aig.jpgAnother day, another market massacre. Right now the SEC is meeting about “improper short selling” of Morgan Stanley and Goldman Sachs stock. The Dow is down nearly 450 points.

We have definitely entered the “dogs and cats, living together, mass hysteria” phase of this meltdown.

But while everybody is running around trying to CYA, the government is giving away the store. Professor Bainbridge has nine excellent questions about the AIG bailout; questions that the government lawyers seem to be willfully ignoring. Here are some crucial ones, maybe we can help Bainbridge (and our country) out of this mess:

* On what basis does the Fed have authority to use the discount window to bail out an insurance company?

* Who would have standing to challenge the Fed action, if anyone?

* Why was AIG to big too fail but Lehman wasn’t? Was AIG’s role in the credit default swap market really that important?

* Has the federal government ever taken an equity stake–let alone a controlling stake–as part of a bailout before? Was there any equity stake in Chrysler?

See the rest of Bainbridge’s probing questions here.

There are a lot of smart men and women here. Does anybody have any idea how the federal government just shoved AIG down our collective throats?

Things I don’t Understand About the AIG Bailout [Stephen Bainbridge]


comments sponsored by

71 comments (hidden for your protection) Show all comments