In the WSJ former AIG CEO Hank Greenberg recently posed a question:
The recently released list of businesses bailed out by the Federal Reserve was not as surprising to me as it was to many members of the general public.
What is clear from the list is that the notion of equal protection ensconced in the Constitution was missing in September 2008. Rather than trying to spread both the burden and benefit of the bailout evenly among members of the U.S. financial services industry, key decision makers at the Fed and Treasury arbitrarily determined which companies should become wards of the federal government (AIG) and which should be permitted to live on (Goldman Sachs and Morgan Stanley). Goldman Sachs was permitted to live by enjoying markedly lower interest rates and access to credit facilities amounting over time to approximately $600 billion.
Federal decision makers had six months following the Bear Stearns collapse in early 2008 to formulate an effective response to foreseeable liquidity difficulties in the U.S. financial-services industry. Instead, the bailout turned out to be a rush for funds that benefited some and punished others. Goldman Sachs, Morgan Stanley and others were permitted to become bank holding companies and have access to cheap federal funds, while AIG was denied this opportunity for reasons never fully explained. It is important that an independent body is convened to seek reasons for these actions.