"I do not see why taxpayers should have to bail out private companies,if we do live in a so-called free market"
Some of you folks need to really educate yourselves because your comments are deeply concerning.
When banks, brokerages, and insurers the size of AIG fail, it's not just the company and its employees that goes down the toilet. It has a monumental and highly detrimental affect on millions of lives whose pensions, insurance policies, life annuities, life savings, etc., are housed with these institutions. We're talking catastrophic consequences to millions of innocent people here, many long retired, and many who had no say in the matter as to where their pension funds were housed. (AIG holds many federal pensions). Insurance companies don't just do insurance as we know it. They are highly diversified financial services firms the operate in many financial services areas.
The federal reserve did the ABSOLUTELY right thing. They did not "bail" out AIG, so to speak. They took them over, plain and simple, with the full right granted solely to the fed to fire senior management. This is the right way to do it.
It is the government's role to step in and protect the people from catastrophic financial failures, but it is also their role to regulate to protect that from happening in the first place....and here they've failed DREADFULLY. Their brokering of the deal where JP Morgan Chase took over Bear Stearns was the right thing to do also. Allowing major banks to fail will only cause a 1929-style run on all banks. And given that banks are required to hold only 12% or less of their deposits in reserve, this would quickly bankrupt the system almost overnight.
So quit your bitching about the government bailing out this one and bailing out that one. It's not something anyone wants to see happening, but it is their role to protect the citizens of this country from financial ruin. Granted they've done a shitty job regulating matters, but to let the banking system collapse is utterly irresponsible.