Tyler Cowen from the Marginal Revolution blog has a selection of old AIG commercials. Can you say foreshadowing?

“

The greatest risk is not taking one.”

“Debts are easy to fix, but liability is the nightmare.”

Manchester United’s Wayne Rooney and Gary Neville looked perfectly happy sporting AIG as a sponsor earlier this month. Would they be equally pleased with the letters replaced by “FED?”

American International Group’s bailout sounds a lot like the conservatorship of Freddie Mac and Fannie Mae. The Treasury will be at pains to make sure everybody knows AIG shareholders are getting wiped out, not bailed out. Meanwhile, the fired management of AIG will be due millions of dollars in golden anvils (as opposed to the parachutes reserved for privately saved company executives). Then, there is an off-chance that during the two years that AIG’s organs are harvested, the markets recover dramatically enough to more than pay for the $85 billion loan the government made to AIG in exchange for its near-80 percent stake. Presumably, that money could go to existing shareholders. But given the hefty interest rate on the loan — 850 basis points over LIBOR – the chance of any payoff is as slim as the day is short.

Bit buyers for AIG’s lucrative assets are already seen around the world licking their chops. Japan’s well-capitalized and acquisitive insurers and Australia’s top player are seen as potential buyers. China’s ambitious insurers would be more cautious given market turmoil at home. It was not immediately clear if insurance businesses might come up for sale, although The Wall Street Journal reported earlier this week that AIG, which operates in more than 100 countries, might sell Transatlantic Holdings, its reinsurance group, with Europe’s Swiss Re and Munich Re as potential buyers. Analysts have also said Canadian life insurance company Manulife Financial would be interested in some of AIG’s businesses.

Other deals of the day:

* U.S. flash memory maker SanDisk rejected a near-$6 billion offer from global market leader Samsung Electronics, but said it would not rule out a deal at a better price.

* U.S. investment bank Morgan Stanley is weighing whether it should remain independent or merge with a bank, given the recent turbulence in the company’s share price, broadcaster CNBC reported.

* Ferrovial’s British airports operator BAA said it is putting its Gatwick airport in London up for sale — but vowed to fight to retain the rest of its portfolio.

* British bank Lloyds TSB is in merger talks with the country’s biggest mortgage lender HBOS , a person familiar with the matter said.

“Dear readers, let us begin this week’s missive by acknowledging its partial incompleteness. For understandable considerations, there are some capital market situations that we cannot discuss. We thank all our readers for their support and look forward to continuing to provide you with timely analysis.”

This is how Lehman Brothers’ strategists began their last ever weekly research note, published on Saturday – only two days before the U.S. investment bank collapsed.

In the 146-page research, Lehman strategists argued that bonds are performing well in September thanks to rising risk aversion and financial institution uncertainties.

“September already shapes up as a splendid month for bonds, thanks to the usual seasonal elevation in risk apprehension accompanied by special amplification through financial institution uncertainties,” wrote strategists at Lehman.

Ironically, Institutional Investor magazine named Lehman Brothers as its top All-America fixed income research team for a ninth straight year on Tuesday.

“September has been a prosperous month for credit risk shorts,” Lehman strategists noted. “With third-quarter earnings for some financials coming out this week and the rest of major corporates over October, with the global economic outlook wilting, and with a hyper-risk sensitive capital market regime in effect, we will maintain our predilection toward short credit exposure.”

Little did they know that their own bank’s collapse would reinforce their argument. Investors dumped risky assets across the board, including equities and credit, sending government bonds sharply higher as Lehman filed for bankruptcy protection and Bank of America agreed to buy another Wall Street giant Merrill Lynch.

Some financial firms, but not all, will be saved. The pattern was set with Bear Stearns in March and repeated with Fannie,  Freddie and AIG this month — but not Lehman Brothers. Information Arbitrage lays it out this morning here.

“Unwittingly or not, Treasury Secretary Paulson has effectively created the Paulson Doctrine. The doctrine states that firms that he deems too big to fail (but we’re not exactly sure where the line is drawn: LEH? No. BSC? Kind of. MER? Maybe. AIG, FNM and FRE? Definitely.) get the U.S. Government (and the U.S. taxpayer) as new senior shareholders, while the others are either left to execute an orderly private markets Good Bank/Bad Bank restructuring (if they can, like Mellon in the late 1980s) or a hurried Chapter 11 Good Bank/Bad Bank restructuring (if they can’t: see BCS/LEH circa 2008).

Sure, the headline reads that the Fed bailed out AIG, but was anyone other than Mr. Paulson pulling the strings? I doubt it. So what of this doctrine, and what does it mean for the global financial markets, the integrity of the U.S. regulatory regime and the U.S. taxpayer?

As for the Federal Reserve-backed rescue ofAIG, Reuters’ Emily Kaiser says that the “US central bank may have wiped out what credibility it won resisting Lehman Brothers’ rescue plea, and opened its door to countless other companies to come calling for cash.”

What do you make of the ‘Paulson Doctrine’?

Picture: Treasury Sec. Paulson/REUTERS/Paul Szep 

Tyler Cowen from the Marginal Revolution blog has a selection of old AIG commercials. Can you say foreshadowing?

“

The greatest risk is not taking one.”

“Debts are easy to fix, but liability is the nightmare.”

Manchester United’s Wayne Rooney and Gary Neville looked perfectly happy sporting AIG as a sponsor earlier this month. Would they be equally pleased with the letters replaced by “FED?”

American International Group’s bailout sounds a lot like the conservatorship of Freddie Mac and Fannie Mae. The Treasury will be at pains to make sure everybody knows AIG shareholders are getting wiped out, not bailed out. Meanwhile, the fired management of AIG will be due millions of dollars in golden anvils (as opposed to the parachutes reserved for privately saved company executives). Then, there is an off-chance that during the two years that AIG’s organs are harvested, the markets recover dramatically enough to more than pay for the $85 billion loan the government made to AIG in exchange for its near-80 percent stake. Presumably, that money could go to existing shareholders. But given the hefty interest rate on the loan — 850 basis points over LIBOR – the chance of any payoff is as slim as the day is short.

Bit buyers for AIG’s lucrative assets are already seen around the world licking their chops. Japan’s well-capitalized and acquisitive insurers and Australia’s top player are seen as potential buyers. China’s ambitious insurers would be more cautious given market turmoil at home. It was not immediately clear if insurance businesses might come up for sale, although The Wall Street Journal reported earlier this week that AIG, which operates in more than 100 countries, might sell Transatlantic Holdings, its reinsurance group, with Europe’s Swiss Re and Munich Re as potential buyers. Analysts have also said Canadian life insurance company Manulife Financial would be interested in some of AIG’s businesses.

Other deals of the day:

* U.S. flash memory maker SanDisk rejected a near-$6 billion offer from global market leader Samsung Electronics, but said it would not rule out a deal at a better price.

* U.S. investment bank Morgan Stanley is weighing whether it should remain independent or merge with a bank, given the recent turbulence in the company’s share price, broadcaster CNBC reported.

* Ferrovial’s British airports operator BAA said it is putting its Gatwick airport in London up for sale — but vowed to fight to retain the rest of its portfolio.

* British bank Lloyds TSB is in merger talks with the country’s biggest mortgage lender HBOS , a person familiar with the matter said.