AIG bet against a complete bust of the system. They were otherwise reasonably hedged. Governments have placed much larger and more harmful bets on continued economic growth in the form of spending commitments that outpace even rosy growth estimates, but I don't hear the populists crying over that.
Bailing out AIG (and their contract partners) was the problem. Creating an environment where bailout was even perceived as possible was the problem. Turning the US into a debtor nation via enormous government spending was the problem (in that it kicked off a number of other distortions).
Bailing out AIG (and their contract partners) was the problem. Creating an environment where bailout was even perceived as possible was the problem. Turning the US into a debtor nation via enormous government spending was the problem (in that it kicked off a number of other distortions).