Maybe it wasn't a good idea to stoke a campaign against Wall Street greed, when we were depending on Wall Street greed to fuel our economic recovery. The Obama administration has been seeking private investors to help it buy toxic assets from crippled banks.
No private investors want this stuff under normal market conditions, and the government doesn't want to be responsible for figuring out the prices for the assets, nor does it want the taxpayers to take on all that risk. So, Obama's plan is to use the TARP money to provide incentives for private entities who can invest in this stuff to buy it from the banks that can't get healthy with this stuff on their balance sheets.
The incentive for these private partners is obviously profit. But AIG employees found out this week that making money while in partnership with the government is dangerous.
Of course AIG was bailed out because it would have failed otherwise. The private partners in purchasing these assets aren't failing or getting bailed out. But if they make a lot of money on this, and collect huge fees or pay large bonuses, they know that the distinction is not going to be important to financially strapped taxpayers who will be really angry to see rich guys on Wall Street collecting huge checks from a government-funded plan.
These guys don't want to get perp-walked before a Congressional committee, like $1-per year Edward Liddy did last week. They certainly aren't going to be interested in taking on risk in this deal if they fear Congress is going to pass a tax bill to confiscate any profits they might earn from it.
Obama knows the difference between the partners the administration is trying to attract for the bank rescue and the bailout recipients, but if the profits of these partners become a hot potato, nobody expects the President to expose his neck to explain to voters who are losing their homes how some of the guys collecting seven-figure checks are good guys.
Meanwhile, former New York governor Eliot Spitzer is pretending to be surprised that the bailout funds the government put out to prop up AIG and prevent it from defaulting on its agreements is being used to prop up AIG and prevent it from defaulting on its agreements.