... “IfAIGweretofailnotwithstandingtheprevioussubstantialgovernmentsupport,itislikelytohaveacascadingimpactonanumberofU.S.lifeinsurersalreadyweakenedbycreditlosses.Stateinsuranceguaranteefundswouldbequicklydissipated,leadingtoevengreaterrunsontheinsuranceindustry. “Inaddition,thegovernment’sunwillingnesstosupportAIGcouldleadtoacrisisofconfidencehere and abroadoverotherlargefinancialinstitutions,particularlythosethathavethusfarremainedviablebecauseofgovernmentsupportprograms. ... “ThiscouldleaddirectlytoadecreaseintheattractivenessofU.S.governmentsecurities and aconsequentincreaseinborrowingcostsfortheU.S.government and relatedissuingentities “Theextent and interconnectednessofAIG’sbusinessisfar‐reaching and encompassescustomersacrossthegloberangingfromgovernmentalagencies,corporations and consumerstocounterparties.AfailureofAIGcouldcreateachainreactionofenormousproportion ... $36,405,06023However,ifthisglobalstructureisshaky,neitherafuturefailureofAIGnorthe2008bankruptcyofLehmanBrotherscanbeproperlyconstruedastheunderlyingcause.Rather,theyaremerelypotentialtriggersofaglobalcollapse.Theunderlyingcausesofglobalinstabilityaremanyyearsofoverborrowing and undersaving,plusthecumulativeweightoftheU.S.housingbust,mortgagemeltdown,widespreaddeleveraginginthefinancialsystem, and thedeepesteconomicdownturnsincethe Great Depression.Meanwhile,thepotentialtriggersofaglobalcollapseareubiquitous—notlimitedtojustoneortwofirmssuchasAIGorLehmanBrothers.Aswedemonstrateinthispaper,inthebankingindustryalone,thereareatleastfourmegabanks and thousandsofsmallerinstitutionsatrisk.Thus,althoughabundanttaxpayerfundsmaylockdownsomeofthepotentialtriggerssomeofthetime,itisunreasonabletoexpectthegovernmenttosilenceallthegunsallthetime.24PartIVU.S.CommercialBanksAreVulnerabletoContagionDespiteExpandedDepositInsuranceOnejustificationoftencitedprivately— and sometimespublicly—forgovernmentactionstoavertlargebankfailuresistheconcernthat...