Henry Paulson in testimony before a House Committee today asserted that the bailout of AIG avoided 25% unemployment. While that remains to be seen, as unemployment is still rising, Paulson's statement reminds me of the ridiculous "jobs saved and created" scam that the Administration tried but subsequently withdrew.
Democratic Congressman Stephen Lynch was more credible when he chewed out Treasury Secretary Geithner for the AIG bailout because Geithner failed to represent the American people. He compared the Bear Sterns bailout, in which the shareholders of Bear Sterns received only 2% on the dollar, while Goldman Sachs, AIG's counterparty in credit default swaps, received 100% on the dollar. The implication is that Geithner was trying to secretly funnel as much cash as possible to big Wall Street firms, an implication that finds further support in the Fed's election not to guarantee AIG's credit default swaps. See Why Did the Fed Board of Governors Nix Guaranteeing AIG's CDS?
But Rep. Lynch is comparing apples to oranges. The Bear Sterns "bailout" was a shotgun marriage arranged with J.P. Morgan. It was J.P. Morgan that was bailed out because J.P. Morgan was counterparty to much of Bear Sterns debt. So the two bailouts are in fact comparable. Rather than chewing out Geithner for not negotiating a good deal, Rep. Lynch should have chewed him out for failure to be forthcoming about where the money was really going in both cases.
Rep. Lynch's ire is a smokescreen designed to identify a scapegoat. In their desperation to win public favor, the Dems are throwing Geithner to the wolves.