I don't know if the AIG exec's deserved the bonus payouts or not. I do know AIG was strong armed to award mortgage notes to folks that were far too risky and should have never been given a mortgage. To whom do we place the blame for that?? Where is the outrage for that?? The bonus payouts were part of a contractual agreement that had nothing to do with the government bailout payments. If taken away they will most likely sue. The state of Conn. is where AIG's financial headquarters are located. The state of Connecticut has a "double payout" clause where if one sues and wins, they win DOUBLE. Maybe they shouldn't have taken the bonus, but what kind of precedence will it set if the Government is allowed to just "Take" something that was awarded via a binding legal contract. Where will it go from there?? 
I hope the executives win double if they sue. Not because they deserve it, but because the government has overstepped their bounds and put themselves "above the law" by taking what was given by a binding legal contract!! 
Matt B.
Ummm...not to defend AIG or the mortgage industry or the financial sector - there's plenty of blame to go around, including members of both parties - but AIG isn't in the mortgage business. They don't make loans. AIG's mistake was
insuring huge packages of mortgages that had been "securitized." That is, a large number of mortgages were packaged together and that was traded as one would trade stock in a corporation. Can you imagine buying stock in Bank of America and having State Farm sell you a policy that said that they'd guarantee that stock to stay at a certain price and if it fell below, State Farm would pay the difference? Where do I sign?
The roots of the crisis are essentially these:
Lots of easy money available at low interest - mostly from overseas (China) and used to finance their own export-driven economic expansion;
Home buyers taking advantage of the easy money to buy homes they couldn't afford in the belief that real estate wouldn't lose value and unaware or uncaring of the risks they were taking in adjustable-rate loans;
Financial "wizards" were being rewarded for writing mortgages they shouldn't have that were then packaged and securitized to supposedly spread the risk;
Other financial "wizards" too smart for their own good who were unable, unwilling or flat didn't care to understand the value and potential risks in the securitized mortgages they were trading (See Bear Stearns, Merrill Lynch, et al);
Still more financial "wizards" at a small division of AIG that insured these packages of mortgages - the infamous credit default swaps - which was fine, so long as credit was easy and homes held their value, but rapidly became worthless when the easy money dried up.
Last, government officials and regulators of both parties who either pushed the easy money and bad loans or failed to do their jobs at overseeing the financial industry.
So, when the easy money started to dry up and housing prices started to fall, the loans started to default and the now panicked holders of those worthless mortgages are now going to AIG saying "Pay up." Only AIG doesn't hold near enough cash in reserve to cover it's bets. The risk in not bailing AIG out is that if AIG folds, many more of these loans then become worthless because there's nothing backing them and that has the potential to take down the banking system of the United States. And because the US is by far the largest economy in the world, the failure of our financial system brings down the rest of the world economy. All because some bright-eyed knucklehead math whizzes got the bright idea to insure things that should have never been insured.
As to the bonuses, I'd like to know about the terms of the contracts. I heard on the news yesterday that the bonus payouts ranged from $1000 to $6.5 million. Somehow, unless they're handing out $1000 bonuses to the part-time janitors, I don't have a problem with the idea of some people getting bonuses. But I can't imagine anyone deserving of a $6.5 million bonus in this economy, unless it's for a career's worth of service. In the end, when we're talking about the amount of money that's being thrown around, the total size of these bonuses is a rounding error. It's really more about the symbolism of the thing.
(I wish I'd sold my home two years ago to someone who thought it really was worth $425k. I'd be
all the way to the bank. But my wife heard the word "rent" and that was the end of that discussion.
)
