Tonight AIG finally buckled under political pressure and released a list of its clients, financial counterparties, to whom it had been sending some of the $160 billion bailout money from taxpayers, many of the same US and foreign banks that have been hammered financially for making all the stupid bets on collateralized mortgages. This on the same day that it's chairman is arguing, apparently with a straight face, of AIG's need to pay out $170 million in bonuses in order to keep its most talented people.
Here's the deal, it's completely over. AIG must fail. We have to stop plowing taxpayer money into the shaky bets that went bad and are now worth ZERO! There is no rescuing this stuff. These are not mortgages, these are the bets that the mortgages wouldn't go bad en masse. They did. AIG's finished. Oh but what about their other healthy insurance divisions? No problem. Those get sold off to new owners. The fraudulent market in credit swaps is what must disappear, not be bailed out.
So why would the US Government still be trying to hold onto the division of AIG that should be closed down, it's executives put in jail? Treasury Secretary Tim Geithner is why. Last year as President of the Federal Reserve Bank of New York he worked to bail out AIG. He's either tied to AIG's fortunes in ways we can't see or he made a mistake and is doubling down on it now as Treasury Secretary. The problem is, his mistake becomes our mistake. Bring on Chapter 11.