Sept. 19 (Bloomberg) -- Employees of Lehman Brothers Holdings Inc., packing up their desks after the company's Sept. 15 bankruptcy filing, must have been confused by the government's decision to bail out insurance giant American International Group, Inc. less than 48 hours later.

The government cut Lehman loose six months after determining that Bear Stearns Cos. was too big to fail. The Federal Reserve anted up $29 billion in March to make the company's less wholesome assets more palatable to acquiring bank JPMorgan Chase & Co.

Lehman's former employees would probably find Treasury Secretary Hank Paulson's comments on the same day the company filed for bankruptcy disingenuous, to say the least.

``What is going on right now in New York has got nothing to do with any bridge loan from the government,'' Paulson said at a Sept. 15 White House briefing, referring to talks between the government and AIG. ``What's going on in New York is a private sector effort, again, focused on dealing with an important issue that's, I think, important for the financial system to work on right now.''

Oops. Is it possible that Paulson and his crack staff of Goldman Sachs alums were unaware of AIG's precarious position when he made those statements? Granted, the outlook for the company deteriorated when the rating companies downgraded AIG's senior debt, requiring the company to post billions more in collateral -- money it didn't have.

Paulson's blanket statements on the government's intentions were quickly overtaken by events.

Misleading Statements

My inbox is already filled with e-mails from disgruntled investors who think the government led them astray with its reassurances that Fannie Mae and Freddie Mac were well capitalized. The government seized control of the two government- sponsored agencies that dominate mortgage finance on Sept. 7.

``The preferred stock that we purchased was issued by Freddie Mac at the request of the Treasury,'' and the GSE regulator ``maintained at that time, and subsequently, that the companies were adequately capitalized,'' one investment adviser wrote.

My correspondent and his clients ``experienced dramatic losses'' when the government seized the two companies, put them into conservatorship and sent the existing shareholders (common and preferred) to the back of the line.

At the same press briefing, Paulson said he ``never once considered it appropriate to put taxpayer money on the line in resolving Lehman Brothers.''

Nuances of Rescues

Lehman's former employees might not appreciate the nuances that went into the decision. They were told that Bear Stearns imploded quickly while Lehman sprang a slow leak that Chief Executive Officer Dick Fuld was even slower to plug. AIG was assigned to the urgent-and-needy category.

Perhaps Secretary Paulson could elaborate on the criteria used to determine who gets a seat in the lifeboat and who goes down with the ship. Instead, he reassured us that ``the American people can remain confident in the soundness and resilience of our financial system. Our banking system is a safe and sound one.''

The American people must be wondering what all that confidence is buying them.

79.9 Percent Solution

For $29 billion, they got a boatload of Bear Stearns's dodgy mortgage collateral.

For $200 billion and unlimited borrowing authority, they got 79.9 percent of Fannie Mae and Freddie Mac, which may or may not turn out to be a good deal. The basic model of borrowing at a subsidized rate to buy higher yielding mortgages is a winner. Unfortunately, the losers -- the underwater mortgages -- will eat into that profit.

For $85 billion, they got 79.9 percent of AIG. (See uncertain outcome for Fannie and Freddie above.)

The American people must wonder why central banks around the world are pumping hundreds of billions of dollars into short-term money markets to keep credit flowing and interest-rates down if the financial system is so sound. The Fed increased its swap lines to central banks in Europe, Japan and Canada to $247 billion. The Treasury is selling bills (raising cash) so the Fed will be able to lend to the wards of the state without depressing the federal funds rate.

At times like these, when no one has a good idea how to stop the bleeding, the Treasury secretary is supposed to instill confidence, not play a confidence game. Never say never at times like these.

Good with Numbers

Barclays Plc agreed to buy Lehman's capital markets businesses, which means many of the employees boxing up their personal effects can unpack.

With any luck, some of Wall Street's newly unemployed bankers and brokers will be able to retool themselves for other professions. Legal services, for example, should be a growth industry in light of expected lawsuits for predatory lending and other real and perceived crimes and misdemeanors.

For anyone who is good with numbers and has first-hand experience working with a chief financial officer of a Wall Street firm, the possibilities are endless.

(Caroline Baum, author of ``Just What I Said,'' is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

Last Updated: September 19, 2008 00:04 EDT