The GM/Chrysler bondholders included all the big Wall Street firms - Chrysler was owned by the Ceberus for crying out loud.

Read Barofky's report on the AIG bailout. The FRB had to make an emergency decision, with no help from Treasury, to deal with a situation where French banks insisted that they would invoke bankruptcy law on any haircut at all. Furthermore, there was good reason to suppose that default would create a massive crisis all over eastern europe whose bankers had been suckered into buying crap by SG. What should have happened was that treasury should have warned France that it was not going to save SG, but Bush was President reading My Pet Goat again and Paulson, who seems to always disappear from these accounts was both Sec. Treasury and former GS CEO. It would have been a real scandal if the president of NYFRB took it upon himself to decide to plunge Europe into the crisis that they seem to have only delayed until now.

The ridiculous conspiracy theory that places all blame on a career civil servant is not much better than the similarly Republican inspired theory that community loan standards were to blame.