In relation to the collapse of AIG, and the beneficiaries of close to $200 billion in U.S. taxpayer money, I suspect Jim Hoagland is right about all of this:
The best guess I hear is that the banks were not buying insurance at all - they seem never to have diligently asked if AIG could pay off, which it manifestly could not. They were in effect buying a piece of the firm's AAA rating, which enabled the Europeans to inflate artificially their required credit reserves and lend out ever more of their capital for bigger profits - until the crash came. Or as financial blogger John Carney has put it, the customers were in on the scam.Hoagland continues,
If that is not the case, the administration needs to make public the facts that refute it. If these reports and suspicions are founded, the administration needs to explain what happened and get in front of what could become destabilizing public anger.I suspect that the Obama Administration, in continuation of Bush Administration policy, is trying to undo as much of AIG's damage as possible before "destabilizing public anger" prevents further action - and I suspect that would be the very moment the President confirmed Hoagland's suspicions. Sad though it may be, the concern appears to be that telling AIG's customers, "Sorry, you knew what you were doing, AIG's bankrupt, and you're not getting more money," could put the world financial system back into a tailspin.