Why was AIG rescued after Lehman had failed?

According to former German finance minister Peer Steinbrück, AIG’s rescue had a lot to do with European pressure.

Steinbrück: The investment bank Lehman Brothers collapsed on Sept. 15, 2008, and the world’s largest insurance company, AIG, was threatened with the same fate. I’m convinced that if AIG had gone under, the financial sector would have reached a melting point. The world was indeed at the brink of disaster.

SPIEGEL: Were you alone in your assessment?

Steinbrück: No, my European counterparts agreed with me: Christine Lagarde from France, Alistair Darling from Great Britain, Wouter Bos from the Netherlands and, not least, the central bank governors from (Bundesbank President) Axel Weber to European Central Bank President Jean-Claude Trichet. Then, in a coordinated telephone campaign, we implored then-US Treasury Secretary Henry Paulson not to risk a second case like Lehman Brothers under any circumstances.

SPIEGEL: Are you saying that without European intervention there would have been a crash?

Steinbrück: We had a frank talk with Paulson in any case. The Lehman decision had triggered an earthquake worldwide. We wanted to know: What on earth are you trying to do? Does it have something to do with the presidential election campaign, or are you trying to set an example? We tried to make it clear to our US counterpart, dis regarding all diplomatic conventions, that it would be a disaster if AIG failed.

SPIEGEL: Did Paulson know that the Lehman bankruptcy was a huge mistake?

Steinbrück: He never admitted it to me — or to anyone else, I believe. But there have been signs from the Americans that make me think they completely underestimated the consequences of the Lehman crash. They didn’t think it possible that its bankruptcy would trigger such an unimaginable shock wave.

More here.