The Internationale Unites the World in Song

So Henry Paulson has changed his mind and decided maybe tough love isn't the best way to handle an economic meltdown. But now that A.I.G. has been bailed out by the Fed to the tune of $85 billion (for which it gets about 80 percent ownership), how much longer before we get to say we live in a socialized economy? As the New York Times points out:

The decision, only two weeks after the Treasury took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank's history.

Apparently socialism is OK, as long as it protects the top 1 percent. But is it socialism, or is it extortion? The threat, of course, is that if A.I.G. goes down, it takes a bunch of us smaller players, as well. As Calculated Risk points out:

It's true that the rescue tonight of A.I.G. suggests there are still moral hazard issues, but an A.I.G. collapse posed significant risks to the system, and the Fed was stuck with a dilemma and no good alternatives. I believe a collapse of A.I.G. would probably have been worse than the rescue.

We'll see whether or not John McCain comes on board with this move. Sometime within the last 24 hours, he came around on economic populism. Earlier in the day, he was against offering any help to A.I.G.:

"We cannot have the taxpayers bail out AIG or anybody else. This is something that we're going to have to work through," he said.

He knew what was bringing Wall Street down and betraying American workers (who, he argued, are the real "fundamentals" of the American economy):

"They've been betrayed by a casino on Wall Street of greedy, corrupt excess -- corruption and excess that has damaged them and their futures," he added.

Oops! He forgot one thing on that list of what to blame: his own personal treasury secretary-in-waiting, Phil Gramm!