AIG was allowed to fail. Being force to sell your company (actually 79.9%) in exchange for an $85B 12% convertible preferred is failure. The reason it works for the fed is that they can force a cramdown of the debt. They got all the assets for a loan and can blow off the debt. It is a hell of a deal.
OK if you say so. But I am still a little bit lost about how capitalism failed this time.