Goldman Sachs

(GS) - Get Report

may deserve an apology.

One of the many criticisms of Goldman is that it was paid 100 cents on the dollar after the New York Federal Reserve agreed in November 2008 to buy $62 billion worth of securities insured by AIG. This batch included $14 billion held by Goldman. The New York Fed's Chairman at the time was Stephen Friedman, a former Goldman Chairman who retained a large stake in the bank and was adding to his holdings while participating in deliberations over whether to allow Goldman to become a bank holding company -- a decision that ultimately came down in Goldman's favor.

Okay, so there are a few eyebrow-raising issues here. However, what has been obscured by the latest furor over revelations that the New York Fed told AIG not to disclose that it made the banks whole on the $62 billion in securities, or who the banks were, is that the government expects to recoup the entire $62 billion, plus interest,

The Wall Street Journal


Friday, citing U.S. Treasury spokeswoman Meg Reilly. In other words, a decent argument could be made that the bailout of Goldman via AIG wasn't such a big bailout after all, or at least that it was only temporary.

One might still argue that the banks should have taken a haircut, as the securities were surely not worth 100 cents on the dollar at the time, given the wobbly state of the markets.

The kind of person one might ordinarily look to for such an argument is Linus Wilson, a professor at the University of Louisiana, and a frequent critic of the bailout especially TARP payments to banks like


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Bank of America

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JP Morgan Chase

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Morgan Stanley

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among many others.

However, Wilson surprised me Friday by saying the government made the right move in paying Goldman and other counterparties like

Societe Generale


Deutsche Bank

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in full.

"They do have a decent argument that there was a run on the investment banks

at the time and if they did not make the counterparties whole that could have created further runs on the investment banks in the U.S. and all over the world," Wilson told me.

The whole debate about how whether Goldman is a vampire squid on the face of humanity is one I don't feel like rehashing here. I simply want to note that, for me, at least, someone who has followed Goldman for several years, this bailout of Goldman via AIG has been a big mark against it. And now I must admit that it really doesn't appear to be as much of a gift as I'd thought. So, I'm really sorry Goldman, you big secretive money making machine. How could I ever have thought ill of you?


Written by Dan Freed in New York