Or at the very least, be stripped of every penny they possess.

Here's the crucial passage from Joe Nocera's short, sweet, damning analysis:

When a company insures against, say, floods or earthquakes, it has to put money in reserve in case a flood happens. That's why, as a rule, insurance companies are usually overcapitalized, with low debt ratios. But because credit-default swaps were not regulated, and were not even categorized as a traditional insurance product, A.I.G. didn't have to put anything aside for losses. And it didn't.

Nocera misstates things a little bit here, in a way that shows the underlying sickness of the high financial industry. Insurance companies don't have reserves because of regulatory requirements , they have reserves so that they can pay the lawful claims of their customers when the risk against which they've insured comes to pass. Making promises to pay while knowing (or having reason to know) that one doesn't have the assets to do so is fraud, either civil or criminal depending on the details of action and intent. Regulations are there simply because it's boring and expensive to let insurors commit fraud, prosecute them, strip their personal assets and put them in prison. So we short-circuit the process a little.

(Those with a little knowledge of history may remember why insurance regulation became necessary in the first place: during the 19th century, it was a popular and profitable business for grifters, because you can usually arrange for a nice long delay between the day you start collecting premiums and the day you have to start paying out. Fire insurance especially, because in a small town center without municipal water, any substantial fire will burn most of the buildings, and the grifter can decamp amid the general confusion. Note, by the way, the violation of the presumption of independent risks.)

At the very least, it looks like AIG's management and directors were negligent. They failed to set aside adequate reserves, and they failed to model the risks correctly, or to establish conservative rules for writing their guarantees (when there's not a lot of history on a particular risk, it is not prudent to assume it will never happen). They continued to make their unlikely promises even when there were plenty of indicators that the market they were underwriting was headed south.

But the most obvious evidence for actual, intentional fraud (what Nocera politely calls "greed") comes with the collateral triggers they wrote into their contracts to extract just a little more revenue. It should have been obvious to any reasonable person that exactly the circumstances under which the collateral triggers triggered would the the circumstances where mortgage-backed securities wouldn't be worth the paper they were printed on. Every security that's based on people's ability and willingness to pay takes a hit during a recession and stock-market slump. And knowing that you won't be able to make a payment precisely under the circumstances when it's called for: there's that nasty f-word.

Also in on the scam: the head of the SEC and the entire chain of command underneath him who didn't call a halt to the operation (fraud is always against the rules, even if there's no specific rule forbidding some particular kind of fraud). And AIG's auditors. For the government employees it's malfeasance and quite possibly honest services fraud, for the auditors, what happened to Arthur Andersen is none too good.

And why the thirst for revenge in parallel with keeping the economy afloat? Because a few million here, a few million there, and you can make just that many more fraud victims whole without tapping the ordinary taxpayer. And because plenty of these folks are young and healthy, and unless they're stripped bare, in 20 years they'll have the resources to do it all again.