The Fed with AIG has bypassed bankruptcy proceedings and made itself the presider over liquidations, plus it has taken control of the company with the loan. In essence, the Fed is doing the Paulson Plan and then some. It is replacing even the Resolution Trust type of workout. The Fed is gaining the power and control that the Paulson Plan envisaged and then some!
Where is Congress, I have been asked by Gary North. Excellent question. Congress is actually the elected government.
We now have UNELECTED government in action. The Fed's actions are as serious a blow to the Constitution as any other serious blow in the past. They rank up there with the NRA and with the Supreme Court making a farmer's wheat crop into interstate commerce.
When Washington Mutual goes, it absorbs almost all of the FDIC insurance fund. Then Congress may awake because certainly the Fed and/or the Treasury will have to enter the lists again.