I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

Th writer is able to go out with his head held high ecause he believes he has done nothing wrong and has been ill-used by his bosses and his ostensible political leaders.

Ultimaltely, AIG's non-felonious employees are suffering for the sins of a razzle-dazzle group that has apparently been allowed to leave AIG quietly and, so far, retain their "earnings" from the last few years, leaving others to clean up their mess and face a full frontal assault from statist Dems and their media allies. That is a basic fraying of the social contract that canno tbe repaired without prosecutions and public exposure of the wrong-doers, and a show of restraint and respect for law from our elites. Neither of these options appear to be on the table.

The problem with the AIG bailout has been the utter lack of transparency. Until last week the $170 billion bailout had barely been spoken of, as AIG, the government, and the media engaged in a seeming conspiracy of silence to obfuscate and hide the truth of what was happening there.

The letter writer speaks of working 14 hour days to help AIG. Have you ever had a sense that this was happening? I haven't. After 9/11, there was a very publci display of flags and workers at the disaster sites. There has been no such display by AIG. No one really knows what's going on there, or at its counter-parties. In an atmosphere like that, of course a bonus payment - even if deserved - would look bad.

I have no idea what the writer's political associations are. It could be he's non-political. Then, again he makes an effort to emphasize his humble "son of two teachers," "mill town" roots, which makes him sound like a Democrat. If he is, he has undoubtedly marinated in tales of "stupid" Republicans," and the like. For people who like to think of themselves as liberal, I hope the last 8 weeks have been educational. Their preferred leaders have revealed themselves to be little more than disingenuous statist authoritarians, prone to panic and punitive acts to salve their left-wing base. Whatever rising tide of anger is out there, don't call it "populist." Call it a revolt of the productive class against those who have abused it.

Some of the same banks that got government-funded payouts to settle contracts with American International Group Inc. also turned to the insurer for help cutting their income taxes in the U.S. and Europe, according to court records and people familiar with the business.

The Internal Revenue Service is challenging some of the tax deals structured by AIG Financial Products Corp., the same unit of the New York company that has caused political ire over $165 million in employee bonuses.

The company paid $61 million last year in disputed taxes stemming from the deals but sued the U.S. government last month in federal court in New York, seeking a refund, according to filings in the case.

Banks that worked with AIG on tax deals include Crédit Agricole SA of France, Bank of Ireland and Bank of America Corp., according to AIG's lawsuit. The banks declined to comment.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

What do pensions have in common with AIG? It turns out a lot. Both were claiming to run a core business when in reality they were fueling a Ponzi scheme using "sophisticated instruments" or "alternative investments" that threaten the security of the global financial system. That's why AIG's dismal results back in August spelled trouble for pension funds.

Just like AIG, most pension funds lack transparency, allowing them to operate beyond the reach of regulators. Moreover, there is no accountability or serious risk management taking place at any of these large pension funds, allowing senior managers to reap huge bonuses for taking excessive risks (typically by beating bogus benchmarks in private markets).

And just like AIG, when their financial solvency eventually reaches a breaking point, these pension funds are going to require billions, if not trillions, in bailout funds to allow them to meet their pension obligations.

You'd better get ready because Uncle Scam wants your money and there is nothing you can do to stop him.

"The first thing that would make me feel a little bit better towards them if they'd follow the Japanese model and come before the American people and take that deep bow and say I'm sorry, and then either do one of two things -- resign, or go commit suicide,'' Grassley (R-Iowa) said on an Iowa radio station, WMT, a clip repeated on a Washington news station, WTOP.

The administration is said to have been outraged when it heard of the bonus plan last week. Apparently Secretary of the Treasury Tim Geithner told AIG's chairman, Edward Liddy (who was installed at the insistence of the Treasury, in the first place) that the bonuses should not be paid. But most will be paid anyway, because, according to AIG, the firm is legally obligated to do so. The bonuses are part of employee contracts negotiated before the bailouts. And, in any event, Liddy explained, AIG needed to be able to retain talent.

AIG's arguments are absurd on their face. Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid; indeed, AIG's executives would have long ago been on the street. And any mention of the word "talent" in the same sentence as "AIG" or "credit default swaps" would be laughable if it laughing weren't already so expensive.

Apart from AIG's sophistry is a much larger point. This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. So to whom should they be accountable? When taxpayers have put up, and essentially own, a large portion of their assets, AIG and other behemoths should be accountable to taxpayers. When our very own Secretary of the Treasury cannot make stick his decision that AIG's bonuses should not be paid, only one conclusion can be drawn: AIG is accountable to no one. Our democracy is seriously broken.

In his letter to the Treasury, Mr. Liddy said that A.I.G. was required to pay about $165 million in bonuses on or before March 15. The company had already paid $55 million in December, but the rest was about to come due.

The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. About seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Under a deal reached this week, A.I.G. agreed that the top 50 executives in the financial products division would get half of the $9.6 million they were supposed to get by March 15. The second of their bonuses would be paid out in two installments in July in September. 

The bonuses will be paid to executives at American International Group’s Financial Products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bond backed by subprime mortgages.

As I understand it, the losses at AIG, the parent, are a result of various credit default swaps made with outside counterparties. At one point these contracts were so out of the money that they probably required tiny premiums to AIG to take the risks (wrapping AAA rated MBS, CDOs etc). The risk of collapse of mortgage markets in particular but also probably other market sectors were perceived as being virtually non-existent. These were contracts where they would pay only in extreme, long-tail events, and the revenues off this book of business were probably pretty small on a per contract basis. Hence, a lot of contracts had to be written to make the business worthwhile, and since the risks were seen as virtually non-existent, this was a management decision in an unregulated entity. Now, we are in the long tail that AIG financial engineers did not foresee, and the contracts have sucked all the capital out of AIG, plus everything the government has given them. 

So let’s walk through this. The government pays money to AIG so AIG can continue to honor its contracts. It is making payments under these contracts, to the counterparties on these contracts. The amount of capital given to AIG by the government, most of which AIG has presumably paid out, has reached $180 Billion. That is a lot of money, and is on top of however much capital AIG had before the crisis, which was also sucked out under swap agreements and paid to counter parties. 

Isn’t it curious that for all the talk on all the channels all day, all the Paulson speeches, all the hearings with bankers paraded before House panels, no one has mentioned where the huge amounts of money flowing out of AIG are going? They must be going to a number of big institutions. Probably their CEOs stood before Congress only three weeks ago. Some of them are getting AIG money, but they remain silent. The government must know who is getting the money, and they remain silent too. Yet somehow it apparently feels compelled to provide AIG a ceaseless stream of capital to pay to these outside institutions. Will these institutions fail if the AIG contracts stop paying? This must be concern, noting else makes sense other than outright looting.