Also clear why you shouldn't strive for a career in politics.

When in trouble or in doubt, run in circles, scream and shout.

(from The Caine Mutiny)

They're useful symbols for larger issues.

For the right, earmarks are symbols of wasteful spending and bloated government.

For the left, the bonuses are symbols of corporate greed and the inequality of our economic system.

As far as opportunity costs, the chattering class has been focusing on Rush Limbaugh for weeks; at least these issues are a bit closer to our problems.

I recall reading - I think on McArdle's blog - that Treasury looked into "not giving them the bonuses", and the lawyers' response was basically "you can try, but they'll sue, and they'll probably win".

It's even worse than just opportunity cost of focusing on this - it's pure political theater, if the Treasury lawyers are right (and I imagine they are).

Professor Drezner is correct. The bonuses represent less than one percent of the 170 billion the taxpayers have given AIG. Wouldn't it be more useful to focus on the other 99%?

More importantly, the bonuses probably have to be paid and not for the flimsy legal reasons being put forth. The fact is that AIG was destroyed by a small group of traders in London who made extremely bad bets. The bonuses are being paid to keep these same traders in place. If they leave there is nothing to prevent them from trading against the riskiest of AIG's remaining positions thereby causing further losses that would dwarf the bonuses.

Granted the running in circles screaming and shouting is a bit much right now.

Nonetheless, let's not lose sight of the significant likelihood that fraud took place within AIGFP and many recipients of bonuses were complicit. Under these circumstances lawsuits by executives carry a substantial countersuit risk, giving the USG a lot of leverage to demand concessions or just say no. I expect the government to be zealous guardians of taxpayer money against fraud in this instance as in any other, and $100M is still a lot of money, even if small in comparison to the whole bailout.

...in suggesting that the bonuses are somehow required to keep employees in place into the future. My understanding is that the bonuses already paid were for retention through a date that has already passed (wouldn't make much sense otherwise). Retention into the future would require new agreements that would appear likely to face rather greater scrutiny, to say the least.

No one who spends much of his professional life writing about IR theory should be too quick to dismiss huge honking distractions that do not matter a whole hell of a lot.

The Congressional assault on AIG's bonus army can be a useful entry point for legislators previously unconcerned with financial markets on their way to actually being able to legislate about them. Sticking it to derivatives traders who helped cause the current economic crisis is an eminently worthy undertaking by itself; if the effort accomplished nothing more than to make government officials start to view people working for large financial institutions less as peers and colleagues and more as people likely to scam the taxpayers if left unsupervised, it would be one of the most useful things Congress has done in years.

Not for nothing, incidentally, but the process argument about earmarks -- the one John McCain was making, by himself, before he ever decided to run for President -- goes to the decay at the very heart of the American system of government. Representatives and Senators don't do oversight of the executive branch anymore; they don't make names for themselves through investigations or policy battles. They redirect spending through earmarks instead -- not just a few senior members of each body, but nearly all of them. People getting their news from the cable television shoutfests, plus a few tenured faculty, may well think this is just an issue about a stray few billion dollars. It isn't.

Wolfboy. My understanding is that the President was told last Thursday that $167 million was to be paid by AIG "later this month". If they had already been paid, the President's instructions this morning to find legal means to stop them would not make much sense. Additionally, Wall Street bonuses are often paid just before taxes are due.

The bonus debacle gave me an idea for a DC beltway billboard:

AIG spent $167 million for failure. You spent $170 billion for it. Which is worse?

After a week of the MSM et al your faux press statement remainds me that there are some reasonable people around.