I have not said a whole lot on the whole AIG-Bonuses business because, quite frankly, the entire story has become some kind of zombie-thing. It has a life of its own, with the company becoming the target of so much rage, breast-beating and brow-furrowing, not to mention cynical and hypocritical nonsense spewing by politicians, and it is my firm belief it will only die if we focus on the main issues. First, AIG leveraged itself in to hell by using credit-default swaps as a way to make money. When you insist that something that is, in reality, worth nothing, is actually worth something, and the real worth (0) comes knocking at your door, the entire structure of financial dealings in which AIGFG engaged crumbled like dust. It didn't bring down the entire American economy on its own, but it certainly was a catalyst. The rage most Americans currently feel (myself included) is not at some fanciful notion that the economy hangs in the balance. The rage is two-fold. First, AIG screwed the economic pooch in a historical manner, coming begging at the federal government's door, receiving billions of dollars in loans. Some of those dollars - which are our dollars, and specifically my dollars - are now going to pay bonuses to the very people who invented the craptacular house of crap that now lies in crappy ruins. Furthermore, even as many people, including many politicians, say it might not be such a hot idea to pay bonuses to a group of people who screwed up so royally, the company is now saying not only it is necessary to keep these people (rather than see if the door will indeed hit them in the ass on the way out), but that not to pay these bonuses could be far worse than paying them.
It's really quite simple. AIG exists right now because of the indulgence of the federal government. All those contracts guaranteeing bonuses are scraps of paper right now, particularly in light of the simple reality that they have not been earned. It will be neither the end of the economy, or capitalism, or even AIG, if those contracts are publicly burned while a group of peopple laugh with glee. As long as the company continue to insist they can make a house of diamonds out of the pile of shit that is their current asset-standing, and as long as we have people in the Treasury who insist that this huge pile of shit needs to be rebuilt in to an entire city of diamonds, we will be in trouble. All we really need to do is tell the current CEO, who happened to have been appointed by the federal government, to do a couple simple things to get back in the country's good graces.
Fire all the really stupid, corrupt, or incompetent (oh, heck, probably all three) people in AIGFS. Don't give them bonuses, don't give them a generous severance package, only give them AIGFS on their resume to assure they will not be hired by any reputable financial services company again during their lifetimes.
Go to the company's books and say three times, "When it says 'zero', it means 'zero'", and take your medicine like your Mother taught you.