The management of AIG claims their hands are tied. They're contractually obligated to pay themselves huge bonuses fresh on the heels of the greatest financial disaster in human history. Can't be helped. At least it's nice to know they feel just as awful

about all of this as we do.

For now we'll just have to trust Tim Geitner that the Treasury really is pursuing every legal means at its disposal to limit the payouts. But it would be nice to see the specifics of these ostensibly iron-clad arrangements for ourselves. And it would be especially interesting to learn not just what they say, but when they were signed; was it before the need for a massive government bailout became apparent---or afterwards?

Pressed for details, AIG will undoubtedly declare themselves hamstrung by confidentiality agreements, the need to protect trade secrets, or some similar dodge. And if, down the road, we should discover that their bonus contracts weren't quite so air-tight as we were all led to believe, well, by then the payouts would be a fait accompli. We know only too well that those about to receive this money are unusually adept at gaming the system. Clearly they have no moral compunctions whatsoever when it comes to protecting their own selfish interests. So if the money is allowed to be spent, it will surely slip away.

Sooner or later, the Obama administration is apt to conclude that like it or not, there's little to be done. In the end AIG may agree to some tepid compromise, perhaps trimming the payouts by a token amount. As Geitner clearly isn't about to let the company fail, there are limits to the amount of pressure that can be brought to bear. But there's another way to get the money back after the fact, which neatly skirts the issue of AIG's purported legal obligations: it can be recovered through taxes.

Whether Congress has the chops to pursue such a bold option is valid question, notwithstanding the intense climate of bipartisan outrage. Nonetheless, here's how it might work. For every dollar above five hundred thousand earned from any company for which Uncle Sam is the majority shareholder, let's tax that dollar at a rate of, say, seventy-five percent. For incomes over five million, we could up the ante further, say to ninety percent. The tax should apply to all forms of compensation, not just bonuses. In this way, the government need not concern itself with how---or even how much---companies like AIG choose to pay themselves.

This scheme that has the added benefit of helping to restore at least a tiny measure of "moral hazard" to the financial sector. And while it will doubtlessly be seen as punitive by some, the real purpose is simply to shield the taxpayer from abuse. By any realistic measure, it's a pretty lenient punishment that only kicks in after half a million dollars---money, mind you, that would almost certainly not exist but for the intervention of government in the first place. Remember; we're not trying to sweep up just any concern that receives a few dollars of bailout money; only those which were about to go bust, and for which the government has been forced to become the majority shareholder, would be affected.