AIG's Corruption

AIG's Corruption

From January 25, 2010 Reuters:

NEW YORK (Reuters) - U.S. securities regulators originally treated the New York Federal Reserve's bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

Crisis in Credit

The request to keep the details secret were made by the New York Federal Reserve -- a regulator that helped orchestrate the bailout -- and by the giant insurer itself, according to the emails.

The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that "special security procedures" would be used to handle the document.

If there is anything that the Bush and Obama Administrations could agree upon it was this: that incompetent Wall Street firms needed government protection. And that alone should have been enough argument for letting them go under. Painful? Yes. But I wonder how much of the continuing crisis more than a year later is because of the unwillingness to allow the market to liquidate and rationalize the bad consequences of the 1999 decision to encourage bad loans.