When the history books are written on the Great Recession of 2008, there will be plenty of chapters devoted to the "Lehman Moment," that Monday, Sept. 15, 2008, when the investment bank fell and the Dow Jones cratered more than 700 points in tandem.
But the real crisis came a day later, when the insurance giant Ame rican International Group (AIG) was on the brink of collapse.
It was a messy situation that needed to be met with brute force without the benefit of a precedent.
To put it mildly, AIG at that time was the Wall Street banks' hedging company on nearly $450 billion in questionable derivatives.
That's why Uncle Sam needed to infuse $85 billion to save AIG.
AIG was not allowed to collapse because it was the nexus of the financial world, so taxpayers bailed out the "insurer," not knowing they were bailing out the banks in the process.
In many cases, the banks were getting 100 percent payback on paper that was trading at half its value.
By its own accounting, AIG's cash bailed out dozens of financial companies, which received billions of dollars in insurance payments.
Nearly $13 billion for Goldman Sachs, $6.6 billion for Merrill Lynch and more than $30 billion to European banks that were close to failure.
This all came under sharp review last week, as shareholders of AIG, led by ex-CEO Hank Greenberg, had the chutzpah to sue Uncle Sam.
What if — like Lehman — Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke and NY Fed chief Tim Geithner didn't nationalize the firm and let AIG go?
It wasn't an option, according to Geithner's testimony last week saying it would have caused "mass panic on a global scale."
The question of whether the ATMs would have worked that Wednesday is moot, thanks to the takeover.
AIG needed to be saved before it consumed us.
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