Did we save the wrong messed-up financial firm? (AIG as opposed to Lehman)

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BusinessWeek‘s Michael Mandel asks the big question: Should We Have Saved Lehman and Let AIG Fail?

These folks at AIG are turning out to be annoying and amateurs to boot, in the deepest sense. It looks like they were just playing out of their league, and they signed bad contracts. I would rather have bet on Lehman.

I heard the same thing from financial-sector guy last week. AIG was saved in September in a rushed and extremely sloppy fashion (the feds could, for example, have presumably insisted on renegotiated bonuses as a prerequisite for the bailout loan). It happened that way because Lehman had just failed and everybody was freaked out about the possibility of a rolling collapse of the entire financial system. A line had to be drawn, the reasoning went, and AIG was lucky enough to be on the right side of that line. But now it’s becoming clearer and clearer that if any major financial institution on the planet deserved to go under, it was AIG. Yes, there are lots of relatively healthy businesses under the AIG umbrella. All the more reason to cordon them off from the holding company and AIG Financial Products and let the latter fend for themselves.