Did Hank Paulson Just Want to Save Goldman Sachs?

Question: [In the Bernanke on the Record forum hosted by the NewsHour,] Chairman Bernanke did not mention the bailout of Goldman Sachs — the first bank to receive such funds. Was it more critical to the survival of the banking system than Lehman Bros? I have heard allusions that Sec. Paulson was only interested in saving Goldman Sachs, nothing else. Is there any substance to that?

Paul Solman: Who knows what evil lurks in the minds of men? The Shadow, perhaps, but not me. Maybe not even the shadow formerly known as the Secretary of the Treasury, who presided during crunch time. It is increasingly clear that the subconscious runs much of the internal show in us humans, so maybe Hank Paulson was dedicated to saving Goldman at all costs (to us taxpayers), and will never consciously know it. On the other hand, this Sunday’s NYT reports Paulson contacts with his former firm, during the heat of the crisis, that are at the very least eyebrow-hiking; at worst, flatly incriminating.

Goldman now disputes that they were in danger at all. In this time’s-arrow universe of ours, moving ever forward, it seems we’ll never know. (Or not in my lifetime, anyway.) But, to take Paulson’s side for a moment, if YOU were Treasury Secretary, which firm would you have saved: Lehman Brothers — reportedly holding $600-700 billion in total assets (loans and the like) — or Goldman Sachs at more than a trillion?

And if they had to do it over again, a lot of people imagine Secretary Paulson would have saved Lehman too. Look what happened when the government didn’t.