This completely ignores the perspective of those who bailed-out AIG. Whether their ultimate assessment of the ramifications of AIG&#x27;s bankruptcy was correct (Which is important to understand for future crises) they feared the collapse of the financial system.<p>Bair&#x27;s question: &quot;Were the others really in danger of failing?&quot; seemed obviously true to everyone involved in the crisis at the time. When AIG failed, Lehman had just declared bankruptcy and overnight lending rates between banks had sky-rocketed. Washington Mutual and Wachovia were on the brink of failure. Goldman and Morgan were both sufficiently dependent on the short-term funding markets that they could have been rendered illiquid next.<p>Looking in from the outside, it&#x27;s easy to see this as insanity. All they needed to do was trust each other and most of the institutions would have been fine. But they lacked sufficient transparency to know which wouldn&#x27;t be. While we can all imagine better solutions, making those things happen takes time. Put yourself in Bernanke&#x27;s, Geithner&#x27;s and Paulson&#x27;s shoes. You can do something that will lead to be pilloried in the press or risk watching a repeat of the great depression with some probability you can&#x27;t estimate.