“A.I.G. was required to forfeit its right to sue several banks…over any irregularities with most of the mortgage securities it insured in the precrisis years.”
So the bailout of AIG in fall 2008 to prevent a complete financial meltdown of the entire worldwide economy included the Bush Administration’s requirement that AIG could not sue to recover even fraudulent contracts/securities AIG insured! That doesn’t sound like capitalism to me.
Why a broad waiver? Why shouldn’t AIG (and by extension, taxpayers) not recover in the event of fraud? And we turn again to the ambiguous standing of AIG. By all rights, it ought to be owned by the government. The reason it isn’t is that we don’t do nationalization in America, and full ownership would require AIG’s debts to be consolidated with government debt. So another way to read this requirement is that the Fed and Treasury were opposed to having fraud at the banks exposed, period.
From the NYTimes article revealing waiver:
Unknown outside of a few Wall Street legal departments, the A.I.G. waiver was released last month by the House Committee on Oversight and Government Reform amid 250,000 pages of largely undisclosed documents.