Inadvertent Nationalisation - Is The Meltdown On?

When Julius Caesar crossed the Rubicon, he knew he was starting a new political system. As the Bush administration takes over trillion-dollar AIG, it has no idea what it is starting. It does not even know what to do next.

All that Secretary of the Treasury Henry Paulson knew was that if AIG was allowed to slip under the waters, all hell would break loose. There might be something close to panic in the streets.
The Secretary and his co-workers knew that one money market fund had already lost so much money when Lehman Brothers declared bankruptcy that it had to suspend its depositors' withdrawals. But Lehman is small potatoes compared to AIG, a gigantic insurance-cum-investment corporation.

If it collapsed, many more money market funds would be in danger of being frozen. Americans have deposited over $3.5 trillion in money market funds and, if that money could not be withdrawn, we would be looking at a depositor panic such as that of 1933, when thousands were pounding on bank doors to retrieve their lost life savings. As it is, many are so frightened of losing their money that they are putting it into the safety of government notes paying interest of around two tenths of a percent.