2009, that Goldman Sachs can avoid the appearance that these trades were improper.