Paulson Says AIG Sent Message In Harsh Bailout Terms

Former U.S. Treasury Secretary Hank Paulson testified in court yesterday that American International Group Inc. (NYSE:AIG) in fact received harsher terms than many of the large banks because a message needed to be sent that a government bailout came with a harsh cost.

AIG lobbying

One primary issue in the case is that AIG, which was known not to engage in heavy political lobbying, received much harsher treatment than the most powerful banks in the world, including Goldman Sachs and Citigroup.

“It was important that terms be harsh because I take moral hazard seriously,” Paulson was quoted as saying in a Bloomberg report.  “When companies fail, shareholders bear the losses.  It’s...