Updated from 11:34 a.m. ET

Update: President Obama has instructed Tim Geithner to “pursue every legal avenue to block these bonuses” planned for AIG executive. It’s “hard to warrant any bonuses” at AIG and there is no way to “justify this outrage,” the President said midday at the White House. After tripping over his words at one point, the President said, “I am choked up with anger,” a familiar feeling in America today.

Earlier: Every time AIG is in the news, it’s almost guaranteed to provoke a gag reaction from American taxpayers and policymakers. This weekend was no different as two stories of bailout abuse and outrageous behavior came to light:

First, AIG was lambasted as disclosures of its $1.2 billion bonus pool came to light. About $450 million of the bonuses were planned for employees of its financial services unit, the rogue hedge fund insider the insurer, which lost $40.5 billion later year. The Wall Street Journal reports at least seven individuals at that unit were due bonus payments of $3 million each.

AIG CEO Edward Liddy says “the firm’s hands are tied” because those bonus payments are “contractual commitments”; apparently, both he and regulators fear the fallout of trying to abrogate contracts, which may be legally binding but were signed before AIG became a ward of the state.

Second, in part to quell the outrage over the bonus revelations – which apparently only came to light because a $165 million payment was due on Sunday – AIG released the names of its counterparties who, thus far, have received at least $90 billion of the $173 billion of government funds the firm has received in what amounts to a backdoor bailout of Wall Street firms, banks and foreign institutions. (Reports vary but Bloomberg says the counterparties got $105 billion of AIG bailout funds.)

Along with Merrill Lynch, Bank of America and Citigroup, the prime beneficiaries of the AIG bailout bonanza include European banking giants Societe Generale, Deustche Bank and Barclays.

But at $12.9 billion to date, Goldman Sachs is at the top of the list AIG bailout beneficiaries. This only reinforces the perception the AIG bailout was really a bailout of Hank Paulson’s former firm. And, by the way, AIG’s Liddy had to resign from Goldman’s board in order to take the AIG job last fall.

Are you outraged yet? The good news is you’re not alone: Ben Bernanke, Tim Geithner, Larry Summers, NY Fed President (and ex-Goldman economist) William Dudley, Rep. Barney Frank, Sen. Bob Corker and others have each expressed anger and outrage over the AIG bonuses and payments to counterparties.

The real question is what they, and President Barack Obama, are going to do about it? The really scary thing is there’s no end in sight to these AIG outrages, unless we make a major change of course – pronto.

source: yahoo finance.

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