Under congressional and media pressure, AIG has revealed where its bailout money went, i.e. who it has paid off debts to with government money. Felix Salmon carefully explains the situation, Barry Ritholtz fumes, Henry Blodget makes a fair point, and Free Exchange makes a basic point:
I was under the impression that the need to make such payments was among the key factors behind the bail-out. More understandable is anger with the continued payment of large bonuses, some of which have gone to members of the AIG department responsible for the firm's situation.
In effect, the U.S. Treasury and Fed have been bailing out the rest of the world, to a massive degree. Is this a good thing? Perhaps.
But the U.S. cannot be the banker for the entire world. Now that the list are public knowledge, Congress is going to balk at providing any more open-ended financing for foreign counterparties. We are faced a global crisis, and it can only be solved through global action.
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