To the economy? Can it get much worse than it already is?
Anyway, what was reported at the time to be a "net loss" to the taxpayer turns out, not so much. I've outlined simple approaches to this issue before on this list that don't necessarily result in "net losses" (let's try, as a group, to stop demanding that everything make a profit[*]) but do make an enormous impact on millions of people's daily lives including millions of people who don't have a house but are saddled with the lingering effects of this long-term recession/depression.
The AIG "bailout" turns out to have made a little money for the taxpayer, due in part, no doubt, to the attention paid to the details of the deal, and the long-term approach to the problem; but this is hardly the most interesting benefit of the activity, which was to put a plug into a leaking dike that would surely have flooded the planet.
This should be good news to the vast majority of lbo-talk subscribers; it shows a perfect example where a colossal failure of "the market" -- which, left to itself, would have turned AIG into a black hole into which everyone would have fallen -- that can and should be righted by an entity that is specifically outside of "the market" -- a government, or a central bank (in many cases they are the same).
That the only complaint people had at the time was that it was going to "cost the taxpayer" shows how simple the analysis has become. If the politics of the day had won that round, we'd all be much worse off. Now is the time to use it as a precedent to solve some of the other market-induced-but-fixable problems.
The Right likes to say that the Government can't do anything. Make them show their work.
/jordan
[*] My favorite version of this is the insistence that passenger trains "pay their way" when passenger cars and airplanes have never been asked to do likewise.