What else is new?

So what else is new?

In several hearings this month, members of Congress said they believed the derivatives had often been used to speculate, not to manage risk. They have expressed outrage that A.I.G.’s trading partners got 100 cents on the dollar for their money-losing trades when ordinary Americans paying for the bailout have suffered big losses in their 401K accounts and other investments.

Some have also been dismayed to learn that taxpayer money had ended up bailing out foreign banks. Some of the biggest beneficiaries of the bailout of A.I.G. were banks in Europe, including Societe Generale of France and Deutch Bank of Germany, each of which received nearly $12 billion, Barclays of Britain, which received $8.5 billion, and UBS of Switzerland, which received $5 billion.

Of course, Merrill Lynch, Goldman Sach, and JPMorgan got paid as counterparties through public funds to AIG.

Deeper yet, what did the FED, Bernake, and Paulson and Geithner know and when did they know it?

They have been playing this game for quite a while. If they are surprised, they are collectively incompetent. If they knew, they are culpable. And now Geithner wants sweeping authority over hedge funds. Hard not to be cynical here. I want to know precisely what he is going to do when the government seizes control. Specifically, let’s see some concrete guidelines for renegotiating employee contracts and counterparty contracts. Is the government going to pay off those counterparty contracts? Deep six those contracts, I say.

And while we are asking questions, how does the Geithner plan handle credit default swaps? We have talk of toxic assets; no talk of credit default swaps. And if private investors are going to buy toxic assets, will they shoulder any real risk risk? Or is the FDIC going to insure that the real risk is its?