Where is the political will?

When will the politicans blink is the key question as the trading day progresses? So far, Senator's McCain, Biden, and Shelby have all signalled an unwillingness to have the government back-stop AIG counter-party risk. The comments were obviously carefully crafted but the market responded with dismay. Former AIG CEO Hank Greenberg was the first AIG affiliated official to explicitly state that AIG would pose a systemic issue for the financial markets. Greenberg said that the government, Fed, and private markets need to solve this liquidity event. The bounce off the lows suggests that market participants are anticipating a speedy resolution to the AIG counter-party risk. Although he is a typical grandstander, Senate Banking Chair Chris Dodd has a history of making market friendly comments during this financial crisis. A Dodd statement at some point today will likely be a key catalyst and signal whether there is the political will to solve this AIG problem. The private markets have unlocked the trigger and are ready to blow the government's head off with sharply lower asset prices in order to force action. Cooler heads will likely prevail but the downside is too great if they do not.