No, sorry to say this, but we are in 100% agreement! :-)!!!

I was 100% for the AIG 'loan' for just the reasons we both explained. But since it was not clear that AIG would ever be able to pay back all the loan, I was willing to call the loan at least in part a 'bailout', that is, 'help' or a 'gift' that might not get repaid.

It's too bad the media wants to use the Paulson, Bernanke, etc. excellent efforts to save the US and most of the world as a source of a coveted scandal by screaming "bailout", but, again, I fully agree with you that what the US did for (with) AIG was just essential.

I will insert: The stuff about a 'balanced budget amendment' and, much worse, Ron Paul's desire for essentially a gold standard instead of a Fed, would mean that there would be no Federal 'lender of last resort' which would force us back to the results we got in the 1930s when we were far too afraid to print money until people started shooting at us.

In addition we would not be able to fight any major wars at all; we might as well shut down most of the DoD.

Paul seems to believe that the Fed is the cause of all bubbles and that with a gold standard we would have no bubbles; history clearly shows otherwise. Even with a gold standard, there still is 'fractional reserve banking' and the possibility of bubbles, crashes, financial 'panics', etc. As I recall the history, at one point J. P. Morgan personally saved the financial system, and that situation was much of the motivation for creating the Federal Reserve.

Moreover, I'd go farther: A comparatively few bucks would have kept Lehman afloat long enough mostly to 'unwind' slowly. That is, there is a good chance that Lehman was mostly the victim of a 'run on their bank', some of it urged on by some short sellers. Sure, I would have expected that the Lehman stockholders would still have lost their shirts, but keeping Lehman going for their 'counter parties' might have greatly reduced the effects that gave us the Great Recession. Houses would still have gone underwater, CMOs and CDSs would still have been in trouble, but some of the intensity and volatility would have been reduced. Alas, the media was so eager to scream 'bailout' that it would have been politically too hot to 'save' Lehman, even if all the owners lost all.

For Paulson and Bernanke going against their beliefs, that shouldn't be too difficult! No one should ever have taken all that simple minded stuff as always 100% true anyway! Besides, Bernanke was a leading Great Depression scholar. Also, Paulson saw instantly the threat of 'bank runs' and 'cascading contagion'.

I do fault Greenspan for drinking too much Ayn Rand Russian Kool-Aid! Of course eventually he admitted before Congress that his belief that the firms would do the right things was expecting too much.

I do have some remaining questions: (1) I can understand what Country Wide and Fannie and Freddie did. But I don't fully understand the other flows, e.g., through the ratings agencies and the 'tranches' and to the CMOs and their CDSs with AIG, etc. I don't have any good data on how much of the paper was held in small banks, large banks, outside the US, or where. Just why the problems were mostly just in Florida, Arizona, Nevada, and California but not the rest of the US I don't get. Just why the problems in just those four states did so much damage to housing and the economy nearly everywhere in the US I don't get. Just what happened to routine commercial banking and why I don't have either good data or good understanding. (2) Actually there were some surprisingly similar housing bubbles outside the US, at least in Australia. So just how the US housing bubble made it to Australia I don't get. Then Canada was largely immune; just why Australia got sick but Canada didn't I don't get.

We should ALL have GOOD data and answers to these and other questions and should have had all along during the bubble blowing over the past 10 years. We didn't. At least this time we're not at much risk of a Hitler, but we've come close and are not fully out of the woods yet.