A TBM guide to how angry we should be at AIG.

Outraged at AIG? Take your spot in line. While you’re there, gawk at all of your esteemed company. First you’ll find both aisles of Congress—“This is an outrage,” Senate Minority Leader Mitch McConnell will be repeating over and over again to Barney Frank, who will be murmuring about misbehavior and abuse of the system. Further ahead, you’ll find Ben Bernanke, the normally placid Fed chairman, reliving his two-time denunciation of AIG as having made “unconscionable bets” and that AIG makes him “angry.” And even further ahead will be the three-headed Sumnerbama hydra, breathing populist fire until it runs out of gas—an “outrage,” spat the hydra on Monday.

At the front of the line, of course, you’ll find your place with the rest of the American hordes. Pitchforks and torches in hand, we’re all ready to skewer AIG—but for what? This week’s two galling pieces of news—that the company is paying out more employee bonuses and that it sent billions in bailout money to other banks—are so confusing and were revealed in such quick succession that it’s hard to figure out why we’re supposed to be pissed off. To help, The Big Money assembled this primer on what is and isn’t worth getting outraged over.

The bailout(s):

We can’t judge the latest bits of AIG news without establishing a baseline. Rather than repeat ad nauseam the history of AIG’s incompetence, I’ll offer three links. First, there’s this basic FAQ that TBM assembled immediately after the first bailout; second, this juicy investigative piece from the New York Times on AIG’s financial-products division; and third, this timeline of the four separate bailouts. Now for the numbers: The government is 79.9 percent invested in AIG, a commitment of $170 billion spread out over four interventions. It’s more money than we have invested in any of our other life-jacket rescues.

The outrage here is directed toward AIG’s blind sweeping of risk under the rug. Its credit-default swaps were symptomatic of the derivative thinking that screwed us over; certainly worthy of outrage. But the $170 billion number is deceiving—if we hadn’t given it to AIG, those mortgage-backed securities would have defaulted without any insurance, causing even more havoc and costing even more money. We would have just ended up giving the money to the banks instead of AIG.

Outrage rating:

The bonuses:

How do you reward a unit that was (basically) singularly responsible for losing you $99.3 billion in the past year? You give its employees $450 million in bonuses! And you pay for it with taxpayer money! This is akin to a college pooling tuition and giving more beer money to alcoholic frat brothers who treat the campus as a private vomitorium. Thus, the outrage; and that a government-appointed CEO is going along with it doesn’t help. AIG says it is legally obliged to give its financial-products division bonus money for the year. On its surface, the bonus money is especially nauseating because that $450 million comes from the same money pool populated by taxpayer dollars. This is the detail that has hurried so many politicians to their soapboxes. Now New York Attorney General Andrew Cuomo is getting involved, issuing subpoenas to find out who received the bonuses, which AIG now says were issued on Friday. This, of course, follows the populist remarks from national politicians earlier in the day. Hell hath no fury like a politico’s constituency scorned.

But before you join the politicians in their outrage, consider the nuances. No matter what, we’ll probably get at least $165 million back, which is the amount of bonuses paid out on Friday. Barring a total blockade of payments, the administration has said it will at least demand the money be returned through AIG’s loan repayment. It follows, then, that one way or another we’ll also be able to recoup the $230 million due to be paid in 2010. So, whenever AIG gets around to paying us back, AIG will really be the one who actually paid most of the bonuses. (This, of course, assumes AIG will be paying us back.) But of course then those greedy dolts still get rewarded for their bile. And for our loss.

Outrage rating: