If you agree that the government must step in because AIG is too big to fail, then you must agree that no corporation must ever get "too big to fail" because it risks everything.
That's key here. The government must put an immediate stop to mega-corporations that are anywhere in the money chain.
Let's see you get that legislation passed.
Those with cash that can buy something before the governments start printing money are sitting pretty. The price of oil would certainly drop. The march of socialism would be set back 50 years. If the feds are so concerned about this bubble bursting they should have passed laws for free before the bubble developed. Had they required 20% down on real estate purchases 8 years ago I don't think this bubble would have gotten so out of hand.
If you will allow me to answer. AIG would have gone into bankruptcy court, a federal judge would have stopped all of the calls on its debts, which would have immediately reassured markets, and then the judge would begin the orderly sale of its assets to pay the debts, or some other workout approved by the creditors, leaving the shareholders whatever was left over.
In short, we have a system for dealing with corporate insolvency. Bankruptcy is actually established by the Constitution. It's a time tested system that works just fine.
Did the bankruptcy of Lehman Brothers cause the Apocalypse? No, in fact, the markets reacted with cautious optimism to the news.
I'm a corporate and tax lawyer of many years. This is a play by revolving-door investment banking types like especially Henry Paulson to save their buddies' bacon at the taxpayers' expense. It's an outrage that threatens the very existence of the capitalist system. It must be stopped.