The Congressional Oversight Panel attacked the Treasury for two aspects of its bailout of American International Group (NYSE: AIG):
“By providing a complete rescue that called for no shared sacrifice among AIG’s creditors, the Federal Reserve and Treasury fundamentally changed the relationship between the government and the country’s most sophisticated financial player.”
In other words, the action did not cost Goldman Sachs Group (NYSE: GS) anything since it was made whole in its AIG dealings.
It added:
“The AIG rescue demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America’s largest financial institutions and to assure repayment to the creditors doing business with them.”
In other words, US officials panicked as the credit crisis reached its peak.
It is easy to look at the actions in retrospect and say that they were wrong, but the nation was probably within days of an unprecedented catastrophe.
Douglas A. McIntyre
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