Bailouts are wrong, but the government had always implied that it would stand behind mortgage securities sold by the GSEs Fannie Mae and Freddie Mac. The deeper wrong was the government’s creation of the GSEs, which financed homes for the poor on promises of someday robbing the rich. That day has come.

And now the government says to AIG, “You incompetent fools for having insured the lousy mortgages we were selling!”