Not to toot my horn, but I was linking to articles and blog posts the last week or so saying that AIG was bailed out to save politically connected banks and investment houses.

Yep..it is a matter of degree of connection, not sane financial practices

Anyone who believes the bank profits are anything but accounting gimmicks is a fool. Here’s the deal – Banks have been booking their normal monthly and expenses, from their regular operating activities, in the first 2 months of 1st quarter. These typically are profitable (duh.) Coupled with the fact that most banks can borrow money at zero percent interest, they’re turning a profit.

But at the end of March, they will have to assess the garbage assets (like their CDOs) still on their balance sheets. Given there is no market for these, they will incur further massive writedowns which will obliterate any operating line profits they have. (unless Tiny Timmy waves his wand and takes them away.)

This is why they are desperately begging to get rid of the mark-to-market rule for illiquid assets. It makes it all too clear that they really are in deep, deep $#%^.

(edited for naughty word.)

How about AIG sells off “troubled” thousand dollar bills at 5% of face value to other financial institutions also “too big to be allowed to fail”.
Favored financial institutions resell “troubled” thousand dollar bills at 15% of face value and pocket lots of “profits”, while holding press conferences about return of profitability (spiking their stock prices upwards). Whoever bought these is going to have to go through whatever legal battles to recover the value, and suffer whatever losses occur to whatever part is not recoverable.
Taxpayers replace AIG’s “troubled” thousand dollar bills at face value.

Two winners
One maybe winner yet to play
Only one nonwinner, and if the maybe wins they can be attacked for winning at taxpayer expense and the profits “recovered” for “the people”.

alas, this is what we get for so many generations of career welfare recipients being allowed to vote

You’re correct, as long as you understand that the biggest welfare recipients of all are on Wall Street.

Get the government OUT OF PRIVATE INDUSTRY NOW!

Yes, but private industry will fight you every step of the way in doing that.

There are no atheists in foxholes, and there are no free-marketeers in bankrupt corporations.

We either pump federal money into the system to let it unwind via the private market driven deals, which is what is really going on with AIG, or we nationalize everything and essentially zero out all their transactions under one roof….the government owned financial system roof.

How about we do neither of those things? Pumping money into the system is being done to stop it unwinding. If we ever want things to really resolve themselves we need to stop pumping money into these companies.

were basically a transfer of money from taxpayers to banks

Not exactly communism, is it? It’s almost like we’re getting ripped off by politically connected rich people.

You would think that with all the talk of disclosure and accountability, we would be getting disclosure and accountability.

This is the biggest organized looting of public wealth in history by far.