A couple of questions about AIG:
1. Is there any real legal difference between the contractual commitment by AIG to pay bonuses to employees and their contractual commitment to pay off mortgage bond guarantees to companies like Goldman Sachs? **
2. In a bankruptcy, how senior would contractual promises of deferred compensation to employees be? Everyone comes after the government, of course, but would such claims be more or less senior to, say, commitments to pay counter-parties?
** before claiming one commitment was outrageous and unjustified, one needs to be clear which commitment he is referring to, since both commitments in retrospect seem crazy to me. It is just that one party (ie Goldman Sachs), which has the added advantage of being represented by many of its former employees in the Treasury department, has convinced Congress and the Administration that not paying them carries systemic risk to the economy.
That seems to be the new key to government largess: Carrying systemic risk. It used to be one wanted to be poor or female or black to merit special consideration in the government spending sweepstakes. But nowadays, in our post-racial society, the key is to be the one who can wrap himself in the flag of "systemic risk." Here is AIG's entry into the "we have systemic risk, so give us taxpayer money" essay contest.