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Quote: Citing the lack of regulatory authority over a financial institution the size and complexity of AIG, Geithner began to answer: "We did not have the ability to selectively impose losses on their counterparties..."
Last I looked, AIG was effectively bankrupt until the US government rode to the rescue using taxpayer's wallets to pave the way. If GS had CDS contracts against securities they actually owned (and therefore had some sort of actual insurable interest in), that's one thing. But if GS had merely been placing bets via CDS instruments (unregulated gambling is what it is) that this whole MBS/ABS/CDO/SIV mess was going to blow up, that's another thing entirely.**
So...regulatory authority my...donkey. This is taxpayer money we are talking about here.
**If GS or others wanted to then sue the US government for not paying off the unbacked gambling debts of a bankrupt company, we should have let 'em go right ahead. $12,900,000,000.00 will pay for a LOT of litigation. Actually, now that I think about it, GS wouldn't have a claim against the US government...because although the government now effectively owns AIG (or 80 percent of it), stockholders in a corporation (which is what the government is in this case) are not liable for the debts of that corporation.
