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What’s going on with AIG?  Just in the past few days the entire country has suddenly become outraged by the fact that much of the federal bailout money going to AIG is being used to pay off its creditors. Creditors, in this case, being people who bought insurance via credit default swaps and are now owed payment either for mortgage-backed securities that have gone bad or for increased collateral requirements caused by AIG’s downgrade from AAA.  And some of these creditors are other banks!  And some of them are even foreign banks!!!

But look.  Last year “counterparty risk” was practically crowned the phrase of the year.  You couldn’t swing a dead copy of the Wall Street Journal without coming across it.  It’s the reason we’re bailing out all these guys in the first place: if a big bank goes bust and stiffs all its creditors, then there’s a chance that they’ll go bust too, and before long you have a cascading series of failures that’s brought down the entire world.  We tried letting Lehman Brothers — a relatively small bank in the grand scheme of things — go under, and all hell broke loose.  That’s why the Fed stepped in a few days later to save AIG.

So why is everyone suddenly acting as if we just discovered yesterday that bailout money is being used to pay off AIG’s counterparties?  And that this is some kind of scandal?  Help me out here.  I’m genuinely confused about why, after six months, this has suddenly become the populist outrage du jour.

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Fact:

In-depth journalism that investigates the powerful takes real money and is so damn important right now.But it doesn’t take a Mother Jones investigation to know that billionaires and corporations will never fund the type of reporting (like they do politicians) we do that exists to help bring about change. Instead, our mission-driven journalism is made possible by people power, and has been for 46 years now since our founding as a non-profit.

In “TITLE TK” Monica Bauerlein writes about the perilous moment we’re in, and why it’s so important that we raise $325,000 by the time November’s midterms are decided so we can be ready to throw everything we have at the big issues facing the nation no matter what happens. Please help MoJo’s people-powered journalism with a donation today.

$400,000 to go!

payment methods

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