“We have more capital so we don’t have to sell good assets in bad markets,”

From the FT, I actually understand what Liddy of AIG is saying:

"Mr Liddy said that with the new plan, the authorities wanted to avoid a repeat of the credit markets paralysis that followed the collapse of investment bank Lehman Brothers, which went bankrupt just before the first rescue of AIG.

“The collapse of Lehman caused the credit markets to freeze up. Had AIG gone, it would have been even more significant,” Mr Liddy said.

Mr Liddy pledged to press on with a wide-ranging programme of asset sales aimed at raising funds to repay the $100bn in capital injected by the government.

He said the extension of the duration of the main government loan from two to five years and the cutting of the loan’s value from $85bn to $60bn would ensure AIG did not have to dispose of businesses at fire-sale prices.

“We have more capital so we don’t have to sell good assets in bad markets,” he said. AIG has not announced a single major disposal so far, partly because potential buyers have not been able to get funding."

Okay. I agree that Lehman was a big mistake, so Liddy is correct. I also understand the plan; namely, keep going until these tanked assets appreciate. Theoretically, the government could buy these assets cheaply and sell them for more later on. The theory is plain enough, but what about the execution?

The problem is that we have no clear idea of how much these assets will cost, or what we'll sell them for or when. And, if these terms need to be eased now, we, the taxpayers, should get substantially more later.

What is also clear is that AIG needs to be broken up into an entity that cannot demand a bailout on the supposed threat to the system. The problem of the free market model here is that an individual company can cause a tremendous ripple through our financial system if it gets too large. No point in debating that anymore. From my perspective, Lehman proved this.

Casey Mulligan claims that this can all be cleaned up by the DOJ enforcing anti-trust legislation. I suppose, in theory, it could, were there a DOJ that had the competence, resources, and laws, to do this. But one point needs to be made: Laws are no different than regulations. Oddly, they are both enforced by human agents. If regulators are suspect, surely anyone working in our legal system is. Both enforce rules. Period. It's preposterous to claim that we need a legal system to enforce contracts, but no regulations because it involves rules and regulators. A system of contracts is a set of rules enforced by human agents after being constructed by human agents. That's what a system of regulations are. Both limit and enforce human behavior.

Why am I going on about this? Because there is a concerted effort to reify and abstract this crisis that will lead to nothing good coming out of it. To the extent that human agents are left out of these explanations, we won't understand what has happened or how to keep it from happening again.

Listen to Mr. Liddy. He's telling it like it is, no matter how much we dislike hearing it. Listen to the agents involved in this crisis. They'll tell us what we need to hear, even when they're trying not to, if we are merely alert to the grammar and vocabulary that they employ.