Here\u2019s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can\u2019t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars\u2019 worth of credit-default swaps would \u201cblow up,\u201d\u009d and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing. It would be funny if it weren\u2019t so awful.<\/p>\n
I asked Mr. Arvanitis, the former A.I.G. executive, if the company viewed what it had done during the bubble as a form of gaming the system. \u201cOh no,\u201d\u009d he said, \u201cthey never thought of it as abuse. They thought of themselves as satisfying their customers.\u201d\u009d<\/p>\n
That\u2019s either a remarkable example of the power of rationalization, or they were lying to themselves, figuring that when the house of cards finally fell, somebody else would have to clean it up.<\/p>\n
That would be us, the taxpayers.<\/p>\n