Potomac Watch: WASHINGTON-

In fact, Congress acted as a detriment. Its members worked overtime, both to protect state regulators who were asleep at the switch, and to publicly rebuke federal officials as a means of distancing themselves from the fact that AIG was probably the largest contributor to federal campaign funds of any company or group in the financial sector.  

Members of Congress held federal regulators responsible for the huge salaries that were being paid to AIG executives, even though in most cases these salaries were provided through contracts entered into long before federal regulators had the authority to oversee AIG.

In other cases, Congress denounced federal officials for high salaries paid to AIG executives who were being brought in to fix the problem or to people who played little role in the actions that brought the company to its knees.

It is unforgiveable that members of the House Financial Services Committee called out Treasury Secretary Timothy Geithner, who, as both Treasury secretary and before that as president of the New York Fed, was required to deal with issues he was barred by law from either dealing with, or learning about, beforehand.

“You should resign!” and, “I have no confidence in you,” were amongst the public comments members of the Financial Services Committee  used in addressing Geithner during his appearances before the panel. Paulson, too, was strongly criticized when he appeared before the committee to defend his actions regarding AIG in particular, and the federal bailout of ailing firms in 2007 and 2008, in general.

In retrospect, it also appears terribly unfair that former Fed Governor Donald Kohn was subject to such intense grilling over the Fed’s decision to have AIG buy back CDS issued to foreign banks. Indeed, given the current focus on Europe, especially France, Greece, Spain and Germany, what could have happened if AIG had not been ordered to buy CDS sold on $374 billion in MBS sold by various U.S. investment banks is too horrible to contemplate.

If there is a lesson to be learned from the terrible events of 2007 through 2009, it is that politicians are always at their most skilled when they seek to shift the blame to others for their most disastrous and selfish actions. It is so sad that the voters just don’t get it.