Should AIG Bend To Obama's Threats?

Think about it for a moment. Obama is threatening to cut off AIG’s air supply unless it reverses course on its bonuses. But AIG’s bailout isn’t meant for AIG, it’s meant for AIG’s counterparties. At some point along the way, it was deemed that the best way to bail out those banks was via AIG rather than directly.

Now we’re learning how wrongheaded that was.

So there’s really not that much upside for AIG. It’s a heads-we-win, tails-we-nuke-the-entire-banking-system proposation. Is it really worth playing that game just to stoke outrage.

Meanwhile, it looks like John Carney’s concern that the whole thing is about paying back taxpayer bonus money with taxpayer bonus money (asinine) is like what’s going on. At least the NYT things so:

By seeking to link repayment of the bonus money to the coming $30 billion in assistance, the administration seemed to leave open the possibility that the company would effectively be repaying taxpayers with taxpayer money. A Treasury official disputed that taxpayers would be repaying themselves, but could not specify how else the company would give back the money.

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