After some months, the Times editorial board wakes from slumber:

The bailouts of American International Group are also rescues of its trading partners — banks and other financial firms — [counterparties] that would have lost out if the insurer had been allowed to fail. But even after four bailouts between last September and this March, no one knows with certainty who those partners are or how much of the bailout money, now totaling $160 billion, has gone to make them whole.

The secrecy is unacceptable. Taxpayers have a right to know how their tax dollars are being spent. ...

A.I.G. was a key player in a type of unregulated derivative called a credit default swap. Such swaps are often defined as a form of insurance because the seller guarantees payment to investors in case their investments go bust. They are not safe insurance in any familiar sense, however, because A.I.G. was not required to set aside reserves in the event of a claim. That is why, when the bubble burst and defaults rose, A.I.G. was unable to make good, provoking the bailouts.

[C]redit default swaps took off as a way to bet on the likelihood of default by a firm or an investment portfolio, without having to own any financial interest in the firm or portfolio. That is definitely not insurance, it is gambling. [09-25-2008] The reason it is not illegal gambling is that, in 2000, Congress specifically exempted credit default swaps from state gaming laws.

The result? Eric Dinallo, the insurance superintendent for New York State, has said that some 80 percent of the estimated $62 trillion in credit default swaps outstanding in 2008 were speculative.

Timmy Geithner's golfing buddies go to the track, get drunk, bet the rent money on the ponies, and lose it all. Now they want us to cover the rent for them, but they don't want to say why. And they can't even see why that might be a problem. Oh, and can they have the rent check for next month now?

Of course, when elites don't want you to follow the money, the first thing that comes to one's mind is corruption and insider dealing. Duh. Roubini:

News and banks analysts’ reports suggested that Goldman Sachs got about $25 billion of the government bailout of AIG and Merrill Lynch was the second largest benefactor of the government largesse. These are educated guesses as the government is hiding which are the counterparty benefactors of the AIG bailout (maybe Bloomberg should sue the Fed and Treasury again to have them disclose this information). But some things are known: Lloyd Blankfein was the only CEO of a Wall Street firm who was present at the NY Fed meeting when the AIG bailout was discussed. So let us not kid each other: the $162 bailout of AIG is a non-transparent, opaque and shady bailout of the AIG counterparties: Goldman Sachs, Merrill Lynch and other domestic and foreign financial institutions. So for Treasury to hide behind the “systemic risk” excuse to fork today another $30 billion to AIG is a polite way to say that without such bailout (and another half a dozen government bailout programs such as the TAF, TSLF, PDCF, TARP, TALF and a program that allowed $170 billion of additional debt borrowing by banks and other broker dealers with a full government guarantee) Goldman Sachs and every other broker dealer and major US bank would already be fully insolvent today.

From mere corruption and theft -- as noticed by the Times -- we move to massive looting, not noticed by the Times. Via Ritholtz (who also lists the 19 banks likely to be stress tested):

We see two issues facing Bernanke, Geithner and the Obama Administration when it comes to the cowardly “feed the zombies” approach articulated last week. First, it is not sustainable financially and must eventually be changed because of funding constraints. And two, the policy of subsidizing the bond holders of the largest banks is unworkable politically and must eventually also be changed to conform with domestic political reality. That’s right, at some point the Obama Administration may need to choose between our foreign creditors and American voters.

The Bernanke/Geithner approach to not dealing with the financial crisis ["muddling through"] amounts to a hideous public subsidy of the global transactional class, a transfer of wealth from American taxpayers to the institutional investors who hold the bonds and derivative obligations tied to the zombie banks, AIG and the GSEs. All of these companies will require continuing cash subsidies if they are not resolved in bankruptcy.

Remember that the maximum probably loss (”MPL”) shown in The IRA Bank Monitor for the top US banks with assets above $10 billion, also known as Economic Capital, is a cash number representing the amount of incremental capital the banks may require to absorb the losses from a 3-4 standard deviation economic slump, such as the one we have today. If you include the subsidy required for the GSEs and AIG, the US Treasury could face a collective funding requirement of $4 trillion through the cycle. Do Ben Bernanke and Tim Geithner really believe that they can sell such a program to the Congress? To put it in perspective, the $250 billion in the Obama Budget for additional TARP funds will not quite cover Citigroup (NYSE:C).

Bottom line: The policy decision articulated this week by Bernanke and Geithner represents the largest transfer of wealth in American history, yet no legislation and been passed and no meaningful debate has occurred. The biggest danger facing the markets is that Ben and Tim still do not seem to have a clue what to do about the big banks — other than to write more checks against the public trust. The conflict over this decision to pass the cost to the taxpayer, between the Fed, Treasury and the Congress, on the one hand, and the Wall Street dealer banks is staggering, yet nothing is said in the Big Media.

Maybe whoever's on the 8:45 call from Obama's spin team could take this matter up?

Look! Over there! Sarah Palin! No, wait, it's Rush Limbaugh! Hey, how about that Bobby Jindal?

Let's remember Krugman's dictum that politics drives economics, not the other way round. Eh?