AIG Bailout Squandered Our Money, Trust

Financial officials, “most notably Timothy Geithner,” deservedly lost the public's trust with their no-strings-attached bailout of AIG, Paul Krugman rails in the New York Times. As a damning report from the TARP inspector general points out, the government made no serious attempt to extract concessions from the banks that made bets with AIG, instead paying them back 100¢ on the dollar—with taxpayer money.

It was part of a pattern that played out throughout the crisis: Geithner and company repeatedly “shied away from doing anything that might rattle Wall Street.” Now the economy’s still in trouble, but rescue efforts are politically impossible, because the public believes they’re just handouts to the wealthy. “Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people.” (More Paul Krugman stories.)