Atrios pointed me to Joe Nocera’s piece in the Times on AIG and just what it was they were doing 
and why we’re now having to spend perhaps hundreds of billions of dollars to clean up the mess.
I strongly recommend reading it.
For those of us who aren’t well versed in economics or complex financial instruments, just what it was these difference banks and investment houses and insurance companies were doing can be really difficult to understand. But Nocera breaks it down in a very clear and thus highly infuriating way.
Though he doesn’t explicitly make the point, the article also suggests one reason why basically every big financial institution is now living by the grace of the federal government. Even if they could, for an institution like Goldman Sachs, it wouldn’t matter if they gave back the TARP money. We’re shelling out so much money to “AIG” because we need to protect its trading partners from the folly of their dealings with AIG. We’re making good on the various reckless bets that AIG made with its various trading partners.
