Will AIG's huge bonuses turn taxpayers against further financial bailouts?

According to The Wall Street Journal (subscription required), "American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall."

Lawyers have told AIG (AIG) that previously agreed upon bonuses are legally binding.

If the government can do something about the planned bonuses, it should. It's not clear whether it can force AIG to stop that payouts, but AIG is now 80 percent owned by taxpayers.

The AIG news is just the kind of thing that will turn Congress, and the American public, against any bailout of financial firms as all. That, in turn, may put pressure on the White House to reconsider increasing TARP investment to salvage banks and other financial firms. It is just the kind of heated debate and tension that the government does not need while it is trying to salvage financial system.

And, like a large portion of the government's financial bailout problems, it traces back to AIG.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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