A couple of days ago I asked why Goldman Sachs was paying back its TARP money even though it also had an outstanding $5 billion investment from Warren Buffett on far more onerous terms. Why not pay Buffett back instead? What's more, why do a risky capital raising first? If they're really well capitalized already, why not just pay back the money immediately?
A reader appears to have the all-too-obvious answer: they can't. The terms of the TARP agreement say this about repurchasing shares other than the Senior Preferred shares issued by the Treasury:
The [Treasury's] consent shall be required for any share repurchases [...] until the third anniversary of the date of this investment unless prior to such third anniversary the Senior Preferred is redeemed in whole or the [Treasury] has transferred all of the Senior Preferred to third parties.
So until they pay back the TARP money, they can't repurchase Buffett's shares. As for the capital raising, there's this:
Senior Preferred may not be redeemed for a period of three years from the date of this investment, except with the proceeds from a Qualified Equity Offering (as defined below) which results in aggregate gross proceeds [...] of not less than 25% of the issue price of the Senior Preferred.
Goldman got $10 billion in TARP money, and they weren't allowed to pay it back unless they raised at least $2.5 billion first. So that's what they did.
Unless I'm missing something, this appears to answer all my questions. Goldman paid back the TARP money first because they were required to, and they raised money before doing it because they had to do that too. Mystery solved.