Earlier this week, the inspector general for the Troubled Asset Relief Program, a k a, the bank bailout fund, released his report on the 2008 rescue of [AIG]. The gist of the report is that government officials made no serious attempt to extract concessions from bankers. Throughout the financial crisis key officials have shied away from doing anything that might rattle Wall Street. And the bitter paradox is that this play-it-safe approach has ended up undermining prospects for economic recovery. Finishing the job of fixing the broken economy has become nearly impossible now that the public has lost faith in the government’s efforts. Officials could have called on bankers to offer a better deal [to bear part of the cost of the bailout], for their own sake, and simultaneously threatened to name and shame those who balked. It was their choice not to do that. And these seemingly safe choices have now placed the economy in grave danger. For the economy is still in deep trouble and needs much more government help. So here’s the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust.