The WSJ reports:

Monday afternoon, a White House official said the Treasury Department will use a planned $30 billion infusion into AIG to compel the company to repay the bonuses promised to employees of its financial-products group, which is responsible for selling the exotic financial instruments that brought the company to near-collapse. The infusion, announced March 2, won't be finalized until the company and the Treasury work up repayment options, the official said.

(Emphasis supplied.) Devil is in the details here (a lot of potential for Peter paying Paul in this I think as the employees themselves won't be foregoing the bonuses but rather AIG itself will have to "repay" the government for the bonuses paid), but it looks like it is worth exploring.

Speaking for me only

AIG, some of its well heeled and compensated employees, and the counterparties to AIG's outrageous transacrtions, certainly are playing with fire regarding this bonuses issue. But what can the government do about the bonuses? Firedoglake has posted AIG's argument for paying the bonuses. From a legal perspective, some of the argument is sound to my eyes:

AIG has been advised by outside counsel that a breach of the retention plan would subject it to claims for not only the contractually owed payments, but also penalties and fees under the Connecticut Wage Act. The Wage Act provides for the recovery of double damages and attorneys’ fees when wages are improperly withheld and the employer’s refusal to pay wages lacks a good faith basis. (Conn. Gen. Stat. §31-72.)3 In addition, individual managers who decide to withhold wages that are due are individually liable for violation of the Wage Act.

More . .

NYTimes:

Attorney General Andrew M. Cuomo of New York on Monday sent a letter to the American International Group, demanding more information about the employees who are set to receive about $165 million in bonus payments. Mr. Cuomo’s letter, demand[s] the information by 4 p.m. on Monday under threat of subpoena . . .

UPDATE - The President said "[i]n the last six months, A.I.G. has received substantial sums from the U.S. Treasury." [He] asked Treasury Secretary . . . Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.” But, "White House officials said that the administration is not looking to take A.I.G. to court to stop the company from paying out the bonuses. But they said the Treasury Department would be trying to figure out what they can do to block A.I.G. from making the payments within the legal confines of A.I.G.’s contractual obligations to the executives."

More . . .

This is an Open Thread.

I wrote about this yesterday, but it is now becoming conventional wisdom. The upside to the AIG furor is that the Obama Administration, should it wish to do so, will now have a much freer hand for adopting temporary takeovers as the the first bailout option. Indeed, it seems to be fast becoming the only politically possible option. Just this morning even Joe Scarborough was advocating for temporary takeovers and "preprivatizations." The Adam Nagourney writes:

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda. . . . Mr. Obama’s aides said any surge of such a sentiment could complicate efforts to win Congressional approval for the additional bailout packages that Mr. Obama has signaled will be necessary to stabilize the banking system.

. . . [T]he financial crisis is the most acute problem facing the administration, one it will not be able to play down. Christina D. Romer, the White House’s chief economist, said Sunday on “Meet the Press” on NBC that the administration was close to unveiling details of its plan to remove the worst of the bad assets from the books of banks, a move sure to refocus attention on winners and losers from bailouts.

(Emphasis supplied.) In my opinion, this is a good thing. The Obama Administration has been entirely too timid in its approach to the financial crisis. Here is a case where angry populism could force the Obama Administration to do the right thing, something it has been reluctant to do - temporary takeovers of insolvent financial institutions.

Speaking for me only

Paul Krugman sort of poses this question:

The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis. Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn.

Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.

But Europe's biggest failure is in its powerless continental institutions. Krugman writes:

News is out about a 2007 secret report by Red Cross officials who visited the 14 "high-value" detainees transferred to Gitmo after stays in CIA secret black hole prison.

The 14 detainees, who had previously been kept in isolation in CIA prisons overseas, gave remarkably uniform accounts of abuse that included beatings, sleep deprivation, extreme temperatures and, in some cases, waterboarding, or simulating drowning.

Read the details about Abu Zubaydah and the others. The take-away from the report: [More...].

As mentioned earlier, the New Mexico legislature has voted to repeal the death penalty. Gov. Bill Richardson hasn't decided whether to sign it. He's asking for input.

Please take 30 seconds and tell Gov. Richardson to sign the bill. Via David Seth at Daily Kos:

Here's the number: (505) 476-2225. The number will record your request. There is no human being on the phone, just a recorder.

If you are near Santa Fe, the Governor is holding meetings with the public tomorrow from 2:30 to 5, first come-first serve...you get five minutes with him to tell him your position.

The No. 1 seeds are Louisville (Midwest), Pittsburgh (East), North Carolina (South) and Connecticut (West). The Midwest region winner will play the West region winner and the East region winner will play the South region winner in the Final Four semis.

Talk about it here.

Daily Kos gives us this video of Dick Cheney upon his triumphant return as the face of the Republican Party

To dignify Cheney as a serious person on policy is something I will not do. This is without saying the man should be, by all rights, in jail. But as the de facto leader of the worst Administration in history, Cheney is not someone whose views should be taken seriously. I certainly will not. I will point out that it is political suicide for the Republican Party to allow Cheney to reemerge as the face of the GOP.

Speaking for me only

The urgent need for crime lab reform (discussed in recent TalkLeft posts here and here) is exemplified by the disaster that was the Detroit police crime lab.

Wayne County Prosecutor Kym Worthy says her office has identified 147 cases of convicted and imprisoned people that will require the retesting of evidence as part of the investigation into the now-closed Detroit police crime lab -- unveiling the first of potentially thousands of cases that are at risk of unraveling because of mishandled evidence.

Worthy calls the 147 cases "the tip of the iceberg." It's an iceberg that is causing damage to Detroit justice of Titanic proportions. [more ...]