This time it appears that AIG is paying either $165 million, or $450 million to senior employees of their financial products division, the one which bankrupted the firm through their credit default swap (CDS) business.

It appears that the treasury, who, you know, manages AIG on behalf or the taxpayers, who now own of 80% of the bankrupt in everything but name only firm, were told by AIG president Edward Liddy that these were contracts, and so they had to honor them:

[Obama economic guru Larry] Summers said the government would examine its options, but he acknowledged it might not be able to terminate prior bonus agreements.

“We are a country of law. There are contracts. The government cannot just abrogate contracts,” he said in an interview Sunday on ABC’s “This Week.”

AIG is already scheduled to pay $121.5 million in incentive payments for 2008 to senior executives and 6,400 of its employees. And AIG is laying out another $619 million for 2009 in retention payments to more than 4,000 employees.
Total expected payments amount to almost $1.2 billion.

Somehow, the contracts signed with auto workers must be renegotiated, but those signed with failed and incompetent financial executives must be supported.

Seriously, the US government claim of impotence in the face of a contract is a reflection of the fact that Mssrs. Summers and Geithner are creatures of the corrupt financial industry on Wall Street, and cannot see beyond this.

If I had to choose between Vladimir Lenin and Timothy Geithner at Treasury, I would be very hard pressed to choose.