Last week, the bankrupt insurance giant AIG received an additional $30 billion in bailout funds from the United States government, raising its total take to $170 billion. The funds, however, aren’t going into the benighted firm’s coffers to aid the liquidation and deleveraging process. Rather, the AIG bailout masks the bailing out of other firms that AIG pays in order to maintain credit default swap guarantees offered to investors who purchased them to hedge risk. These firms include (according to the WSJ) Goldman Sachs ($6 billion), Deutsche Bank ($6 billion), Merrill Lynch, Société Générale, Calyon, Barclays, Rabobank, Danske, HSBC, Royal Bank of Scotland, Banco Santander, Morgan Stanley, Wachovia, Bank of America, and Lloyds Banking Group.
It appears that we all work for Wall Street, in one way or another. Nonetheless, the convergence of capital markets and government must stop if the institutions of a liberal international order (1, 2) are to be maintained.