Justin Fox wonders whether we should have just let AIG fail — or at least the holdco and the AIGFP subsidiary. They certainly deserved to fail. So why did we bail them out? Because of the systemic fragility of the CDS market, is the answer — it’s basically the same reason why the government stepped in to prevent Bear Stearns from being forced into liquidation. It feared a cascade of counterparty failures which could kill the entire financial system.
Barack Obama is a lawyer — and a very good one, too, by all accounts. Andrew Cuomo, too, is a lawyer, and is attorney general of New York. And neither of them seem remotely impressed by AIG’s protestations that it’s contractually obliged to pay out $165 million in bonuses to members of the very financial products group which brought the company to its knees.
Alan Stanford, obviously, needs a lawyer. But his assets have been frozen, so he can’t afford one. It’s just not fair, according to one lawyer Ashby Jones spoke to: