Did Goldman Kill A.I.G.?

Even critics can't bring themselves to blame Goldman

Of course Goldman Sachs tried to extract the most money from its bets with insurance giant A.I.G--it would hardly deserve its top-dog position it it didn't strong-arm from time to time. But A.I.G. was no ordinary firm, and the big question New York Times reporter Gretchen Morgenson asks this weekend is: did Goldman's aggression exceed propriety and run them into the ground?

Many business writers say 'No'--even avowed Goldman critics say the firm can't be faulted for protecting its financial interests. This marks the second favorable breeze of opinion the firm has enjoyed. Is it starting to turn around the PR war?

• A.I.G. Bound to Fall Anyway  Barry Ritholtz at The Big Picture. Ritholtz notes that Goldman's huge profits from A.I.G.'s collapse are well known. But, he insists, the blame still rests with A.I.G. "A drunk driver who drives off the road might as well blame the guy who planted those trees 50 years earlier. Given AIG's massive mortgage exposure, they were going down anyway. GS just happened to be the one who made the opposite bet. In this zero sum game, AIG's losses were GS profits."

• Proves A.I.G.'s Too Dumb to Exist  Claudia Deutsch at True/Slant gives credit to Goldman for collecting on A.I.G.'s very bad bets. "I don't fault Goldman for playing hardball on this. ... The reason we take insurance is so that if there's a problem, we get paid." She concludes that the insurer's mistakes show "AIG isn't too big to fail. It's too dumb to exist."

• Tells Us What We Already Know  Felix Salmon says it's a well-known narrative, but one that reinforces that the government would have been better off taking over A.I.G. "At the very least, AIG and the New York Fed should have threatened to call Goldman's bluff...But no one did that, because AIG was only 80% owned by the government, and the government didn't want to provide essentially unlimited liquidity support to a company which still had a relatively large number of private shareholders. Outright nationalization, then, might have been a much simpler -- and cheaper, in the long run -- way of addressing the situation."

• Overlooks the Real Culprits  Yves Smith at Naked Capitalism. Smith is no friend to Goldman, but argues that the firm is on solid ground defending its actions. Yves Smith gives an elaborate, detailed criticism of the article, concluding that "The failure of regulators to push for much larger-scale inquiries suggests at best a troubling complacency, or at worst, the knowledge that a full bore investigation will reflect very poorly on the powers that be."