Below are various links, including some that pertain to AIG.

The government is eventually planning to sell the normal insurance lines of AIG. The proceeds from those sales then can be used to fund losses on the credit default swaps and pay off government loans. 1. The Washington Post reports,

Yesterday, Fannie Mae went public with its concerns about this federal assistance. It warned that it “may prove insufficient” to allow the company to routinely pay off its loans or “continue to fulfill our mission of providing liquidity to the mortgage market at appropriate levels.”

One of the conditions of the bailout was that Fannie Mae should stop lobbying. But that’s like asking the sun not to shine.

2. Felix Salmon writes

the job [Treasury Secretary] is bigger, now, and includes persuading both Congress and the public that the government is doing the right thing… And [Larry] Summers, like Paulson, is really bad when he has to talk to people he doesn’t respect.

If one of the criteria of Treasury Secretary is “plays well with others,” then I agree that Larry may not be the ideal choice. But, gosh, playing well with others in today’s environment means going along with the trend toward turning more of the financial sector into quasi-private, quasi-public entities like Freddie and Fannie in their glory days. Larry at least recognizes the problems with that model. I hope Larry gets the job, although I doubt he will.

3. I owe Yves Smith an apology. When I brought up Mussolini in the context of the bailout, it was over two weeks after she had done so. I somehow missed that.

4. I saw it when I read her take on AIG.

Remember, AIG does NOT [have] any God-given right to existence. If every significant operation AIG has must be sold to repay the taxpayer, and AIG ceases to exist, that would be a perfectly fine outcome. A systemic collapse would have been avoided, taxpayers would have gotten as much as possible out of a bad situation, and AIG would be liquidated in an orderly fashion. What is wrong with that picture?

The question is not whether AIG ceases to exist, but when. My sense is that government decision-makers are taking the view that “now” is not a good time, for two reasons. First, they think that hurriedly selling off the insurance lines in the current environment would fetch a low price. Second, they think that AIG’s counterparties in their credit default swaps are making excessive demands for collateral relative to likely losses. As time passes and the losses come in lower than feared, the liquidity problems in the credit default swap business will ease. I’m not saying that I agree with this reasoning, but I’m guessing that’s the thinking.

Steven Randy Waldman piles on.

What kind of society is compatible with an economy managed by a cadre of large, politically connected firms whose operations and those of the state are intimately connected, and which cannot be permitted to fail since that would bring “chaos”?

…It is likely that taxpayers will turn a paper profit on their paper claims against financial institutions. But that’s not because they are good “investments”. It’s making these investments good is now a constraint on government action. The Fed cannot behave in ways that would compromise the value of the trash on its balance sheet. Once AIG was too big to fail, it cannot fail, no matter how big the black hole grows. Once GM enters the penumbra, very soon now, it also must not fail. Of course, we will not count this terrible loss of policy freedom as a cost.

I wish that those of us who are frightened about Washington’s bear hug of what used to be the private sector could do more than just carp on the sidelines. One of the reasons that I would prefer Larry Summers for Treasury is that I think he is less likely to be awed by corporate executives insisting that the survival of their firms is of great social import.