DEAL ME OUT. In a brilliant New York Times front-pager, Gretchen Morgenson shows how an AIG subsidiary called AIG Financial Products created "collateralized debt obligations" that provided a further layer of insulation between the global insurer and the increasing debt it was covering:

Because the underlying debt securities -- mostly corporate issues and a smattering of mortgage securities -- carried blue-chip ratings, A.I.G. Financial Products was happy to book income in exchange for providing insurance. After all, Mr. Cassano [AIGFP's head] and his colleagues apparently assumed, they would never have to pay any claims.

AIGFP saw huge, apparently insubstantial gains from these debt packages, and their shakiness seems to have somehow gone unnoticed by the U.S. Office of Thrift Supervision, whose duty it was to monitor them. When AIGFP's packages came a-cropper, AIG found itself called upon to make good, which precipitated its downward spiral.

Morgenson reveals also that Goldman Sachs had a fat hand in AIGFP's dealings, which the more cynical among us may suspect influenced the willingness of Treasury Secretary and former Goldman CEO Henry Paulson to move quickly to pick up AIG, as a straight bankruptcy would have left the Goldmanians with pennies on the dollar.

Now both Democrats and Republicans -- some of the latter dragging their feet for whatever slim plausible deniability it may give them -- are getting the big Bush bailout rolling, with only a few Congressmen resisting. And from what I'm hearing, in order to pass it bipartisan-like, the Democrats couldn't even keep in a provision that would give homeowners some relief.

They say it's necessary, and in this atmosphere of panic there's no one reliable who can tell us whether it is or isn't. But fuck it. This financial system is rotten and nothing about the bill (including whatever "oversight" provision they come up with) is going to change that. As an old man I'm in sympathy with the urge to postpone the inevitable, but in this age of internet speed I doubt the inevitable will tarry as it did in olden days. Either use the $700 billion tide to lift all boats, including those of mortgage holders, or keep it in the bank and let the free market wreak its creative destruction at the top end of the food chain for a change.

UPDATE. The House server is slow, but I got the sectional summary of the current plan (the full plan pdf shows up blank for some reason). Section 110, we are told, "Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer." It will be interesting to see how this requirement and encouragement is supposed to work and be enforced.