AIG is much in the news these days. But I’m not sure, even now, if people are getting the ultimate message.

AIG is in trouble because it wrote many credit default swaps, in effect guaranteeing others against losses it lacked the resources to cover. We, the taxpayers, are now covering those losses, for fear that not doing so would cause a financial catastrophe. But this means that US taxpayers have now assumed the downside risks for all of AIG’s counterparties.

In effect, then, we’ve already nationalized a large part of the financial industry’s potential losses.

So at the very least, we have a right to know who the counterparties are: who are we subsidizing, here? And beyond that, shouldn’t there be some quid pro quo? Shouldn’t the US government get something in return for taking on so much of the risk?