John Gapper parses Goldman Sachs’ view of the government’s role in saving both the financial system and Goldman, and tries to understand how government intervention could be “indispensable” for the financial system, but not indispensable for Goldman.
I think the answer to this conundrum lies in the system of collateral posting for OTC derivatives (that was put in place with heavy lobbying from Goldman as well other TBTF financial institutions). As Lehman made clear, what happens when a financial firm is about to fail is that all of its counterparties swoop in and take ever increasing amounts of collateral — leaving shareholders and unsecured creditors with almost nothing. Thus, in the event of a financial collapse, there will be one or two firms left with almost all the assets of the financial system (that existed prior to collapse). I think it’s probably a pretty safe bet that the last firms standing will in fact be solvent.
The way I read Goldman’s statements: We had every intention of managing our collateral demands in the event of a financial collapse so that Goldman would be one of the last firms standing.