Pigs are flying today. People are upset about someone paying back a government loan.

Goldman’s plan to raise private equity and repay their TARP borrowings has a bunch of undies in a bunch. Felix Salmon at Reuters and John Carney at Clusterstock both seem aggrieved at the turn of events. Their argument seems to center on the argument that financial firms need to be forced to become smaller and that this equity offering will somehow thwart that eventuality.

I happen to agree with the premise that we could do with smaller, less complex financial institutions. I don’t, however, see how Goldman’s offering has anything to do with whether or not that occurs. Both Salmon and Carney somehow conflate Goldman selling stock to capitulation to the maintenance of the financial services industry status quo. The connection escapes me.

Salmon sees the sale of the stock as “…part of the problem, not part of the solution,” and Carney thinks that”…those considering buying into the Goldman offering should at least be put on notice that future financial regulations may include caps on the size of a business such as Goldman and may intentionally reduce the profitability of the firm by reducing the amount and type of risk it may take on.” I suspect that most buyers are well aware of the risks that they’re entering into with any purchase of Goldman stock. If they want to assume that risk the so be it. I do doubt the usefulness of including media speculation as to the future course of public policy as required disclosure in stock prospectuses.

Realistically, any significant change to the country’s financial system is going to evolve over a fairly long period of  time. Few experts even argue that major changes should be undertaken in the middle of this crisis. Stability is the goal at this point in time not change that engenders even more uncertainty. It’s likely that most if not all TARP money will have been returned to the government before any meaningful restructuring is finalized.

So by all means, let businesses tap the equity markets and pay us back. Lord knows we have other uses for the money. And, wasn’t it supposed to be a good sign when private investors were willing to take a flyer on the financial companies?