He seems like a nice enough guy but he is being disingenuous when he says the government lacked the powers it needed to handle the collapse of a company like AIG and that, "Coming into AIG we had, basically, duct tape and string." Setting aside the method (meaning tools), it was the PRICE that was wrong. The tools at hand (using AIG as a conduit to cover banks exposed to CDS losses) were used poorly. The Fed could have poured less cash into AIG rather than paying out on CDSs at 100 cents on the dollar. Also, the subtext seems to be that the CDS counterparties used economic collapse as a playing card ("we will bring the financial system down by demanding that AIG make good on its CDS obligations") and that the Fed caved in. Crazy both in the recklessness of the counterparties and if the Fed bought the argument. Put simply, the Fed should simply have said: "we can pay you some amount on the CDSs or you can take your chances in bankruptcy court with AIG." As bankruptcy court for AIG would have meant bankruptcy for the counterparties (as the financial system collapsed), they would have accepted the "some amount". Separately, why is Goldman's hedged position with AIG relevant? Either they were hedged (in which case there was no need to bail GS out because there was no system risk from failure to satisfy the CDS obligations to GS) or they weren't (in which case they weren't in a position to demand 100 cents on the dollar).
The Fed should ask for its money back.