From Moon of AL. Bernhard links to two powerful posts:

William Buiter is "speechless and weak with rage" about how the Fed handled the AIG mess. Read whole thing. Wince, rage, sharpen the tines of your pitchfork...but do read the whole piece.

...When it was uncovered during the late summer of 2008, that AIG had nurtured a little rogue, unregulated investment banking unit in its bosom, and that the level of the credit risk it had insured was well beyond its means, the AIG counterparties, that is, the buyers of the CDS, were caught with their pants down.

Instead of saying, “how sad, too bad” to these counterparties, the Fed decided (in the words of the Wall Street Journal), to unwind “.. some AIG contracts that were weighing down the insurance giant by paying off the trading partners at the full value they expected to realize in the long term, even though short-term values had tumbled.”

The logic of collective action teaches us that a small group of interested parties, each with much at stake, will run rings around large numbers of interested parties each one of which has much less at stake individually, even though their aggregate stake may well be larger. The organised lobbying bulldozer of Wall Street sweeps the floor with the US tax payer anytime. The modalities of the bailout by the Fed of the AIG counterparties is a textbook example of the logic of collective action at work. It is scandalous: unfair, inefficient, expensive and unnecessary. (Emphasis mine)

Then, Bob O'Brien of Sanity Check (who I don't know, but do trust Bernhard's links):

I think the defining moment for me was when Bernanke responded to the question from Congress, as to whether the American people (and their elected representatives in Congress) would be told to whom all their tax dollars have been given or lent. That single word summed it up perfectly for me: "No."

Any illusions that the money trust in the US, that collection of bankers and hedge fund managers and industrialists who are the beneficiaries of the systematic looting of the Treasury under the current "emergency" measures, is going to do anything other than precisely whatever it likes, or is going to report to those being looted, was dispelled at that moment. Likewise, nobody has been able to articulate why the massive swindle at AIG continues to be subsidized by our tax dollars - but again, no reporting on where those dollars are going will be forthcoming.
SNIP
So AIG sells insurance for which it has no collateral, thinly disguising it as credit default swaps, to those with no financial interest in the things being insured (which is illegal if insurance), and you and I get to pay those who bought the swaps and are now collecting big on the destruction of the market and the American way of life. Not a mention of simply making swaps illegal and calling them what they are - illegal insurance, which should be null and void. Nope. Instead, we get to pay out hundreds of billions, to Goldman and the Saudis and whomever else is fortunate enough to be a counterparty - but we can't know to whom the billions are being paid. Again. That's a secret.
I was thinking about how casual the disregard for the rule of law has become on Wall Street, and how confident the money trust is in our apathy and our absence of the will or the means to interfere with their schemes. And well they should be. As nothing has, and likely nothing will.

When I started writing about the naked short selling scam, and the underlying larceny that drove it, I predicted it would ultimately destroy the engine of prosperity that is the US market system. My reasoning was simple - if you allow crooks to run the system, to take money without requiring they deliver what they were paid for, you don't have a market, you have a giant fraud. And a system built upon a foundation of fraud isn't sustainable...

Damn. I was trying to explain to a friend how the CDS things worked, got nowhere until I used the example of me buying house insurance and someone down the block buying a CDS thing from AIG which would pay that neighbor if and when my house does burn down. It hit her then that the person down the block was simply gambling. She kept using the work "gambling" in rewording what was happening with AIG. She was getting it and bit -- and getting angry.

When the general pubic gloms onto what has been going on, where our 'bailout" money is going and for what, there will be massive fury. Massive.

It seems that parts of the press are actually beginning to report on some of the realities of the Big Meltdown Me$$ -- previously, this kind of thing was found mostly on the economics blogs, right? Now there's been the WSJ report on where the AIG money went, the articles we've been collecting here at Corrente.

Obama better get a clue, or he will be reviled along with Hoover. As will the Dems. I do not want Obama to fail; I want him to do well for the country and for himself. I want the Dems to get with the principles of the Democratic wing of the Democratic Party. Get a grip, Mr. Prez! Shake Geithner and Summers out of the Wall Street force field, find a way to melt their brain freeze. Now, now, NOW!