The Federal Reserve is almost forced to bail out AIG. This company has their hand in almost everything. If they ever collapsed you would see interest rates rise up into double figures and that would dry up lending around the world. That would almost guarantee a pretty harsh recession.
Paleassssssse. If the private equity markets didn't want to bridge loan this disaster why should the taxpayer? The principal of moral hazard had to be instituted by a Darwinian imperative if not the entire system collapses. If the fed steps in based on a hypothetical risk that a domino effect will ensue as a result of AIG collapsing then the signal to global markets and specicifically to stewards of powerful financial institutions will continue their reckless disregard.
Somebody has to pay the piper. It shouldn't be Joe six pack.