As a former employee of the AIG Financial Products division, one that was not in an executive level position, I would like to make it clear that what is being called a “bonus” for an other-than-executive level employees is actually “end of year” compensation. The salary structure at AIG FP was such that your annual salary was below market (though your expected work hours per week were significantly above market) with the understanding that you would receive an additional, bulk payment at the end of the year. The “bonus” part was that the end-of-year amount fluctuated depending on how well the firm did. Most non-executive employees relied on this end-of-year compensation to pay basic living expenses that were not covered because their bi-weekly salaries were less than they would have received at other companies.

More importantly, when bad news started to surface about AIG FP in late 2007, there was nothing to stop otherwise highly educated and employable persons from leaving AIG FP and taking a job elsewhere. To entice these folks to stay and put up with what would be a very messy and stressful situation, contracts were offered promising guaranteed end-of-year compensation for the next two years in return for each employee foregoing the opportunity to be employed elsewhere.

I am not defending executives at AIG FP who were employed there for years, have tens of millions of dollars in bank accounts, and who should bear the brunt of the responsibility for the problem. I agree they should not be receiving “bonuses” in the millions of dollar range. However, to penalize the al 400 employees when the large majority are not executives and do not receive executive pay and bonuses, is just creating two wrongs to try to make it right.

"However, to penalize the al 400 employees when the large majority are not executives and do not receive executive pay and bonuses, is just creating two wrongs to try to make it right."

To penalize the entire country because you people destroyed the economy is even more unfair. If you hadn't been bailed out by the government you would have NO FREAKIN job! That was your damn bonus. How dare you come here and whine about how this all isn't fair. Fair!?!? Fair would be your company suffers the consequences of its own actions and you yahoos beg for pennies on the street.

Mamamia is exactly right, and this is how it works at a number of similar units (this is not unique to AIG), but these facts are obviously too nuanced for commentators who are currently just looking for a convenient scapegoat.

What nuance have I missed oh super one?

"The “bonus” part was that the end-of-year amount fluctuated depending on how well the firm did."

How well did AIG do last year???? It LOST $62 BILLION!!!! AIG is not only bankrupt; it has dragged the world economy down the sink.

Those who are fortunate enough to still have a job at AIG should be grateful. Their "end-of-year compensation" should be less than zero!!!

There's no need for Congress to write a tax bill naming AIG. They simply need to impose a tax on any bonus in excess of $100,000 paid by any firm who received government bailout funds in 2008 or 2009, and require that any firms receiving those bailout funds report the bonus payments with a new coding in box 12 of the W2. (B for Bailout, or P for Piggy.)

I understand the anger of the public, largely fueled by the media and sound bites at this point, but wonder if the tunnel vision on the employees of AIG who received the payments/bonus is missing the bigger picture of the irresponsibility of AIG's compensation model. Congress should be looking to ensure these kind of practices are corrected moving forward for any company receiving federal dollars. Additionally, if there taxes were to be added to these bonuses I can assume the companies would increase the annual salaries to help make up differences anyway. The better thought would be to levy some sort of higher corporate taxes against those companies that take federal dollars (why not tax the bailout money as income for the company basically). I am not a tax writer, nor a corporate lawyer but there has got to be a better way to keep these companies honest.

As someone who runs a non-profit grant program we are required to document, document, document every single dollar we spend (and return every dollar we don't). I cannot figure out why the management stipulations that govern federal dollars to non-profits are more controlled and thought out.

Response to "lost in the middle":

The nuances you may have missed include:
1) assuming that those people "destroyed the economy" (you may want to look further than that group of traders, including to the management and board of AIG, the rest of Wall Street, the regulators overseeing the transactions they engaged in, and a generation of lax regulation).
2) assuming that ALL of those people were involved in some wrongdoing (you tar with one brush all the people who are there trying to sort through the rubble in good faith on behalf of the American people in addition to those cretins who caused the explosion - which is not fair)
3) assuming that those traders would not otherwise have a "freakin job" without the bailout (as OP said, employable people had and still have alternatives - and the retention gig serves to keep people in place to accomplish the restructuring, which is in your interest)