Two astonishing questions have erupted as the Great AIG Trial goes into its final week at Washington. In the trial Starr International, one of the owners of AIG, is suing America for upwards of $40 billion because, it asserts, the Federal Reserve and the Treasury violated, among other things, the takings clause of the Constitution when the Fed seized AIG in September 2008. The government claimed that it had to do so to prevent a collapse of the financial system. But: a) “Was the taxpayer bailout of AIG, the biggest in U.S. history, really necessary?” and b) “What would have happened if the main sovereign wealth fund of America’s biggest geopolitical rival had rescued it instead.”

Those questions are posed in an important dispatch by Richard Teitelbaum in the magazine Institutional Investor. Mr. Teitelbaum calls the questions “gobsmacking.” He has pieced the tale together from the weeks of testimony and documents produced at the trial in Washington, where the case is being brought in the United States Court of Federal Claims by Starr International, which is led by erstwhile AIG chairman Maurice “Hank” Greenberg. At the trial President George W. Bush’s treasury secretary, Henry Paulson, defended the seizure of AIG and testified repeatedly about “moral hazard.”

“Despite talk of moral hazard,” Institutional Investor reports, “it turns out that at least one alterantive to the taxpayer rescue was readily available.” He reports that China Investment Corp., the sovereign wealth fund of the communist regime in Peking, “approached the Treasury Department directly” and was “eager to make an AIG investment.” Institutional Investor reports that “one or more officials in Paulson’s office” believe the Chinese communist offer was “sufficient to meet the insurer’s needs at the time.”

Mr. Paulson, Institutional Investor reports, citing a court document known as the Plaintiff’s Corrected Proposed Findings of Fact, told the China Investment Corporation that its help wasn’t needed. “Paulson’s brush-off of CIC is proof,” Institutional Investor quotes critics as saying, “that at the very least there were unexplored rescue options for AIG.” It quotes one of those crticis, investor Jim Rogers, as saying, “There were other solutions that did not require taxpayers’ or anybody else’s money.” It quotes another critic, James Cox, a professor at Duke Law School, as fuming, “It’s sinister or cynical. It’s protecting the big banks against the yellow peril.”

Mr. Teitelbaum reckons that the disclosures in the trial “bolster the arguments of those who view the bailout as a giant payoff to banks that were on the hook for tens of billions of dollars if AIG went belly up.” They include Goldman Sachs Group, where Mr. Paulson served as chief executive between 1999 and 2006, when he acceded to treasury secretary. He suggests that a rescue of AIG by China Invesment would have meant AIG driving a much harder bargain in untangling itself from its credit default swaps with Goldman. That’s in sharp contrast to the Fed, which insisted AIG pay off the swaps at 100 cents on the dollar, Institutional Investor reports.

What we here at the Sun take from all this is the glory of the Fifth Amendment to the United States Constitution. It is America’s bedrock safeguard of private property. It requires due process of law before the government can take property for public use. It also requires just compensation. We don’t know how this trial will turn out. But gobsmacking is an apt word for the record it has uncovered. It raises at least the possibility that Mr. Paulson and the Federal Reserve chairman, Ben Bernanke — the two top financial officials in our government — were in such a panic over AIG that they forgot about the very Constitution they had sworn an oath to support.