The outrage at AIG bonuses is valid but beside yet more outrageous things.

http://news.yahoo.com/s/ap/20090316/ap_on_go_pr_wh/aig_outrage

There is so much that is specious and fraudulent about the comments of the administration concerning AIG that it is hard to know where to start:

1) The bonuses are said to be contractual.
***This is the administration that intends to violate the millions of contracts between mortgage holders and mortgagees. The sanctity of contracts is important but not to this administration.

2) The bonuses are said to be necessary to retain the talented (sales) people who are important for AIG if the taxpayer is ever to recover the money "invested" in AIG.
a)This is a chimera; the taxpayer is never going to recover money from AIG, certainly not all of it.
b) The salespeople are concentrated in the Connecticut subsidiary that sold all the Credit Default Swaps that got AIG ( and everyone else) into trouble in the first place. If it's all the same to those wanting to retain these talented people, I'd just as soon they not sell any more of this toxic stuff.

3) Certainly, the genius troika that first started the AIG "investment" path ( two jackasses and a horse yoked together in violation of Biblical prohibitions; Bernanke might be the horse, by the way; the others are for sure the other ) could have anticipated that such contracts existed. Of course, the troika didn't anticipate how large the bailout would be ( and it is still counting. )

4) Had AIG been allowed to go into bankruptcy, these contracts would have been invalidated and the issue would not have arisen.

5) Is the AIG bailout really important for the AMERICAN financial system? The money is going down a rathole but the rats aren't even American.

The bailout is really not of AIG but of the counterparties to AIG. The remains of the troika ( Bernanke and Geithner ) are chary about letting the public know who the counterparties are but it is already clear that they are largely European banks ( Deutschebank being finally identified as one ). It is reported that Paulson was led to his panic mode ( demanding $700Billion with a three-page mandate and intending to bailout AIG ) based on an hysterical call from the French finance minister. (Another story has it that Goldman Sachs, from whence Paulson came, was also a significant counterparty but at least it's an American company. )

If the European banks would have been put into jeopardy by AIG's bankruptcy, THAT would have been the time for a bailout by the American taxpayer but not, fraudulently, of AIG but, realistically, of the European system. That would at least have been transparent and gotten the taxpayer credit for the sacrifices demanded.

The fiction that we are bailing out the American system by throwing money at an American company is apparent but not yet admitted by the Obama administration and Geithner/Bernanke. Of course they are loath to admit that it's not an investment at all but a subsidy, and of foreigners. Children know the fairy tale of the neverending bowl of soup; guess who is filling the bowl and who is getting the benefit?

If there's outrage now, ask what it should be. (Obama will probably blame it on Bush although he seems to have retired six months before Obama was elected. Obama appointed Geithner Treasury Secretary and the subsequent folly is on Obama's watch. )