From the New York Times:
Fearing a financial crisis worldwide, the Federal Reserve reversed course on Tuesday and agreed to an $85 billion bailout that would give the government control of the troubled insurance giant American International Group.
The decision, only two weeks after the Treasury took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank’s history.
With time running out after A.I.G. failed to get a bank loan to avoid bankruptcy, Treasury Secretary Henry M. Paulson Jr. and the Fed chairman, Ben S. Bernanke, convened a meeting with House and Senate leaders on Capitol Hill about 6:30 p.m. Tuesday to explain the rescue plan. They emerged just after 7:30 p.m. with Mr. Paulson and Mr. Bernanke looking grim, but with top lawmakers initially expressing support for the plan. But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with.
So, in other words, as a taxpayer, I just bought an insurance company. Well, it’s not exactly what I was looking for…
I also think I have this federal oversight thing figured out. When Democrats propose government oversight of financial institutions, it’s socialism. When Republicans propose it, it’s sound business practice. Got it.
$85 billion is a lot of money. In fact, as Rick at SFDB notes, that’s $50 billion more than SCHIP would have cost to insure kids stuck without insurance. But the Republicans considered that to be way too much money.
Uninsured kids or bankrupt insurance company. Your call.