For instance, the $13 billion AIG owed to Goldman Sachs, as a result of its bet on subprime mortgage loans, was paid off in full by the U.S. government: 100 cents on the dollar. These fantastic handouts—plus the implicit government guarantee that came with them—not only prevented Wall Street firms from failing but spared them from recognizing the losses in their subprime mortgage portfolios. Even so, just weeks after receiving its first $25 billion taxpayer investment, Citigroup returned to the Treasury to confess that—lo!—the markets still didn’t trust Citigroup to survive. In response, on
...more
