Thomas has been questioning GS’ David Viniar for a good 5 minutes on whether the Federal Government paid Goldman 100 cents on the dollar for AIG contracts that was worth 48 cents on the dollar. In other words, when the government took over AIG and fulfilled AIG’s contracts, did GS make the government pay 100 cents on the dollar for contracts that an isolated buyer in the market would have paid 48 cents on the dollar for.

Thomas seems shocked that Goldman made the government pay full price. The problem here, however, is that the Government wasn’t a normal buyer. When the government assumed AIG’s contracts, the government was assuming the role of AIG–AIG owed 100 cents on the dollar for their contracts to Goldman. If the Government only paid 48 cents on the dollar, the contracts would still exist and AIG’s financial situation would not have changed–there would have been no point to the bailout. Whether the GS should have accepted a discount on these contracts is a different question from whether the Government paid out what the contracts were worth.