No surprise here. The Europeans aren’t extending any sympathy to the U.S. taxpayer for the money their banks collected from AIG.

The Telegraph.co.uk lobbed this little bomblet our way:

Some in Washington are already singing the predictable tune: US taxpayers’ money was used to bail out European banks. But the decision to bail out AIG meant such uses of cash were inevitable: either a bailout makes good on valid contracts, or it doesn’t.

Once the bailout decision is made, and the funds are in, the rescuer doesn’t get to choose which obligations are honoured. That’s especially true for AIG. The whole point of the rescue was to keep the mega-insurer from defaulting on its obligations.

There sure is a lot of moralizing about contracts and the need to honor them going on these past few days. One’s position on that point probably has a lot to do with whether you’re the one being honored or the one forced to do the honoring.

Anyway, the article does a pretty good job pointing out that in a lot of the cases collateral is either being posted by AIG or returned by AIG to European banks that had lent it to AIG. A lot of the payments don’t necessarily involve the expenditure of funds.Some of the more sensationalistic stories have tended to overlook that point.

The final two paragraphs are worthy of the Wall Street Journal. 

What this means is that AIG honoured its contracts. Whether it should have signed those contracts in the first place – or been bailed out subsequently – is another debate altogether.

European banks simply did what it was their duty to do. Where AIG got the money from didn’t matter. Foreign banks aren’t the custodians of US taxpayers’ funds.

In other circumstances it would be nice to see such free market sentiments from the Europeans.