Can we blame Goldman for Government's largesse?

Guambat needs to keep things simple lest his head blow up. This story is certainly bound to end up more complex, but to Guambat, the latest government inquest about the AIG debacle has only revealed that Goldman was a very good debt collector, protecting its interests.

So far, to Guambat's usually cynical eyes, he has seen nothing that implicates Goldman in any nefarious dealings to get the government to pay out 100 cents on the dollar that AIG owed Goldman.

Mind you, given Goldman's Godfather touch, you might reasonably suspect something, but suspicion alone is of dubious utility for anything other than casting aspersions. And Guambat has cast a few of those Goldman's way.

That being said, somebody somewhere needs to answer the question,

what in God's name was the government (Hank Paulson and Tim Giethner, etc.) thinking when they paid Goldman full value for debt worth maybe half that?

And it's fair enough to ask that question of Goldman and anyone else.

Goldman executives defend pursuit of payments from bailed-out AIG

Goldman and AIG sparred over the value of mortgage bonds behind complex financial derivatives for more than a year before the government rescued AIG in September 2008, executives from the two companies told the Financial Crisis Inquiry Commission.

As part of the bailout, the government took an 80 percent ownership stake in AIG. After the rescue, federal officials decided to pay Goldman the entire $13 billion it was owed by AIG on credit default swaps. At the time, the swaps were worth about half their face value, said Bill Thomas, the Financial Crisis Inquiry Commission's vice chairman.

But Goldman Chief Financial Officer David Viniar said the company was not trying to gouge taxpayers. "All we were paid was what we were due under a contract," Viniar said.

Goldman had insurance for the money owed by AIG and would have received all it was owed had the government decided not to pay off AIG's debts, he said.

A representative from the Federal Reserve Bank of New York, a key player in the AIG bailout, called Goldman at one point to ask whether top executives would think about taking less than all that was owed, but there were no other conversations, Viniar said.

Federal officials, including former Treasury Secretary Henry M. Paulson - a onetime Goldman chief executive - and current Treasury Secretary Timothy F. Geithner, who was head of the Federal Reserve Bank of New York, have been strongly criticized for not forcing Goldman and other large financial firms to take reduced payments to save taxpayers some money.

Guambat remains keen to see if the Commission asks the hard questions of Paulson, Geithner and others who were supposed to be representing the taxpayers' interests.