Far be it for me to say something nice about AIG, but the lawsuit starting today should shed light into one of the dark corners of the financial bailout of 2008. The Federal Reserve and Treasury decided in the bleak, "world's coming to an end" days of Sept / Oct 2008 to pour money into AIG. The announced reason was to prevent insolvency of the insurance company and avoid another body blow to the markets. AIG did need bailing because that old Wall Street toxic recipe of greed, incompetence and lack of risk controls had bought the once proud company to the brink of bankruptcy. The way the Government poured money into the company did more to save AIG's trading partners than AIG itself. The AIG bailout's major beneficiaries were the parties who traded with the company (read Goldman Sachs, JP Morgan, Deutsche Bank, Merrill Lynch etc.) These trading partners were on the winning side of the trading bet but with AIG unable to pay, so what, they stood to become insolvent themselves. The money dumped through the insurance company help make them whole and kept these firms out of the bucket unlike Lehman Brothers.

I am not criticizing the Government's actions during the crises. Henry Paulson, Ben Bernanke and Tim Geithner were dealing with a major events every hour and they made a lot of decisions on the fly. The fact that we still have capital markets means they were more right than wrong. My objection concerns a year later when Wall Street was well on the road to recovery and the banks who benefited from the subrosa bailout were proudly taking credit for being great businesses. Lloyd Blankfein at Goldman couldn't wait to tell the world how much money the firm had made in 2009/2010 and Jamie Dimon was willing to admit he was the greatest banker ever. I have absolutely no sympathy for the banks as they complain about Dodd Frank act and increased scrutiny of their activities. I think we should go back to Glass Steagall and get commercial banks off Wall Street.