A Very Reasonable Proposal from the NYTimes

Fearing the whole financial system could collapse, the government loaned A.I.G. $85 billion, which it used to pay off more than a dozen big banks that were on the other side of those derivatives trades.

The banks may have needed the money, but they certainly didn’t deserve it. They knew or should have known the risks they were taking when they did business with the highflying A.I.G. But they were paid up anyway because it was believed that widespread failures would be costlier to the economy than the cost of the bailout.

Goldman Sachs got $12.9 billion. Deutsche Bank got $11.8 billion. Bank of America got $5.2 billion, Morgan Stanley $1.2 billion and JPMorgan Chase $400 million, and so on. Since then, the government’s commitment to A.I.G. has swelled to $173 billion.

Now, to try to repay some of the bailout money, A.I.G., which is nearly 80 percent owned by the government, is selling off some units and planning initial public offerings in others. And according to a recent analysis by The Wall Street Journal, several of the banks that were paid off in the first go-round, together with lawyers and accountants, could collect close to $1 billion in advisory and underwriting fees to move those efforts along. (snip)

It seems safe to say that a reasonable person would find that galling. When it comes to A.I.G., the big banks have clearly already got theirs. Now they get more? A.I.G. must be restructured for taxpayers to have a shot at recouping some of the bailout billions.

Jail for AIG executives would be better, and the govt taking over AIG's assets completely-- but, this is better than the status quo.