OF BONUSES AND HOLD-UPS. New York Times business writer Andrew Ross Sorkin wonders if the hedge fund bonus recipients aren't collecting a ransom.

But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

Correct me if I'm wrong, but isn't new Yankee lefthander C. C. Sabathia in a position to earn more in five years than A. I. G.'s entire derivatives team will?

On the other hand, Mr Sabathia is unlikely to put several Chicago White Sox on base in order to demonstrate his effectiveness with runners in scoring position. Econobrowser suggests the incentives in high finance are different.

These payments apparently included "retention" payments of over $1 million each to eleven individuals who are no longer working at AIG.

One of the reasons this is so outrageous is that the promise of such bonuses was in fact one of the very factors that caused our current problems, creating incentives for managers of AIG to get out of solid insurance underwriting and into hedge fund gambling. If anyone had supposed that AIG had "learned its lesson", this report seemed to dash that hope against the wall like a plate of china.

Deeper in the post is a chart that shows where some of the other A.I.G. moneys have been going.

Also in the New York Times, Frank Rich is unsparing.

Bob Schieffer of CBS asked [former Treasury secretary and Harvard president Larry] Summers the simple question that has haunted the American public since the bailouts began last fall: “Do you know, Dr. Summers, what the banks have done with all of this money that has been funneled to them through these bailouts?” What followed was a monologue of evasion that, translated into English, amounted to: Not really, but you little folk needn’t worry about it.

Yet even as Summers spoke, A.I.G. was belatedly confirming what he would not. It has, in essence, been laundering its $170 billion in taxpayers’ money by paying off its reckless partners in gambling and greed, from Goldman Sachs and Citigroup on Wall Street to Société Générale and Deutsche Bank abroad.

I'm not sure laundering is quite the right word: if these payments are closing open positions, that's one way of relieving troubled assets, which I would think is what a troubled asset relief program does.

On the other hand, he notes that the respect for contract behind some official non-disapproval of the retention bonuses (which might be better described as deferred commissions) is a respect frequently honored in the breach.

Summers was even more highhanded in addressing the “retention bonuses” handed to the very employees who brokered all those bad bets. After reciting the requisite outrage talking point, he delivered a patronizing lecture to viewers of ABC’s “This Week” on how our “tradition of upholding law” made it impossible to abrogate the bonus agreements. It never occurred to Summers that Americans might know that contracts are renegotiated all the time — most conspicuously of late by the United Automobile Workers, which consented to givebacks as its contribution to the Detroit bailout plan. Nor did he note, for all his supposed reverence for the law, that the A.I.G. unit being rewarded with these bonuses is now under legal investigation by British and American authorities.

True though that is, the compromise of integrity inherent in abrogating contracts without a formal bankruptcy proceding, bundled with the compromise of integrity inherent in treating the tax code as outside constitutional provisions on bills of attainder, present yet another Atlas Shrugged moment.