OK, I have had enough of these temper tantrums, these "cut your nose to spite you face" Congressional and public rampages.
There are two choices re AIG and the other bailouts. And both are nothing but bets.
1. Let all these companies (AIG, Citi, BofA, the auto companies, etc.) go bankrupt and just hope that the world doesn't collapse. You want to risk a global depression? A stock market down to 0? You think these are exaggerations? If the financial world collapses, not even the full faith and credit of the U.S. is likely to save you. If you're right and I'm wrong, well, you can say "I told you so".
This is what can also be thought of as one side of the "sunk cost" decision. Yes, we've invested multi billions of dollars but that's no reason to send good billions after bad billions.
2. Monitor, regulate, exercise strong oversight and help all of these companies to recover. The consequences? The economy improves and all the taxpayers get paid back. It's possible that one or more of these companies will fail no matter what we do but, at a minimum, the money we've invested will have given us the time to wind them down in a more orderly fashion. Will this take time? Yes. The economy isn't going to recover tomorrow and none of these companies can fully recover until the economy does. But only children should expect things to happen tomorrow. So what if it takes 4 or 5 or 6 years to full unwind everything? In the history of the country, that's about the length of the Revolutionary War, the Civil War or WWII. And it's a lot shorter period than the Great Depression.
This is partly much the other side of the "sunk cost" assessment: I've already put so much money into this hole, I might as well keep going and hope for the best.
Me, I'm the cautious and optimistic sort. I prefer choice #2.