Hank Paulson was on Charlie Rose couple days ago claiming that Goldman Sachs did not see the housing bubble blowing - but this NYT article clearly shows that GS bet billions on the fact that the housing prices would go down.
Another strange thing in the article - AIG sold insurance that was, in part, contingent on its own financial health. That is, if it ever was in a compromising position, it would be required to pay out more. I would call it the Express Suicide clause. The consensus in this whole debacle seems like GS was able to find a trading partner who was rich and incompetent, and just big enough that it could be deemed too big to fail.
And now if the banks claim that they have returned the TARP funds, the follow up should be - has AIG? AIG is just as likely as GM to pay back anything. And those losses directly paid off GS ($12+ billion) and others like Societe General.
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