Why is everyone saying terrible things about Goldman Sachs? asked Floyd Norris in The New York Times. Once the most respected name on Wall Street, the politically connected bank is now the subject “of more conspiracy theories than the Central Intelligence Agency.” There’s the rumor that Bush administration Treasury Secretary Henry Paulson, a former Goldman CEO, steered $85 billion to tottering insurer AIG just so AIG could immediately funnel $20 billion to Goldman, its biggest trading partner. Goldman’s Wall Street rivals also note darkly that since last September’s financial crisis, “government officials, often Goldman alumni, have gained the power to decide which firms lived or died.” And then there’s AIG’s government-appointed CEO, Edward Liddy. He’s a former Goldman board member and still owns $3.3 million of the firm’s stock. So whose interests does he represent—those of Goldman’s shareholders or of the taxpayers who own AIG? Add it all up, said Paul Farrell in Marketwatch.com, and it looks as if Goldman is using its Washington access to gain “control of America’s $15 trillion economy.”

Calm down, said Edward Jay Epstein in TheDailybeast.com. “No conspiracy theory is needed” to explain the flow of Treasury funds from AIG to Goldman. The firm was one of AIG’s many worldwide trading partners, which collectively stood to lose trillions of dollars if AIG defaulted on its obligations to them. The Treasury’s bailout covered all those obligations—not just Goldman’s. Paulson, in short, wasn’t surreptitiously helping out his old firm. He was staving off “financial Armageddon.”

But even if you discount the conspiracy theories, some of Goldman’s recent moves seem questionable, said Andrew Ross Sorkin in The New York Times. Take the firm’s announcement last week of a $1.8 billion quarterly profit. On the strength of that profit, Goldman sold
$5 billion in new stock to the public and announced plans to pay back the $10 billion it borrowed from the government’s Troubled Asset Relief Program. But Goldman posted a profit only by changing its fiscal year to end in November rather than December, “effectively erasing the impact of a $1.5 billion loss that month.”

Goldman’s explanation for wanting to pay back the TARP money also sounds fishy, said John Gapper in the Financial Times. Goldman says it’s motivated by a sense of “duty” to the American taxpayer. But even if Goldman pays back the TARP funds, it will still enjoy “the benefits of public backing.” It recently issued $28 billion in bonds at below-market interest rates, thanks to a guarantee from the Federal Deposit Insurance Corp., which oversees Goldman now that it has converted from an investment bank to a commercial bank. Yet Goldman insists that once it repays the TARP loan, it should be able “to go back to paying employees what it wants.” If the Obama administration lifts Goldman’s pay restrictions, it will “exacerbate suspicions that Goldman, with its long history of producing Treasury secretaries, gets special treatment.” And the conspiracy theorists will have some new ammunition.