Late yesterday evening, the government bailed out insurer AIG (NYSE:AIG) with a ‘bridging loan’ of $85 billion.

Taxpayers are now on the hook for Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) and AIG – three corporate giants that have lost a lot of money by doing stupid things with their money.

“All this debt [...] has to be paid back,” says currency expert Chris Gaffney. “And how does the government plan to do this? With cheaper dollars…”

This from today’s Daily Pfenning:

Just a day after making statements that he would not put any more taxpayer money at risk to bail out his Wall Street buddies, Paulson and Bernanke did just that, purchasing 79.9% of troubled insurer AIG for about $85 billion of tax payer money.

The purchase was made after the two remaining ‘healthy’ investment banks passed on the deal.

I read where investor Warren Buffet says his phone has been ringing off the hook, but the man who is arguably the world’s smartest investor has decided to pass on all of these ‘opportunities’.

So US taxpayer money is being used to buy a company which couldn’t get anyone else to lend them money. True, the press reported that the billions were just a ‘bridge loan’, but it really is nothing more than a bailout using taxpayer dollars.

And how do you think the latest moves makes the folks over at Lehman feel? I guess they just weren’t nice enough to Paulson and Bernanke during their days on Wall Street.

This latest move by Paulson/Bernanke reinforces a very bad precedent which they set with the bail out of Bear Stearns and Fannie/Freddie.

The Fed has moved from its primary goal of price stability to ‘purchaser of last resort’ for ailing financial firms. Our fearless leaders are now making ad-hoc decisions on whom to help, setting new precedents for investors as regulators crowd out the market’s own risk and reward incentives to manage exposures to ailing companies. As expected, the government bailout was top on his mind last night as he sent me the following in an email:

“So now the U.S. Treasury is bailing out AIG with conservatorship and an $80 Billion allowance for their newest member of the dysfunctional family. What’s next? Oh, I already know, the Big 3 have asked for a Gov’t check, and before you know it, Disneyland will be asking for an allowance from the Gov’t! (OK, I used Disneyland to show how ridiculous this has gotten)

And… The Fed decided to leave rates unchanged… I’m shocked! All throughout this past year, I called for rate cuts by the Fed, because I thought that’s what they would do, not what I thought they SHOULD do! And now, that I think they

SHOULD have cut rates…. They leave them unchanged! Clueless, toothless, delusional, there’s lots of descriptions for the Fed Heads, and I can’t pick one, because they all fit!

And still… People buy dollars… If there isn’t a thing called the PPT (Plunge Protection Team), then I’m a monkey’s uncle! (when was the last time you heard that expression?)

But just think about this long and hard folks… All this debt, and all the debt that has yet to be booked (baby boomers all retiring and wanting their payments is a start) has to be paid back… And how does the Gov’t plan to do this? With cheaper dollars… With cheaper dollars… Say that to yourself a few times and you’ll begin to wonder what’s going on with people propping up the dollar! With cheaper dollars, folks… With cheaper dollars…”

Source: Paulson speaks with forked tongue…