If you can force yourself to watch it, pay particular attention to the part where Paulson and Ben Bernake roundup Congress, and tell those nitwits that if they don’t give the bankers $700 billion there will be martial law. Unlike what the frontline report wants you to believe that was not a warning, but a threat. It’s the most serious kind of Fed Speak targeted to a very select audience. It’s a carrot or the stick. The Fed makes lots of threats that way. Look for it. Any time the Fed says give us our way or the economy is at risk, it’s a threat.

Now look at what Karl Denninger caught AIG doing.

From a Reuters blog:

We are hearing that discussion of breaking up large financial institutions that pose systemic risk to the market is gaining traction on the Hill. At this point, discussions are in the early stages, but we understand that an amendment addressing breaking up institutions deemed “too big to fail” could be introduced in the House over the next few days. How does one define “too big to fail” and how would the divestiture process work – these are good questions that Congress will have to address as the discussion moves forward. To our understanding, any amendment that could be introduced in the coming week would likely be vague and would give the regulators discretion to determine which institutions qualify as “too big” and how to address the risk they pose to the system.

The author goes on to say that Kanjorski may be the originator of this. Good, as far as it does, assuming it’s real.

But that’s not the bombshell in the post. No, it’s this:

He left Geithner with two documents. One was a fact sheet that listed all the attributes of AIG FP [the division run by Joe Cassano that blew the company up] and argued why it should be given status as a primary dealer. The other–a bombshell that Willumstad was confident would draw Geithner’s attention–was a report on AIG’s counterparty exposure around the world, which included “2.7 trillion of notional derivative exposures, with 12,000 individual contracts.” About halfway down the page, in bold, was the detail that Willumstad hoped would strike Geithner as startling: “$1 trillion of exposures concentrated with 12 major financial institutions.”

Was that a threat?

No Karl I think that was a warning.