Oct. 22 (Bloomberg) -- Repeat after me: Goldman Sachs is not too big to fail. Goldman Sachs is not too big to fail. Goldman Sachs is not too big to fail.

Are you laughing yet?

This might be funny, except that Goldman Sachs Group Inc. wants us to believe it’s true.

Let’s begin with the obvious: Of course Goldman is too big to fail, and of course the government would intervene to prevent Goldman from collapsing if it ever came to that. It’s probably the most important investment bank in the world. There’s a decent chance it could take down the world’s financial system if it ever blew up. It’s the very embodiment of what’s known in government parlance as a “systemically significant” financial institution.

Only two U.S. bank-holding companies, JPMorgan Chase & Co. and Bank of America Corp., held greater amounts of derivatives than Goldman as of June 30, according to the Office of the Comptroller of the Currency. Citigroup Inc., which would be dead already if it hadn’t been too big, was No. 5 on that list.

Fannie Mae and Freddie Mac also used to say they didn’t have any federal guarantee. Not many people believed them either.

It was against this backdrop that Goldman’s chief financial officer, David Viniar, got on a conference call with reporters last week and said Goldman enjoys no government guarantee. Not even an implicit one, he said.

How to Justify

Viniar’s remarks came after a reporter for the Daily Mail of London, Simon Duke, posed a perfectly reasonable question: “It seems fairly clear that, post-Lehman, that the U.S. Treasury’s not going to let any bulge-bracket firms go under,” Duke began, according to an audio recording of the call. “How can you justify these levels of pay, when you effectively enjoy an implicit guarantee from the U.S. taxpayer?”

The pay Duke was referring to was the $16.7 billion that Goldman has accrued for employee-compensation expenses so far this year. Viniar responded by attacking his question’s premise.

“We’ve heard many people say that, but we certainly don’t operate the company that way,” Viniar said. “We operate as an independent financial institution that stands on our own two feet.” He didn’t stop there.

“If we felt that we had an implicit guarantee, we would not be holding nearly $170 billion of cash on our balance sheet. We would not have reduced our balance sheet by $400 billion.” (Actually, the “cash” figure he cited also included certain securities that Goldman considers to be highly liquid.)

What Crisis?

After Duke pressed him further, Viniar turned emphatic. “I don’t believe any of our bondholders think that we have a guarantee, and we don’t think we have a guarantee,” he said.

It’s as if last year’s bailouts of everything from the money-market industry to American International Group Inc. never even happened.

Sure, it’s of some comfort that Goldman is down to a measly $882 billion of assets, or 13.5 times equity. And it’s nice to hear Viniar say Goldman is operating as if it had no federal safety net. To say Goldman doesn’t have one, though, is crazy talk.

Consider what former Federal Reserve Board Chairman Paul Volcker said in a July interview published last month by the Minneapolis Fed’s in-house magazine, the Region.

“Think of the situation with Goldman Sachs,” said Volcker, one of President Barack Obama’s economic advisers. “They’ve had government assistance. They were presumably deemed too big to fail. And at the same time, they have an enormous trading book. They’ve made a lot of money. There’s nothing wrong with making money, but I don’t want them to make money by taking those risks with the support of the taxpayer.”

Leading the Polls

Likewise, here’s what Fed Chairman Ben Bernanke told the House Financial Services Committee in July, when asked to estimate how many systemically significant, too-big-to-fail companies there might be.

“A very rough guess would be about 25,” he said. While Bernanke didn’t name names, leaving Goldman off that list would make as much sense as a Top 25 college football poll that didn’t include Tim Tebow’s undefeated Florida Gators.

Last spring, Goldman was one of the 19 major banks the Fed picked to undergo its so-called stress tests. Under that program, the government expressly committed to provide additional capital to any bank on the list that needed it and couldn’t raise enough from other investors. That capital would have been convertible into common-equity shares, meaning the government in effect was setting a floor for the banks’ stock prices.

Impossible to Imagine

True, Goldman passed the test, and in June it returned the $10 billion it received last year under the Treasury Department’s Troubled Asset Relief Program. Yet the point remains: Goldman had a federal safety net. It’s just about impossible to imagine the government wouldn’t provide another lifeline if needed.

Goldman’s bosses obviously are concerned about the criticism they’ve received over the bank’s massive profits and bonus pool this year. Many Americans believe Goldman would have died were it not for last year’s taxpayer bailouts of the banking industry. And a lot of them feel like Goldman owes the country a debt -- of gratitude, if nothing else.

As long as Goldman keeps feeling the need to explain itself, the least it could do is ease up on the hubris. Goldman Sachs doesn’t have an implicit government guarantee?

Give me a break.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

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To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

Last Updated: October 21, 2009 21:00 EDT